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Monday, November 5, 2007

Brand momentum strategies released, but methodology for brand value determination still unclear

Landor Associates and Stern Stewart's BrandEconomics unit released on November 1 the results of its third Breakaway Brands Study. The study analyzes brands that "exhibited sustained, quantifiable growth over a three-year period, delivering brand-driven value to the bottom line between 2003-2006." It includes about 2,500 brands from Young & Rubicam's BrandAsset® Valuator database. (Some brands, like Yahoo!, are excluded from this database, says Fortune (11/12/07), and they include "nonprofits and media firms with their own distribution channel -- whatever that means.)

Top Brands

Nevertheless, the top 10 momentum brands, ranked in descending order by value gained over the three year period, include:

1. General Electric
2. iPod
3. Microsoft
4. Blackberry
5. Samsung
6. Costco
7. T.J. Maxx
8. Barnes & Noble
9. Propel
10. Stonyfield Farm

Key Findings

Three key findings from the study, says Landor, include:

1. It is important to engage customers through branded experiences. "Samsung, Barnes & Noble and TJ Maxx have each leveraged deep customer insight to deliver uniquely relevant and engaging in-store and online experiences to consumers old and new."

2. Partnerships can help to build the brand. "BlackBerry built strong relationships with virtually all of the national telephone companies to attract independent subscribers, while Gatorade’s Propel and Apple’s iPod also saw growth through partnering strategies."

3. Businesses that are brand-centric have greater brand success. "Even mighty industrial and technology giants like GE and Microsoft have demonstrated they can accomplish significant cultural change through brand-driven initiatives, while yogurt maker Stonyfield Farms has retained and even enhanced its core brand persona despite coming under the wing of a global food giant."

Fortune notes the importance of corporate social responsibility to the top-ranked brands. For example, Microsoft's brand has been bolstered by its "kinder, gentler" image..."the company's image as a fierce, rapacious monopolist has faded" while General Electric's brand growth "is attributable almost entirely to its environmental efforts."

Brand valuation still unclear

Personally, one thing that still confuses me is how the value of a brand is determined. I went to the Landor web site and learned that BrandEconomics uses an "economic value added" framework to determine brand value. The site says that "EVA involves deducting a charge from post-tax operating profits that represents the opportunity cost of all the capital employed by the business. The capital charge represents the minimum return required by the providers of capital to the business; whatever a company produces over and above this represents an excess return on the investment." The company also uses "Young & Rubicam Inc.’s Brand Asset Valuator (BAV®)...the world’s largest database of consumer attitudes towards individual brands."

I would like to know how EVA and BAV work together to yield a number. Fortune says that Landor starts with BAV then turns to the financial calculations, but this is not specific enough. This is the crux of everything related to brand--and it's still murky.