What's Brand Valuation For?
Richard Huntington points out that the season of brand valuation is upon us again and that WPP and Millward Brown have determined the top 100 brands by mathematical methods. He outlines their arguments here and provides a link to the site (complete with its annoying oral explanations).
It all seems faintly ridiculous to me because valuations may go down as well as up and I'm not sure what you're meant to do with the valuation once you've assessed it. As ever, to this cynic, it reeks of trying to justify marketing efforts via recourse to the tools of the accountant and, in doing so, it is filled with assumptions that are entirely subjective.
Take the second stage of the valuation - whereby the proportion of intangible income that comes from the "most commited" consumers i.e. those not attracted by price or functional issues. I sort of see the logic (although I always thought price and function were key elements of any brand) but, even within their parameters, how do you determine the degree of commitment to the brand? Are early adopters commited to the brand or to the street cred of being the guy with the new stuff; are followers less commited or does the brand prove all important in tipping their purchase decision; and are heavy users commited to the brand or just heavy users who would move their heavy use to an alternate brand if it came along?
Ascribing financial values to non-financial attributes is faught with danger, so why not just focus on the existing financial data? Call me simplistic but total sales is a pretty good indicator of how much people are commited to the brand and gross margins indicate the premium those people are prepared to pay for that commitment. Real figures that give a good idea of how customers rather than branding experts value your brand.