IS YOUR BRAND IDENTITY WORTH BILLIONS?
Is your brand valuation worth a billion dollars today? Maybe yes or maybe no, but it surely is worth something pretty big. At the end of the day, all the work you have put in pushing your name identity and your range of products and services in your marketplace adds up in an abstract space of the consumer's mind, where it acquires some great value. This equity can be measured as a real, soft asset. It can have a monetary value like that of a certain type of goodwill or particular reputation. Brand identity is something you might not use to pay the bills but can surely use to negotiate a better price in an M&A or sale of the company.
To measure the value, there are many
rules, mostly according to the sales volume and how it has increased
over the years, monies spent in promotion and advertising, and how the
brand has climbed and at what rate. There also are many other factors,
like financial performance, customer perceptions and actual market
share.
Published Figures
Most valuations are in
billions of dollars; otherwise they don't get media attention. Most top
brands of any country are often valued in tens of billions of dollars,
and unless you gather a team of forensic accountants, there is no way
to prove it wrong or to challenge how a US$50 billion brand value
slipped to $25 billion and vice versa.
Most high-profile
valuations are done without any input from the management and the
owners of the brands, as it is done from published figures. Sometimes
brand owners get pretty upset as they are moved seemingly arbitrarily
up and down the scale against their competitors.
Normally,
year after year, Coke, IBM, Microsoft, Disney, Toyota and Gillette are
given a combined value of close to half a trillion dollars.
Most
people would think that if Coke were to restart its entire branding
history, it would easily cost a trillion dollars, as the company
marshaled a global country-by-country marketing and branding launch in
a bid to repeat its branding success. The brand valuation of Coke is
over $50 billion or so, but somehow the total stock value of Coke is
still about $40 billion. Strange math.
Let's explore reality.
Brand Name Dilution
A
globally protected unique brand with a unique name identity and steady
sales growth can be valued by multiplying annual sales a few times,
adding in all the advertising and promotional costs spent on that brand
from its inception, and adding in expected sales and the value of each
client spread over years. From that, subtract some key things, like
competition, lawsuits and other risks, such as possibly losing
ownership claim to the brand name and so on. The bottom line is that
you might easily end up with a billion dollar number.
Certain
things are very tangible and black and white, such as the brand name
and its ownership; simply put, either you own this name outright or you
don't. Most managers try hard to convince themselves that their single
trademark filed in the country of origin is sufficient. They ignore the
global e-commerce reality. Most CEOs are simply shy to check the
dilution of their brand names on Google.Because less than 1 percent of
names are globally protected, the chance is that the entire evaluation
is on shaky ground. During any M&A, a price is established on hard
and soft assets. Brand valuation is really a soft asset, as opposed to
trademarks and intellectual property, which are hard assets.
Imagine,
Amazon without its globally protected name identity and URL is just a
warehouse with books. E-trade is just an office. What about EBay or
Google? The message should be pretty clear.
Recommendations
Management
should formulate a small committee and take a quick inventory of issues
to calculate some brand value numbers. As long as the resulting
valuations are a few times over total stock value, you are doing OK.
However, if for some reason it is way less than total assets, then you
need to figure out all about your branding and the real issues
surrounding the ownership of the brands, names, trademarks and URLs,
etc.
Today, branding correctly with the right image and a
universal name identity is still a very easy thing to do. All it
requires is the right skills. However, the old mass-advertising model
is dead. Now, one-to-one marketing offers extremely unique
opportunities to become a viable brand with the smallest budget in the
shortest time. Apply the correct expertise and correct methodologies.
Old models are dead.
If for some reason your brand is not
worth a billion dollars, start the right image development process
today. It won't take long. Just go for the new rules and new laws of
creating billion dollar brand name identities. It is very easy.
About Naseem Javed
Naseem Javed , author of Naming for Power and Domain Wars, is recognized as a world authority on Global Name Identities, Image, Cyber-Branding and Domain Issues. He introduced The Laws of Corporate Naming in the 80's and also founded ABC Namebank, a consultancy established in New York and Toronto a quarter century ago. Naseem also conducts executive workshops and conferences on global image and name identities issues www.azna.com/ceo.htm