BRANDS LOSE GROUND

Finweek English Edition - - Advertising & Marketing -

IF YOUNG & RU­BI­CAM is to be be­lieved there are se­ri­ous flaws in the tra­di­tional way most brands are val­ued – and those flaws could be more costly for the world’s econ­omy than the sub-prime dis­as­ter. Af­ter years of strug­gling to per­suade big busi­ness to put brand val­ues on their bal­ance sheets, the brand mea­sure­ment busi­ness has now suc­ceeded too well. Like a thun­der­bolt in 2004, Y&R’s BrandAs­set Val­u­a­tor made a wor­ry­ing dis­cov­ery: while brand own­ers were record­ing record val­ues for their brands, con­sumers were los­ing faith, trust, aware­ness and ad­mi­ra­tion for thou­sands of brands. Not a few – thou­sands.

And those con­sumers are the true repos­i­to­ries of brand value. Brands re­side in the per­cep­tions of the peo­ple who buy, con­sume or use them. If they think a brand is more valu­able than its com­pe­ti­tion then it is. In this field, per­cep­tion is re­al­ity.

“We found that most brands weren’t adding to in­tan­gi­ble value of their en­ter­prises… at the same time, how­ever, brands were cre­at­ing more and more value for their share­hold­ers,” write John Gerzema and Ed Le­bar in The Brand Bub­ble. “Be­cause bullish in­vestors be­lieved that brands were grow­ing, they ex­pected more rev­enue growth and higher share prices in the fu­ture.

“When all the facts were put to­gether we dis­cov­ered that, yes, there is an in­creas­ing ex­pan­sion of in­tan­gi­ble value, but this is ac­tu­ally the by-prod­uct of fewer and fewer brands.”

There’s cred­i­ble ev­i­dence com­pa­nies think brands are worth more than con­sumers do. The num­ber of high-per­for­mance, value-cre­at­ing brands is di­min­ish­ing across the board. Yet at the same time the fi­nan­cial mar­kets keep rais­ing brand val­u­a­tions. The re­sult? A brand bub­ble that could erase large por­tions of cor­po­rate in­tan­gi­ble value and send an­other shock­wave through the global econ­omy. And the trou­ble with bub­bles is that they burst. In­evitably.

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