Communication

How much is a brand worth? How do you put a value on the phrase “nobody ever got fired for buying IBM” becoming received business wisdom?

That’s the tricky question that firms like Brand Finance, Millward Brown (via the Brandz report), and Interbrand seek to answer. They all begin their calculations in broadly the same way. They look at brand value as a proportion of a company’s market capitalisation. They then apply a range other analysis, normally some form of consumer-related data.

Through their analysis these firms achieve dizzyingly different valuations of brand value. In 2015, for example, Google’s brand was valued at $174bn according to Brandz, whereas Interbrand valued it at $120bn. That’s a $54bn difference. That’s huge. Brand Finance valued Google brand at $76bn, making the difference between the highest and lowest valuations more than the market capitalisation of Nike Inc. This huge variation implies that, at best, only one firm has got brand value right, more likely none have.

There is, however, a deeper problem. There are two key reasons why I believe that using market capitalisation as a starting point hampers these studies.

1. The growth of intangibles

Crudely speaking, the value of a brand is calculated from a corporation’s intangibles – a group of assets that accountants cannot put a fixed financial value on. Typically, this will include things like intellectual property (patents, trademarks, etc.), human capital and goodwill.

Over the past 30 years or so, for publicly listed firms, intangible assets have grown in both absolute value and as a proportion of a company’s value. There are many reasons for this, including the growth of service businesses (which consist mainly of human capital) and the distributed nature of supply chains (Apple, for example, doesn’t own the factory that makes iPhones, so it doesn’t have the tangible capital value of the factory sitting on its financial statements).

The growth of intangible assets has made it harder to assess brand. To properly assess the value of brand, you also have to assess the value of patents, trademarks, human capital, goodwill, and so on. Often, particularly with regard to R&D and patents, the information needed to make firm assessments of value isn’t publicly available.

Accountants recognise this. Just like marketing and communications, integration is the buzzword in financial reporting. There has been a call for, and some movement towards financial reports that disclose more (and more consistent) information about intangible assets and other things that affect a firm’s value. So-called ‘integrated reporting’ should, in theory, help brand valuation firms reach less varied conclusions.

2. Long term value vs. short term value

Brand, as every consultant will tell you, is a long term asset. It’s something to cultivate, build and invest in. It will draw customers towards you, it will differentiate you from your peers, it should outlast your factories and shops and offices.

Brands like Woolworths, stay in the public’s mind long after they have disappeared from the high street. That long-term association is something marketers regularly take advantage of. The resurrection of brands like TSB, Truman’s and Wispa are all excellent examples of brands where the product died before the brand, but the strength of the brand allowed the product to return.

If we’re all agreed on the long term value that brands create, and the need to take a long view on their care, then why are we measuring their value on metrics that receive daily scrutiny and have quarterly reporting? The financial measures upon which brand valuations are currently based are too closely linked to shareholder value that, as the current debate about corporate governance and responsible business show, is a very short term measure.

None of this is to say that the brand valuation firms are charlatans, or that they don’t do very good work. However, the variations in the numbers they come up with, coupled with the opaqueness of intangible asset values and the short termism of shareholder value means that their estimates are destined to fail.

The growth of data continues to pose a headache for digital marketers. The range of data sets available is bewildering and contains as many gaps as it does duplication. Growth has brought with it some questionable data gathering techniques.

Poorly scripted survey monkey polls morph from ‘quick and dirty’ research into facts. Google Analytics data is taken as gospel without any effort to remove spam. Data presented at conferences is copied and repurposed without any reference to the source.

It’s terrible that so much data, which informs how we spend a lot of time and money, is poorly gathered and used.

Here are three simple questions to ask to make sure you know you’re working with information you can trust.

What?

It shouldn’t really need saying, but the first step is to ask what data you really have. So many bad decisions are made because people don’t question their data sources. How was it collected? What biases does it have? What can it not tell us?

Let’s be frank, not all data sets are equal. For example, there are opinion polls that seek to genuinely capture public opinion and there are those that are designed to generate headlines. You need to differentiate between the two.

Only when you understand your data can you begin to get information of any value from it.

So what?

Once you’ve got to grips with your data, you then need to ask whether it means anything. Why is it relevant to your business and what you’re trying to achieve? If it’s not useful, dump it.

We’ve all seen the slides showing how many tweets are sent in a second or how many users Facebook has. They’re very impressive, but from a campaign planning perspective, they’re completely useless. Only keep the data that is useful.

Now what?

This is the crucial bit. What can you do with it? Can you repeat the data gathering to provide you with useful information about trends? Has it given you soame insights about your clients that can inform a creative brief? Ultimately, this is the most fun question. Once you have data you understand and is relevant, you can then have fun manipulating, querying and playing with it.

Employing these three simple questions should save you time, money and, crucially, provide you with a better understanding of where your marketing really is.

A marketing lesson for consultancies from my plumber.

The way people buy things is complicated. Their likes and dislikes are built over time and the specific effects of different elements of marketing are hard to gauge. There is, however, usually one activity that prompts a sale. For consumer goods, it’s usually something simple like an in-store promotion. For consulting firms, such activity is much harder – it’s difficult to target marketing activity at the exact moment someone’s putting together a pitch list.

So how can firms make themselves top of mind when they can’t easily be present at the point of the critical decision?

The best example I’ve seen of staying top of mind at the crucial moment is from my plumber, Ash. He does it using a radiator key. He’s had his phone number etched into hundreds of radiator keys and gives one to every customer. It’s cheap and it’s useful.

Ash’s thinking is that the only time people really worry about their heating is when it isn’t working. And the only thing that most people really know about radiators is how to bleed them.

So if their heating is below par, they bleed their radiators. If that fixes it, great. They’ll hopefully remember Ash gave them that key. If bleeding the radiators doesn’t work, his phone number is in their hand the second they realised they need to call a plumber.

Ash understands his customers and he’s found a way to be top of mind when they need him.

It’s hard for consulting firms to copy Ash. Consultancy purchases are rarely driven by a pressing need and there isn’t a uniform point at which clients decide to write a pitch list. Yet, the fundamentals are the same: you need a useable insight and a creative execution that puts your firm in the room when you’re not physically in the room. That’s the key to being top of mind.