What would you do if one of your core lines of business was called into question by a corporately-sponsored analysis… and those findings were subsequently used by a professor/consultant to describe your work as “’unproven crap?”
You might do what Brand Finance did – issue a written response and challenge its critics and the entire branding industry to an open debate. They, along with Millward Brown and Interbrand, recently had their brand valuation practices accused of being worth “nil.” That term, along with “crap,’ was used to typify the work of these three companies, all of which follow the ISO 10668 global brand valuation standard. Nonetheless, professor and consultant Mark Ritson recently wrote an article declaring that, based on a comparative analysis (presented by trademark firm Markables) of those firm’s valuations with actual corporate purchase prices, “the entire brand valuation game is unfortunately another example of ‘fluffy marketing.’”
Given the seriousness and severity of the criticism, Brandingmag reached out to each of the three named firms. Interbrand declined to comment, but Brand Finance (in the form of sending its posted and disseminated written counter) and Millward Brown both responded in support of their practices.
We asked two questions:
1) Do you accept the Markables analysis?
Brand Finance: David Haigh, CEO answered “The assertion that purchase price allocations necessarily represent a fair value of brands is… deeply flawed. In addition, several brands that form part of Markables’ analysis have been transferred internally, making the figure highly unlikely to represent the true market value. Brand Finance will be conducting an analysis over the coming days and weeks to thoroughly unpick Markables’ research and set the record straight.”
Millward Brown Vermeer: Greg Christoforides, Senior Partner, replied “We can’t comment specifically on the analysis, other than to say it is one way to look at data. (It also includes some errors in the text; for example, Disney and Mercedes are both included in the Millward Brown BrandZ Top 100).”
“The assertion that purchase price allocations necessarily represent a fair value of brands is… deeply flawed.” – David Haigh, Brand Finance
2) How do you respond to Mark Ritson’s conclusion that “it’s time to declare the value of valuation to be nil.”
Brand Finance: David Haigh said “The suggestion that public brand valuations studies are ‘crap’ and worthless, simply because value opinions differ, is ill-informed nonsense. No one is surprised that valuation opinions for other assets vary widely, so why should brand valuers be expected to come to identical conclusions?
Compare this with share prices. Looking at Bloomberg today I find that 67 equity analysts follow Apple. The current Apple share price is $130. The lowest target price among analysts is $65 and the highest is $185. The 12-month consensus target price is $143. So there is a 300% high: low variance in valuation opinions. 66% say buy, 30% say hold and 4% say sell.
Brand Finance, Interbrand and Millward Brown all agree that Apple is the most valuable brand in the world. In 2014 Brand Finance valued the Apple brand at $104 billion. Interbrand said $119 billion. Millward Brown said $148 billion. That is a variance of only 42%, which is hardly surprising in my view. For other brands the variance may be much greater, but that is no surprise either.”
Millward Brown Vermeer: Greg Christoforides stated, “We absolutely believe that brands have value, and that the value can be measured. Consumers will pay more for one brand over another – based on meaning, difference and salience – and successful brand stewards focus on driving a premium for their brand.
There are a number of methods to evaluate brand value, and Millward Brown Vermeer’s methodology includes both financial and consumer input, which we think is the best representation of current and future prospects. Do clients take the everything at face value as Ritson suggests? Of course not. But they do use the information as a gauge of brand value over time, within their category and across the total marketplace.”
We absolutely believe that brands have value, and that the value can be measured. –Greg Christoforides, MIllward Brown Vermeer
Throwing down the gauntlet for an open debate
In addition to these responses, David Haigh of Brand Finance responded with a challenge of his own: “I challenge Mark Ritson, Markables and any other interested parties to a debate in London when the newly convened ISO brand valuation committee reconvenes in London between the 9th and 12th June.” As of publication, Brandingmag was not aware of any response to this invitation to a public debate.
Image: Ken Teegardin