New Studies Show that Brand Value can Represent over 50% of a Company's Market Value, and the Largest Piece even for Business to Business Enterprises

Share Article

Brand Value is usually the largest component in a company's market value, even for business to business companies. However, this is often not recognized, and even more rarely is brand value managed to grow company value best. Usually, money, time, and thought which is invested in a brand pays off many times.

The value of the Coca-Cola brand, as reported annually in Business Week, is 58.9% of the market capitalization of the entire company. The IBM brand is 39.1% of the market cap. Even for Hewlett-Packard, the brand is 18.7% of the market capitalization. Yet for the most part, the scale of the value of brands in today's capital markets is severely underestimated. A huge mistake! While the above may seem only important to large companies and brands, the true fact is, the same proportions apply to medium and small-sized companies -- public and private. And when it's lost, so is the company.

The Brand is rarely addressed when a company is getting special attention. Research by Max Brand Equity has shown that there are a number of reasons for this:

  • Top Management does not understand how brands accrue value, nor how to grow it.
  • Brand building is complex, not simply a matter of advertising or new products.
  • Brand building is seen as expensive, largely because it is often seen as a function of advertising.
  • Brand building is seen as a lengthy task, and many people do not have the patience for it.

However, in successful companies, brands are a key component of the company's value. Even in Business to Business environments, brands are very important, indeed in anything other than pure commodities (of which there are very few), brands may often be more important than in some consumer driven businesses. For example, the author developed a program branding electrons for an energy company, Reliant Energy. The Oracle Brand accounts for 12.5% of the company's market capitalization -- a healthy, by any standard, $ 11.5 Billion!

So in seeking to maximize the market value of a company, in many cases the rational thing to do is to focus as strong a spotlight on the brand as on any other element in the company. In a consumer product or service company, it may indeed, merit even more attention than all other elements combined.

Experience and study shows that effort put into brand development may be more leverageable than comparable effort put into other areas. However, in inexperienced hands it can take far longer to have an effect. The reason to use very senior, experienced people with both brand and general management expertise is that they can put a phased plan into effect. This gets fast results in some areas, while developing a living plan which has a cumulative effect. Not doing this simply leaves money on the table. Postponing it simply postpones enhanced valuation.

Richard Guha, Partner in Max Brand Equity, ex-P&G and Mars, Inc executive, former CMO in Fortune 500 companies, and ex-President of Reliant Energy Retail, said, "CEOs and owners of many companies are leaving money on the table by either not recognizing the value of the brand, or not knowing how to grow that value."

These and other issues are discussed regularly on http://takecontrolof.blogspot.com/

Max Brand Equity, http://www.maxbrandequity.com is a professional services firm which assists corporations, Turnaround management firms, and private equity firms to value and manage branded goods and services companies. The firm works to assess potential, identify steps required to reach it, and execute against that brief.

For more details, please contact Richard Guha, Partner, at Richard.Guha @ maxbrandequity.com or 626-284-6965

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author

RICHARD GUHA
Visit website