I recently read an article that reported on South Africa’s most valued brands for 2016. The country’s top-10 brands were MTN, Vodacom, Sasol, Standard Bank, Woolworths, FNB, Absa, Nedbank, Investec and Mediclinic; with Multichoice bubbling under at number 11.
What was missing in this article was the ‘so what?’
So what if MTN is the most valued brand in South Africa and Africa? Does it mean that it requires a lot of cash to acquire this asset based on the equity that it has built over the years trading within the African market? Does a higher brand value mean that the firm has better access to capital and this capital is being offered to them at a more affordable rate than brands that are valued lower than it?
Does a higher brand value mean that your firm is in good financial health and will continue to deliver a good return for its stakeholders? Does it also imply that a higher brand value means that you’ll be able to attract the best talent who will contribute to the further appreciation of the brand going forward?
These ambassadors can develop proxies that they can use to bring in a bit of tangibility when it comes to the benefits of using the brand. The use of proxies to evaluate the value of a brand would, therefore, provide some insight on how the brand is benefitting the organisation; converting these insights into dollars and cents from a savings, top- and bottom-line contribution standpoint.
So, from the point above, the problem with valuing a brand is that it is an intangible asset. Measuring anything intangible comes with the setback of subjective measurement. From my reading, there are many ways to value a brand, and the differing methodologies also produce differing results. The differing results often inspire heated debate on whose methodology provides the better measurement, and also, what proxies can be used as further reference to determine whether the better approach was on the money.
But the unanswered question of ‘so what?’ still remains.
As an example: MTN’s brand was valued at R37 billion in 2016, down from R54 billion in 2015. This signifies a drop in value of R17 billion within the space of a year. As a stakeholder, does this mean that I should start looking for employment elsewhere? Reducing my shareholding to invest in other assets? Re-negotiating interest rates for money lent to the bank based on the company being at a higher risk based on the loss in brand value? Does it also mean that the company neglected the nurture of the brand during the operating year, with all of the brand related activities taking away instead of adding to the existing equity?
An example of an answered ‘so what?’ is:
Our brand is so valuable that we should consider expanding into other regional markets. With our solid brand value, we can borrow money at a favourable interest rate, enabling us to invest on debt instead of equity and pay back what we owe in the shortest possible time without any impact on our bottom-line. A better-valued brand also means that we can outcompete our competition both locally and externally, including us trying our luck in geographically distant markets.
…or at least that is what I think a brand valuation should inform.