It can sell you a “magical” product, and then 14 months later it can make you believe that same device is a clunky has-been in need of an expensive replacement.
That is what makes Apple Inc. a marketing juggernaut. But how much is its brand actually worth? It depends whom you ask – and the calculations are billions of dollars apart.
It’s an issue that goes beyond just Apple, of course: how do companies determine the actual value of their marketing efforts? Many companies (and their procurement departments) are taking a harder look at marketing budgets; and the pressure to show why that investment is worthwhile has never been higher.
Over the years, brand consulting agencies have stepped in with lists that place a concrete, dollar value on that intangible asset – the brand. Those lists help firms market their own consulting services, and give chief marketing officers an independent account of how their work contributes to the bottom line.
But some argue that the absence of a standard system for determining brand value is actually undermining the attempt to show that marketing has real returns.
Because “brand value” is not a balance sheet item, there is no unified system for how it is defined. The difference is hardly minor: in their 2012 rankings of the world’s most valuable brands, for example, brand consulting firms Millward Brown Optimor and Brand Finance both rated Apple at number one.
But while they agreed that the tech giant is tops, the brand values they published were more than $100-billion apart. According to Brand Finance’s calculations, Apple’s brand value is just over $70-billion; Millward Brown pegged the number at nearly $183-billion.
“There are a number of firms that purport to measure brand value. But none of them agree with one another. That tells you something about the problem,” said David Stewart, a marketing professor at Loyola Marymount University and chairman of the Marketing Accountability Standards Board (MASB).
Roughly a year ago, the group launched a project to create a universal standard for marketers to assign a value to their brands.
“I’ve had a CEO tell me that he had squeezed everything out of operations that he could get in terms of efficiency, but marketing is 25 per cent of his budget. It’s a big target. The question is, ‘What are we getting for it?’” Prof. Stewart said.
“We have all kinds of measures. We can measure awareness, we can measure how people feel about a brand. But they’re not really linked to the financial performance of a firm in the way a CFO or a CEO would like to see.”
That’s not helped by the lack of a well-defined measure. In three of the most well-known rankings last year, three brands made the top of the list as the world’s most valuable: Interbrand handed the top spot to Coca-Cola; Millward Brown to Apple; and Brand Finance to Google. In the same year, Coca-Cola was either the most valuable brand globally, the sixth most valuable, or not even in the top 10, depending on which report you consulted.
The MASB is not the only organization paying attention: the International Organization for Standardization (ISO) set its own standard for valuations in 2010.
But while those guidelines are a good start, they still “leave a lot of wiggle room for people to use different methodologies,” said David Haigh, chief executive officer of Brand Finance, which is ISO accredited.
“If you don’t define clearly what you mean by ‘brand,’ you can take more of the intangible earnings [into your calculation] than you should,” Mr. Haigh said.
“It’s certainly quite convenient if you want to schmooze a client, to have a value that’s quite large. Clients [who are marketing executives] want these numbers because they want to demonstrate to their board that there’s a valuable asset, it needs investment, they’re doing a good job. The problem is, if you put a value on it that’s too high, and your finance director asks how you got to that ... it’s deeply unhelpful.”
Consulting firms would be better off marketing their services in other ways, he argued, and their credibility would be easier to demonstrate with a clear-cut, standard measure. Mr. Haigh will be in Chicago next Thursday for the MASB’s biannual summit to discuss their standardization project.
The firms that publish lists of dollar values for brands are all clear that their systems are proprietary, and specific to them.
“Perhaps it’s more a question of understanding all the methodologies and what each firm is looking to do,” said Alfred Dupuy, managing director of Interbrand in Canada, which is also ISO certified.
He believes those guidelines are a step in the right direction.
“But it’s going to be hard to get a standard among various firms …that’s a pretty tall order.”
But some marketers are beginning to recognize the importance of a standard. In February, Kimberly-Clark Corp. – whose brands include Kleenex, Huggies and Kotex – joined the MASB’s project.
The board is in talks with four other companies to join the “long-term” attempt to establish a clearer method for valuing their brands.
“If you go back 50 years, most of the value of companies was in tangibles – buildings, or assets like equipment,” Prof. Stewart said.
“We’re now at a point where economists tell us that something over 80 per cent of the value of many firms is in their intangibles – brands, patents, and so forth. We have difficulty managing well if we don’t have ways to value those things. People are realizing that there’s a real need to understand this.”Report Typo/Error