DANA POINT, CA: Attempts to value brands are often replete with flaws, limiting their potential impact when it comes to driving improved marketing performance, a leading executive from OgilvyRED has argued.
Joanna Seddon, president of the strategic consulting group, discussed this subject at the Association of National Advertisers' (ANA) 2015 Brand Masters Conference in Dana Point, California.
"In order to make brand valuation actionable and meaningful, we have to throw out everything we think about brand valuation," she asserted. (For more, including how this activity should be reformed going forward, read Warc's exclusive report: OglivyRED's Seddon champions brand valuation.)
"We have to turn it on its head. It has to stop being a thing, a valuation, a number. That's not interesting. We can't do much with a number."
Part of the problem, Seddon warned, is the discipline's history in "acquisition accounting" – namely, that firms which had frequently overpaid when buying brands were seeking to salvage the situation.
"With a spate of takeovers in consumer packaged goods companies in the 1980s, the acquirers paid large sums of money – large premiums over the assets on the balance sheet – for these businesses," she said.
"Some bright spark had the idea, 'Let's separate brand from goodwill. Let's valuate.' And brand valuation was born."
Characterising brands as "intangible assets" in this way does have some undeniable benefits, but not if the focus is simply on generating a hard-and-fast figure.
"The accountants rushed in," Seddon said, "but all they were after was tax and accounting advantages. All they wanted was a number to record. They didn't really care how they got to it. It was just a number.
"Unfortunately, this idea of brand valuation still persists today. It's enshrined in accounting standards, tax regulations and operational standards.
"It's about a point in time. It's about a number. There is no link to the business. You can't do anything with it. And the accounting bias called 'brand valuation' has carried over into marketing."
Rather than secretive methodologies and obsessing over competing sets of rankings, Seddon therefore urged marketers to profoundly reimagine the concept and purpose of brand valuation.
"It has to become the link between marketing and money, so that we can use it to understand how a brand and marketing drive revenues and profits."
Data sourced from Warc