Though he is a critic of theoretical brand valuation, he does believe that using metrics as a management tool, as RHM does, is a good thing, but prefers the term “brand evaluation.“
“The learning that comes from brand evaluation forces you to ask the tough questions about where you are making your money and future trends in the market,” he says. “I don’t think we’ll ever be at the stage where it is fully treated as an investment, but there is more pressure for marketing people to provide more hard data.”
Whatever the accounting arguments, says David Haigh, chief executive of Brand Finance, as brand valuation moves increasingly into the domain of finance, it’s becoming less “airy fairy waffle” and more about hard numbers. “Brand valuation has really come of age. You are now talking to real people about real numbers.”
A Call for Creativity
Though consumer-goods companies have been at the forefront in adopting brand valuation, other sectors are catching up. Take Telefónica, Spain’s €28 billion formerly state-owned phone company. Having hired FutureBrand, a consulting firm, to do its first global brand valuation in 1999, it launched its first annual brand measurement programme last year.
“This is not a food company where the market is fairly stable year to year,” says Marisa Guijarro, vice general director of marketing at Telefónica. “Technology and the markets we operate in are changing all the time. The only thing that doesn’t change is your brand. You need to know very well how your brand is performing to make strategic decisions.”
Telefónica’s initial brand valuation—covering seven countries and six business sectors—helped the company identify and act upon a number of strategic risks and opportunities. Hence its decision to reduce the number of company-owned brands in the mobile telephony market. The ongoing brand-measurement programme—a software-based scorecard, employing economic value added (EVA) evaluations—brings finance and marketing together to assess a number of key topics, including budget allocations, M&A analysis and co-branding decisions.
The result at Telefónica and other companies undertaking similar exercises is nothing short of a revolution, says Sebastian Shapiro, New York-based head of brand evaluation at FutureBrand. Before brand-management metrics began taking off, he says, “you’d get the marketing manager coming in to tell the board about an improved aspect of the ‘hipness’ of a brand, and the finance guy talking about the ROACE spread, and nobody would understand what the other was talking about. We’re trying to put it in more of a common business and strategic planning language.”
Though it is no small feat, Guijarro is in favour of such a effort. Arriving at hard numbers through brand-valuation exercises “has meant finance understands what we are doing and that it is very important to us strategically as a company.”