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“How do I place a financial value on my brand?” the CEO asked.
I was like a deer caught in the glare of headlights. What kind of question was that? It was like asking “What’s the value of my financial system?”, I thought. But I was urging this executive to invest significant funds in a marketing campaign . . .
“Well, it depends on your definition of valuation,” I replied. I could see the CEO, a former CFO, raising one eyebrow at receiving an “it depends” answer from a marketing consultant, so I hurried to continue.
“In an M&A scenario, a certain goodwill value could be assigned to a brand based on its ability to generate future business or the amount that has been invested in building it (or, of course, what it is perceived to be worth by the purchaser). Marketing people and financiers could argue about this ad nauseam. The real issue is, what’s the purpose of the question? What is the objective of wanting to place a value on the brand?” Now I was warming to my theme.
“Is it for financial purposes so the brand can be shown as a balance sheet asset? Is it as part of an M&A negotiation? Is it to help determine what should be invested to sustain it? Or is it to understand the return on investment being made in sustaining the brand?”
“We need to agree on what exactly you’re trying to measure. From a marketing perspective, there are well-established ways to value a brand that revolve more around its purpose: awareness, reputation, securing differentiated pricing, enabling future revenue streams, attracting investment or talent, etc.”
“In my experience, these are more typical metrics with which to baseline brand value and monitor its progress over time than traditional financial metrics.”
“There are lots of firms, including accounting firms, that are qualified to attribute a financial value range to a brand. I’m just not sure what you’d use that information for right now. Unless you’re looking to monetize your brand as part of a financial transaction, I recommend using the marketing metrics I’ve proposed in your marketing plan rather than financial metrics.” I held my breath as she considered my answer.
“Fine”, she said. “I’ll expect your campaign report in my inbox on a weekly basis. We’ll reconvene at the end of the quarter so you can show me, using your marketing metrics, how you’ve increased the value of our brand.”
I had just started to relax when she continued, “Now, speaking of ‘value’, let’s talk about your retainer . . .”