“If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and trademarks, and I would fare better than you.”
–John Stewart, Chairman of Quaker, 1900
TAMPA, FL – Business owners considering sale or merger should be taking steps to become a brand rather than generic in order to improve company value to increase profit at closing, according to Andrew Bowen, APR, founder and senior counsel at Clearview Communications and Public Relations/the Message Masters (www.clearviewcom.com) .
One established method of doing both, Bowen recommends, is to plan and launch a well-crafted marketing campaign that drives positive visibility to multiply brand value. “An investment in a year-long marketing/public relations campaign to raise brand visibility for your company can result in significant multiples of that amount in eventual profit at sale,” says Bowen, a marketing/public relations executive for more than 25 years.
Here is some research from Clearview that supports taking that action, sooner rather than later:
• Brand value can be used to negotiate a price when licensing the brand, transferring the brand to another firm, or valuing a firm for mergers and acquisitions (Justin Anderson, Cal State)
• A study by Interbrand and JP Morgan concluded that on average, brands, that is, positive market visibility, account for 30% of shareholder value. The converse? No brand recognition may deprive you and your firm of 30% of its market value.
• For major brands, the shareholder value of the highly visible brand is much higher. For Coca-Cola, the brand name alone is estimated at 60% of market cap. For Microsoft, 65%; IBM, 51%; GE, 41%; Disney, 29%; Mercedes-Benz, 21%. McDonalds? An astonishing 71%. Visibility is indeed valuable, while invisibility is worthless.
• In general, name brands command 30% more margin than generics (common, standard, non-specific). Which one are you? Brand or generic?
• There is a global trend in corporate accounting to treat the brand value as an asset on the balance sheet that in some cases has more genuine shareholder value than
factories and employees.
• Brand value can be calculated as the net present value of future price premiums that a branded product will command over an unbranded or generic equivalent.
• People will pay more for a branded product than a generic one, and more for a favored brand than the alternatives. (Brand research firm Millward Brown)
• Brand equity has been defined as the financial value that a firm derives from customer response to the marketing of a brand.
• Investors will and should pay more for a firm that owns brands with favorable brand imagery associations and strong loyalty than a similar firm with less appealing brands (Madden et all 2006).
• The firm that owns the brand derives economic rent, which is earned revenue to the firm; the firm benefits from the favorable associations created by the firm’s marketing policies for the brand.
• Brand image resides in the consumers’ minds, but brand equity is a dollar value to the firm. It is the profit that a firm makes from owning the brand.