Brand Value – What does it all mean?
There is now mounting awareness that brands, or rather intangible assets play an important role in generating and sustaining the financial performance of businesses. With high levels of competition and excess capacity in virtually every industry, strong brands help companies differentiate themselves in the market and communicate why their products and services are uniquely able to satisfy customer needs.
Management is increasingly held accountable for the contribution of their brands to commercial success. Smart investors want disclosure of brand values and marketing performance to improve their investment decisions.
Given the widespread interest in brand valuation, many company decision makers are now asking what it all means. There are also questions on what exactly is being valued, whether the trademarks, the brand or the branded business is being valued. The question about the purpose of valuation is also being raised and ultimately what are the methodologies that is being used to value brands.
In a webinar organised by Singapore Management University’s Centre for Marketing Excellence (CME) on 4 October, participants hailing from around Asia and various industries were enlightened about the Top 100 brands in Asia, how they have grown in brand value over time, and how the COVID-19 pandemic has impacted some. Through its Marketing Series, CME aims to share and disseminate knowledge among the SMU Community and industry practitioners on topics of relevance.
The insightful session was delivered by branding expert, Mr Samir Dixit, Managing Director of Brand Finance Asia Pacific and moderated by Professor of Marketing, Srinivas Reddy, CME’s Director. Prof Reddy said, “It is clear that Asian Brands continue to gain in importance globally. It is also reflected in their increased brand valuations highlighted by Brand Finance. We at CME have had a long association with Brand Finance and we are happy to bring their top 100 Asian Brands to our students and associates.”
With more than 30 years of global experience across brand, marketing, communications, management consulting and financial industries, Mr Dixit has handled global business and brand strategy, marketing ROI analysis, research, IP management, valuation, corporate communication, PR, global brand management, balanced scorecards, M&A branding, brand architecture, and brand governance.
Mr Dixit explained the meaning of brand value and debunked the myth that enterprise value and brand values grow in tandem. Brand valuation is a specific asset valuation which calculates the value of the transferable element of the brand.
Brands are valued for commercial, technical and strategic reasons. The benefits of brand valuation to the management include insight, strategy, benchmarking, education, communication and understanding. On the financial side, brand valuation helps in investor relations, mergers & acquisitions, joint ventures, licensing, tax compliance risks and litigation. Brand valuation links the effects of strategic marketing activities to business value, helps understand strengths and weaknesses, helps create a framework for marketing mix modelling and a framework for reporting on and managing brand performance.
Increasingly, analysts believe that acquired and internally generated intangibles should be included in the balance sheets and should be revalued each year. Brand values are driven by brand strength, business performance and economic outlook, and companies with strong brand values have proven to perform better consistently.
Mr Dixit illustrated the concepts of Branded Business Value, Enterprise Value and Brand Value using global examples such as the Virgin group and Unilever group. He also shared about the three leading brand valuation methodologies – Brand Finance, Interbrand and Brandz. Various ISO approaches are used in these methodologies, which include the cost approach, market approach, and income approach.
In the second part of the webinar, Mr Dixit also gave an overview of the Top 100 brands in the world today. Unsurprisingly, a majority of the 100 spots are currently dominated by the banking and technology sectors. Significant impact of the pandemic can also be seen. The leisure, tourism and travel sectors decreased in brand value, while technology, retail and spirits have experienced an uptrend.
The session included an engaging Question and Answer segment, with interesting discussions on when brand building should start, how to maintain the consistency of brand across products and the importance of government support to grow Small and Medium Enterprises.
Ending the session, Mr Dixit highlighted three important Key Performance Indicators that brand custodians should focus on in order to have successful brands in the long run; the brand governance strength index (GSI), brand strength index (BSI) and brand value itself. As a final word, he said “If you want your brand to be an asset, treat it like an asset.”