Magazine article Marketing

Mark Ritson on Branding: Microsoft over Louis Vuitton? Really?

Magazine article Marketing

Mark Ritson on Branding: Microsoft over Louis Vuitton? Really?

Article excerpt

Twenty years ago a widening disparity began to appear between the tangible net assets of a company and the actual price that would be paid to buy that company. This created a maelstrom of merger, acquisition and defence as companies scrambled to value their most precious assets - their brands.

Interbrand emerged from this era as the industry leader in brand valuation and, since 1999, its joint publication with BusinessWeek of the top 100 global brands has solidified that position. Each August Interbrand tells us what the world's most valuable brands are and, unlike other marketing surveys, the managerial world listens.

How does it do it? To cut a long story very short, Interbrand uses three sources of data to value a brand. First, the expected earnings the brand will generate for the next six years. Second, the percentage of earnings that can be attributed to the brand, as opposed to other decision-making factors such as location. Third, the relative strength of the brand. The higher the brand strength, the less risky the six-year earnings predictions and the more likely they are to materialise.

Combining these figures produces remarkably precise calculations. Last year, for example, Interbrand informed us that Intel's brand was worth dollars 35.6bn (pounds 20bn), up 6% on 2004. As marketers, we are typically afraid of numbers, especially big ones that are derived using super-complex financial calculations.

The reality, however, is that despite the apparent precision and current dominance of Interbrand's top 100, I would argue that much of it is actually a load of old tosh.

The problem with the top 100 is that the majority of the brands on the list did not work directly with Interbrand. Whereas the expected future earnings of a brand can be extrapolated from annual reports and the estimates of merchant banks, the brand data in the survey is often based on a series of educated guesses by a bunch of Interbrand employees. Peel away the complex calculations and impressive PR and ultimately you have a bunch of accountants using a simplistic seven-point scale that some bloke came up with years ago to score brands on which they have no consumer data.

Even worse, the top 100 may feature global brands, but their presence is often the result of a single global rating for brand strength that ignores the manifest variations that most brands experience from market to market. …

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