Week 10 - Intro to Brand Valuation

Brands – what do they do, what makes them valuable, how do we account for them?



Honestly, what motivates someone to
put this on their vehicle, besides an
irrational brand loyalty? Still, these are
quite popular, and one can pick what
brand they want to show dislike for.



A successful brand evokes recognition and value in the eyes of the consumer. They can play upon strong emotions, such as tradition. If my mother’s mother used Clabber Girl Baking Powder for the traditional Christmas dessert, than that is the one that I also must use (or it just won’t be the same). My grandfather was a Ford dealer for decades starting back in the early 50’s (Tom O’Daniel Ford right in Bloomington), his dedication to the brand was so especially fierce, that my bringing home a Chevrolet resulted in open disappointment. He was always trying to get me to the dealership long after he retired, saying that only Ford had the value and quality worth having. He was thrilled in 1998 when I bought an Explorer… I never had the heart to tell him it was the worst vehicle (it was expensive, thirsty and had lots of problems) I had ever owned!    

The next Pepsi campaign to feature
Michael Jackson

A brand is a product’s reputation, built bit by painstaking bit, to portray what the company wants the consumer to perceive when they see the brand. This could be low cost, quality, performance, status, etc. It takes great effort to build the brand and it is all too easy for the reputation to become damaged, for instance by a quality issue or campaign. Once that trust is damaged, it can be rebuilt, but takes a tremendous amount of time and effort. We have the example of Tiger Woods to demonstrate this. However, in Tiger’s case, I do believe that he may be on the cusp of rebuilding much of what was lost. I see that Pepsi is getting ready to introduce a new promotion featuring Michael Jackson. Who would have thought, after all of the scandal surrounding MJ, that a strong brand like Pepsi would use this as their primary strategy to claw back declining market share from its competition? http://abcnews.go.com/blogs/business/2012/05/pepsi-announces-michael-jackson-ad-campaign/

A brand also defines to the consumer what to expect when they buy the product; a brand implies a consistency that consumers come to rely on. One can be assured that entering a McDonalds’ anywhere in the nation, that a QuarterPounder with Cheese will look and taste exactly the same. Although there is a focus to adapt the brand to respond to regional tastes and cultural expectations, McDonalds has been very effective at promoting the brand all over the world.

Where's the Beef? I took this picture while travelling in India
last year. Instead of the Big Mac with hamburger, McDonalds has
introduced the Chicken Maharaja Mac. The Filet-O-Fish is the same.

Therefore, what makes a brand valuable? It is that despite the availability of substitutes at lower prices, consumers are loyal to purchasing the brand. They promote the brand themselves by word of mouth, by wearing  promotional clothing, by decorating their homes and vehicles to let others know about the brand. Consumers derive self-esteem from promoting the brand. The fact that anyone would pay $1700+ for a Gucci handbag that costs $50 to make is the overwhelming argument (although incomprehensible to me personally) that brands matter, and that they are valuable.  

I believe that brands should be included on the balance sheet, although I still struggle with an objective way to quantify them, despite the methods mentioned in the Brand Valuation article. To me, it is just like a tangible asset, and Professor Talbot mentioned real estate as a good example in his video. True value is what someone else is willing to pay for the asset, no matter whether it is tangible or intangible. We know that if McDonalds’ or Coca Cola were to be acquired, it would cost much more to purchase than just the value of their buildings and equipment. It is this excess that should be placed on the balance sheet.