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.

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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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

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

10 Branding Insights and Opportunities

Leading South African brand consultancy, Interbrand Sampson, uses global insight from parent, Interbrand, to bring 10 branding insights and opportunities to the local market:

1. Clarity

In practice, clarity of vision, values and positioning overall, are often given insufficient attention. The majority of corporate and brand visions are interchangeable, bland and viewed with cynicism. In an over-communicated world, lack of clarity will substantially reduce effectiveness and efficiency; and complex brand and sub-brand structures without a real audience rationale will reduce this still further.

2. Brand as central organizing principle

The world’s most valuable brands use their brand as the central organising principle for all products and services, corporate organisation, structure and behaviour, environments and communications. They are brand centric. In this way, they ensure that their promise to and relationship with the customer is constantly delivered and refreshed.

(Well I tend to agree more with Douglas Rushkoff, author of the provocative new book Get Back in the Box, who urges companies to focus on products, not branding. But well this should be the number one advice coming from a branding agency, wouldn’t it? at&t bought it.)

3. Brand as a total experience

The success of experience-based brands at building deeper customer relationships at the expense of solely product-based brands argues strongly for every brand to think about its total chain of experience – from visual identity to advertising, product, packaging, PR, in-store environment – and increasingly round-the-clock presence and availability online.

4. More compelling and imaginative expressions of brand identity

The ability to break through brand proliferation and communications clutter depends on imaginative and innovative creative expression. Every opportunity to communicate counts, and every channel, from marque to distinctive corporate communications, from the office environment to the person answering the phone.

5. The brand as platform for innovation

In the constant battle to stay ahead of current and future competitors, it is becoming increasingly difficult to get sustainable competitive advantage through product development alone. Using a distinctive brand platform as a starting point for innovation in all areas of operation and experience can release more distinctive results – as well as being more effective and cost efficient. Use the brand platform as a springboard to look at growth categories for the future and in the context of consumer trends – and examine what your brand could distinctively bring.

6. Brands need profound protection

It is estimated that 9% of the world trade is counterfeited. Brand owners must use the full weight of the law, quickly and publicly, to prevent value loss and degradation. Legally ‘ring-fencing’ your brand should be a never ending process.

7. Understanding the value of your brand

Use brand value as a core measure of people’s performance, which both built momentum and created sustainable premium growth. Brand values also crucial management information for mergers, acquisitions and divestments, which will continue in the future as markets shake out and consolidate.

8. Effective and efficient brand monitoring and measurement

It can be tempting for organisations to do a brand programme, and not put in proper monitoring and measurement – and indeed support – systems to maintain them properly. The most successful organisations integrate these systems into their day to day operations and plans.

9. CSR as core social responsibility

In an all-seeing digital world, and in a sharper business environment where employees at all levels can be ambassadors or saboteurs for the company’s reputation, there really will be no hiding places any more. Organisations will have no choice but to be transparent in their dealings and fulfil their promises, or to have transparency forced on them. Corporate social responsibility (CSR) seems to be an overused buzz term in too many organisations today, and a whole new industry has grown up around it. Although good intentions may be there, all too often organisations look at
CSR as an insurance policy, or a more sophisticated form of cause-related marketing, rather than as core to their operations.

10. Always act like a leader brand

What can be termed a ‘leader brand’ today is not a brand leader in the old fashioned sense, reflecting scale and muscle alone. Rather, it reflects a newer, restless and agenda-setting leadership across all areas of philosophy and operations, inside and out.

10 Key Attributes of Brand-Guided Company

Booz Allen Hamilton and the brand consulting firm Wolff Olins carried out research among marketing executives across Europe. It shows that over 90 percent of companies believe their brand is a key element of their success—twice as many as five years ago. Yet less than 20 percent put the management of their brand at the heart of their business systems and capabilities. This appears to be significant in explaining superior brand performance.

The study identified three categories of organizations:

Brand-guided companies

…recognize the importance of brands and sound management of brands for their business success. They have established a common understanding of what the company stands for, and hence have assigned clear brand ownership at top management level. Brand-guided companies occur across all industries.

Emerging brand companies

…have not yet fully recognized the importance of brands for their business success but expect brands to become increasingly important over the next five years. They are working on establishing a common understanding of their brand within their company, but have not yet established clear brand ownership.

Brand-agnostic companies

…do not consider brands to be an important factor to their business success today and do not believe they will be important in the next five years. They do not intend to develop a common understanding of their brands within the company and have no interest in establishing clear brand ownership in their organizations.

Brand-guided companies have clearly-defined brand values that are understood throughout the entire organization. They establish well-defined ownership for management of the brand at top management level. This enables the brand to provide the cohesive force that guides key activities—such as product development, customer service, sales, and operations—and supports the strategic management process.

On average, the research shows that brand-guided companies have profitability margins nearly twice the industry standard.

The study also identified 10 key attributes of brand-guided organizations.

  1. The company recognizes that the brand is a key asset in delivering its strategic targets at a level that is higher than the industry standard
  2. The company doesn’t consider the brand as merely a communications issue—brand is recognized as the key platform to link the company strategy with customers and employees
  3. Brand management processes are integrated seamlessly into the company’s processes—i.e., “branding” is not a separate activity
  4. Success is generated by corporate confidence—the brand delivers that success by providing a catalyst for the company’s products, services and employees
  5. Senior management is accountable for the brand’s continued health—brand responsibility resides at C-level
  6. All employees share a belief in the brand as well as a common understanding of it, the power of the brand acts as an incentive to employees, employees’ activities are aligned with the brand values and contribute to building and strengthening the brand, and employees are measured and rewarded by the success of these brand-guided activities
  7. Marketing department is able to talk in terms of expected return on their investments—marketers can leverage customer insights to make the most effective marketing decisions, they can also analyze what they know about customers to contribute effectively to strategy in the future, and marketing activities are always closely aligned with the core brand values
  8. The company has sufficient IT capability in place to capture data on customers, segment them effectively, respond to their needs, and catalyze marketing techniques to deliver high ROI
  9. The company assesses key performance indicators, such as “share of wallet,” on a regular basis—as a result of these assessments, you take appropriate management action
  10. The company identifies brand equity (the financial value of your brand)— understanding the brand’s value drivers and the levers required to influence these drivers

Via Bnet.

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%

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.

7 elements of brand valuation

The [tag]Interbrand[/tag] model of brand strength is a useful framework to consider the performance of your own brand. Consider these seven points and you should get a better sense of the strength of your own brand, as well as some ideas on how to move forward.

Market: 10% of brand strength. Brands in markets where consumer preferences are more enduring would score higher.

Stability: 15% of brand strength. Long-established brands in any market would normally score higher, because of the depth of loyalty they command.

Leadership: 25% of brand strength. A market leader is more valuable: being a dominant force and having strong market share matters.

Profit trend: 10% of brand strength. The long-term profit trend of the brand is an important measure of its ability to remain contemporary and relevant to consumers.

Support: 10% of brand strength. Brands that receive consistent investment and focused support usually have a much stronger franchise, but the quality of this support is as important as the quantity.

Geographic spread: 25% of brand strength. Brands that have proven international acceptance and appeal are inherently stronger than regional brands or national brands, as they are less susceptible to competitive attack.

Protection: 5% of brand strength. Securing full protection for the brand under international trademark and copyright law is the final component of brand strength in the Interbrand model.