The Blake Project, the brand consultancy behind Branding Strategy Insider, delivers interactive brand education workshops and keynote speeches designed to align marketers on essential concepts in brand management and empower them to release the full potential of the brands they manage.
Twenty plus 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 Summer 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 $30.9 bn, down 4% from 2006. 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. It is hardly likely that IBM has the same brand strength in China as it does in the US, nor that the brand has the same magnitude of influence on decision-making in both markets. Yet IBM was most likely awarded a singular global rating for its multinational, multi-dimensional brand equity.
These flaws may help to explain some of the peculiarities in the current top 100. In 2007, was Coca-Cola really the world's most valuable brand?
If you had a choice between owning the Microsoft brand or the world's top 12 luxury brands (including Louis Vuitton, Chanel, Porsche and Armani, to name a third of them), would you really be better off going with software? And can Interbrand seriously exclude Wal-Mart completely from its list on the technicality that 90% of its revenues come from the US? Wal-Mart, not a strong, global brand? Come on.
In fairness, Interbrand does, very quietly, acknowledge the flaws in its method, but argues that finding accurate international metrics for brand strength is all but impossible to do without clients engaging its services.
There is another method. Enter WPP’s Brand Z Top 100, an alternative brand valuation system that uses up-to-date international consumer data to value the world's leading brands.
30 SECONDS ON … INTERBRAND'S TOP 100 GLOBAL BRANDS
- Ford was the biggest loser in Interbrand's 2007 survey. Its value dropped from $11bn in 2006 to $8.9bn in 2007 – a 19% drop.
- Coca-Cola was rated the most valuable brand at $65.3bn, followed by Microsoft in second place at $58.7bn.
- The biggest winner was Google, which posted a 44% uplift in its value from $12.3bn in 2006 to $17.8bn.
- Apple's value also rose from $9.1bn to $11bn on the back of the continued success of its iPhone.
- The highest-ranked non-US brand was Finnish telecoms company Nokia, placed fifth in the table, with a value of $33.6bn.
- The highest-placed UK brand was HSBC, which came 22nd in the table, with a valuation of $13.5bn.
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