Category: Brand Value

Brand Value vs. Brand Recognition

Interesting article in Fast Company Magazine, basically an interview with John Wang, HTC chief marketing officer — AKA Chief Innovation Wizard.

The HTC brand was already there among its users. A few years ago we started to put the HTC logo on the phones. We basically formalized the brand recognition on the physical product.

Let me share with you how we think about brand. There is a very important difference between brand value and brand recognition. Brand value means something to the end user. Brand recognition, all it means is a bunch of advertising to make people recognize the brand name. At HTC we care about brand value, not brand recognition. Building brand value is like earning respect; you have to earn respect, you cannot buy respect.

The brand value vs. brand recognition point is generally true. But in certain markets (either geo or in terms of products) you might not have the time, the patience and the resources to wait for the recognition to come from the market in an “organic” way. Without a push on the recongnition pedal, you might not have the chance to put the brand value in customers hands. Definitely what a brand is looking for mainly is value. Value for the customer, for the brand itself or for the company that owns it. But I don’t think you should leave aside, by all means, the recognition effort.

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Approaches to Brand Valuation

Interesting article on brand valuation on 4hoteliers.com website. First off all the author is corectly placing the brand as a independent category among the intangible assets of a company:

Brand and relationship intangibles: these include trade names, trademarks and trade symbols, domain names, design rights, trade dress, packaging, copyrights over associated colours, smells, sounds, descriptors, logotypes, advertising visuals, and written copy. In addition, associated goodwill (the general predisposition of individuals to do business with one brand rather than another brand) should be included.

Then the article si focusing on several approaces to brand valuation:

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Best Global Brands by Value – 2006

The previously announced Interbrand & BusinessWeek 2006 Best Global Brands by brand value is finally out with no major movements in the top 10.

Brand value is calculated as the net present value of the earnings the brand is expected to generate and secure in the future for the time frame from July 1, 2005 to June 30, 2006. To be considered the brands must have a minimum brand value of US$2.7 billion, achieve about one third of their earnings outside of their home country, have publicly available marketing and financial data, and have a wider public profile beyond their direct customer base.

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4 Brand Valuation Methods

Value has different meanings to different people. The objective of the valuation is determined by its use. Some of the more common valuation approaches are market based/direct measurement method; brand communication investments based method; awareness and franchise valuation method; finance based/indirect measu- rement method; excess-earnings method and relief-from-royalty method.

The simplest direct measurement is to add all the brand’s communication investments, adjusted for inflation. An additional adjust- ment is sometimes made to account for and reward the risk taken by past managers. This adjustment is called the discount rate and it is used to compute the net present value of the successive investments, that is, what they are worth today. The method is simplistic and overvalues the brands; but brand buyers use it for that very reason. It also penalises brands that do not advertise heavily.
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Dollar Value of Brand Equity

Brand equity is that incremental value that accrues to a product when it is branded. Simple brand awareness is one source of brand equity. If you can get your name to pop up in people’s minds when they think of the product category, you’ve won a big part of the battle.

[There are] two other sources of brand equity: a consumer’s perception that a brand is better than it really is (“attribute-based” equity), and nonattribute-based equity, for instance, a consumer’s preference for a brand based on the cachet of owning it. If you’re successful in these three aspects, an added benefit is that stores will feel a customer pull to carry your product, and so your availability and hence sales will increase.

Simple awareness ”getting the brand’s name to pop up in consumers’ minds”generates the largest return, followed by consumers’ responding to the cachet of owning the brand (nonattribute-based equity). Attribute-based equity trails in third place. This means that a brand’s image provides a stronger incentive for buying even than the perception that it is a better product. But greater awareness of your brand is the major component driving brand equity.

These are some extracts out of an interesting study with the title Calculating the Dollar Value of Brand Equity made by V.Seenu Srinivasan Professor of Management at Stanford Graduate School of Business along with Chan Su Park of Korea University Business School and Dae Ryun Chang Yonsei Business School. Read more about the study here.

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New Global Brand Valuation Study

Despite its dominance, Interbrand/BusinessWeek global brand league table has inherent weaknesses. This is not news to anyone who works in branding: most marketers accept that the Top 100 is an imprecise but important approximation of global brand equity.

But all this is about to change. Next month global agency group WPP will launch an alternative brand valuation league table that will directly challenge Interbrand’s calculations. The system has been masterminded by chief research officer Andy Farr and his marketing quant jocks at Millward Brown Optimor (MBO).

Here are some insights into this soon to be revealed WPP study:

  • WPP’s annual Brandz survey questions more than 650,000 consumers and professionals in 31 countries.
  • The results are analysed to create a combined diagnostic and predictive tool that evaluates the strength and growth potential of brands.
  • Respondents are asked to compare more than 21,000 brands in 300 categories from sectors including long purchase-cycle brands, FMCG, retail and e-commerce and services.
  • Each respondent is asked to evaluate brands in a competitive context from a category they shop in.
  • Their responses generate scores for levels of bonding with a brand, its advantage over rival brands, brand performance and relevance to consumer needs.
  • Consumer loyalty and claimed purchasing data are used to generate a ‘brand voltage’ score, indicating the brand’s potential.

More here

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Evaluate Your Name

When re-branding a business or a product or when you set up a new one and have to come up with a brand new name you should find a way to evaluate among different options that might come up in order to choose the best one out of them. Here I just stumble upon and interesting tool to dissect potential names into the nine categories to make it easier to understand why name work or don’t work, and to more easily weigh the pros and cons of one name versus another:

Appearance – Simply how the name looks as a visual signifier, in a logo, an ad, on a billboard, etc.

Distinctive – How differentiated is a given name from its competition. Being distinctive is only one element that goes into making a name memorable, but it is a required element, since if a name is not distinct from a sea of similar names it will not be memorable.

Depth – Layer upon layer of meaning and association. Names with great depth never reveal all they have to offer all at once, but keep surprising you with new ideas.

Energy – How vital and full of life is the name? Does it have buzz? Can it carry an ad campaign on its shoulders?

Humanity – A measure of a name’s warmth, its “humanness,” as opposed to names that are cold, clinical, unemotional. Another – though not foolproof – way to think about this category is to imagine each of the names as a nickname for one of your children.

Positioning – How relevant the name is to the positioning of the product or company being named, the service offered, or to the industry served.

Sound – Again, while always existing in a context of some sort or another, the name will be heard, in radio or television commercials, being presented at a trade show, or simply being discussed in a cocktail party conversation.

“33” – The force of brand magic, and the word-of-mouth buzz that a name is likely to generate. Refers to the mysterious “33” printed on the back of Rolling Rock beer bottles for decades that everybody talks about because nobody is really sure what it means. “33” is that certain something that makes people lean forward and want to learn more about a brand, and to want to share the brand with others. The “33” angle is different for each name.

Trademark – As in the ugly, meat hook reality of trademark availability. All of the names on this list have been prescreened by a trademarked attorney and have been deemed “likely” for trademark registration.

Read more about it here

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Brand Value – 10 Ways To Create It

Consumers love brands because they offer an extra value—that is, one in addition to the core product or service. That value becomes the major motivation for consumers to buy or use the product.

How precisely is this value being added and incorporated into the brand? Advertising professionals say it is advertising. Consumers love the ad—so they’ll love the brand. Other marketing experts are suggesting that a consistent and total brand experience is the key.

Brands are not human-like and they do not have a life of their own outside the consumer’s mind. They are instruments, simply means to achieve ends. Emotions cannot be glued to them. They arouse emotions when they are perceived as a source of something beneficial. The positive emotions are direct outcomes of these anticipations. Their various symbolizations (name, logo, font, emblem and so on) have little impact on their own; their importance is mainly as identifiers of sources of already attributed and anticipated benefits.

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Brands Value Growth – Top 10

The Next Generation of Growth Brands is based on compound annual growth rate in brand value between 2001 and 2005. The report describes the growth brands as having “outperformed their peers in their respective markets during the past four years and are likely to continue to do so into the future”.

Apple, creator of the iPod, is the fastest growing brand in the world, with internet brands Google, Amazon, Yahoo! and eBay following close behind, pushing notoriously powerful brands like Coca-Cola off the list.

According to marketing consultants Vivaldi Partners and Forbes, Apple has managed to increase its brand value by 38% in the last four years — largely thanks to the ubiquity of its portable music device iPod.

Power brands like Coca-Cola and McDonald’s, which typically spend the most on advertising, did not even make it into the top 20.

Here is the top 10:

Brand – Value Increase
1. Apple – 38%
2. Blackberry – 36%
3. Google – 36%
4. Amazon – 35%
5. Yahoo! – 33%
6. eBay – 31%
7. Red Bull – 31%
8. Starbucks – 24%
9. Pixar – 23%
10. Coach – 22%

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Brand valuation – 7 applications

Since seven seems to be the magic number which relates with brand value and brand valuation let’s check seven applications of brand valuation:

External investor relations
Mergers and acquisitions were the original driving force for brand valuation. Now many successful companies use brand valuation as an ongoing business performance indicator: to help ensure that brand strength is reflected in share value.

Internal marketing management
Brand valuation is increasingly being used as a management tool in leading organizations. For example: brand valuation figures can be used to evaluate new product and market development opportunities, to set business objectives or allocate budgets.

Internal royalty rates
Across a large organization there may be many affiliates, subsidiaries or divisions that make use of any particular brand. As the profit potential of brands becomes more clearly understood more companies are charging royalties, across their business operations, for the use of these brand assets.

Licensing and franchising
Where companies allow outside organizations to use their brand, on a licensing or franchising basis, a brand valuation can lay the foundation for appropriate charges.

Tax planning
As the management of brands as financial assets becomes more sophisticated, so tax authorities around the world have started to take an interest in how these assets are managed. The result is that more and more international organizations are planning the most cost-effective domicile for their brand portfolios and are organizing their tax affairs with their brands in mind.

Securitized borrowing
Even in the conservative world of banking, the asset value of brands has been recognized. As a result brands have been used to secure loans, especially in the US, where companies such as Disney have borrowed significant amounts of money against their brand name.

Litigation support
Brand valuations have been used to support litigation against the illegal use of a brand name (as a basis for calculating damages, for example) and also in cases of receivership, to prevent the assets of the business being undervalued.

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