Brand value bubble ready to burst? ~ Brand Mix

Wednesday, October 15, 2008

Brand value bubble ready to burst?

Not wanting to be left out of anything, we branders now have our very own bubble to talk about.

A new book, titled The Brand Bubble claims that most worldwide brands are dangerously overvalued by financial markets in comparison to their value in the minds of consumers. If this bubble bursts, company values could fall by billions/trillions of dollars.

Authors John Gerzema and Ed Lebar reached this gloomy conclusion by taking a look at 15 years of data from BrandAsset Valuator (BAV), the world's largest database of consumer attitudes to brands. Their conclusion is that investors are dramatically overvaluing brands because they are looking at the wrong metrics, specifically brand trust and awareness. Gerzema and Lebar show that these measures do not correlate with real brand value and, furthermore, that companies that try and increase these scores via traditional awareness-building marketing programs are likely to actually destroy value.

What companies and investors should be focusing on is "energized differentiation" or, in less technical language, a company's "appetite for creativity and change." Moving the needle on that metric will help drive brand value and start closing the gap between how consumers perceive and investors value brands. The book offers a model to help companies assess and develop energized differentiation in their own brands.

A while back, I wrote about the dangers of focusing on things that can be measured rather than things that matter. In that post, I used the example from the medical field where doctors rely on proxy metrics to see if a drug is working. The problem is that this "treating the numbers" approach backfires if there are faulty assumptions made about the relationship between the condition and the proxy metric.

Tracking brand awareness because it's easy seems to be a classic case of this problem, close to home.

Previous Posts in the Death by Tools and Metrics series:
1) Discounted Cash Flow and Earnings per Share
2) The P&L
3) Same store sales
4) ROI
5) Treating the numbers (measuring what you can measure instead of what's important)


Anonymous said...

Marklives recently interviewed co-author John Gerzema. You can check it out here

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