BRANDS LOSE GROUND
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.