Measuring and valuing brands

This presentation is all about measuring and valuing brands. So how can you measure something as intangible as a brand? Well, if a brand is a set of ideas in people’s minds that influences how they think, feel, and act and so creates commercial and social value, then you can measure, at least in theory, the strength of those ideas, the change in how people act, and the value that’s therefore created. And looking at ideas is an idealist approach. Looking at behaviour, how people act is a behaviourist approach. And looking at the value created is a financial approach. And we’ll look at each of these three approaches to measuring and valuing brands. First, the idealist one, measuring ideas.

And traditionally, it’s these five things that get measured. This is a sort of ladder really, starting with awareness, have people heard of you? And then measuring consideration, do they consider what you offer? Do they think of you when they’re thinking of buying soap? Do they think of Dove? And then preference, do they actually believe that you’re better than the other soap brands? Then satisfaction, having bought Dove, did they have a positive experience? And then loyalty, would they keep buying Dove and would they actually recommend it to their friends?

The advertising agency Y&R has a slightly different methodology

that measures four things: differentiation, relevance, esteem, and knowledge, and combines them together to create a measurement of the strength of a brand. So this is a slightly different way of measuring the ideas in people’s minds. And it does this by going out and interviewing thousands of people constantly.

WPP also has a thing called BrandZ, which surveys over 150,000 consumers every year about a wide range of brands and discovers what they’re thinking, how they’re feeling, the ideas in their minds about those brands. And puts those calls into what it calls a brand dynamics pyramid. Starting with presence, which is a little bit like awareness and going up to bonding, which is a little bit like loyalty.

So secondly, how do you measure behaviour? How do you measure what consumers actually do?

Well, there’s lots of ways.

But the typical behaviours to track are these: the number of customers, their average spend, their frequency of buying, and therefore the revenue that’s generated. And those things are influenced by ideas that we talked about in the previous section, so awareness and consideration, influence, how many customers you have, preference, influences, their average spend. [? Does ?] satisfaction and loyalty influence their frequency of buying? But this is much more looking, not at ideas in people’s minds,

but at solid data: number of customers, average spend, frequency of buying, revenue.

And then thirdly, how do you measure the value that’s created by all of this activity?

Well, Tim Ambler of London Business School has defined a brand as an upstream reservoir of future cash flows. Can you put a figure to that? Can you put a dollar amount to that? Lots of people think that you can. And three agencies use very sophisticated techniques to create dollar valuations for the world’s biggest brands. And they do this and update it every year. The latest figures are coming up now. Here we go. Interbrand, BrandZ, Brand Finance all have a league table of brand valuations. And here they are in billion dollars. So Interbrand thinks that Apple is the most valuable brand in the world. It’s $119 billion. BrandZ thinks it’s Google. Brand Finance thinks it’s Apple.

So the lists are similar, but they’re not the same. And the valuations differ quite a lot. So what conclusions would you draw from looking at these figures?

The next step in measuring value is to have a look at social value as well as commercial value. And nobody’s yet really done that. So how would you go about doing it?

Here’s a good book if you want to find out more, Vulcans, Earthlings, and Marketing ROI.