Week 10: Brand Valuation

In Week 10, I spend much of my time doing the marketing plan. My focus is on the IMC section of the plan. I get a chance to use IU business resources extensively again since the first year in-residence. Mintel reports and Market Research provide great source of information. I could find most of research data for the marketing plan there.

I am amazed with how today’s digital media technology is used in marketing communications and the ripple effect that it could create. Some interesting stories about using social networks in automotive industry:  http://www.headlightblog.com/2010/09/bentley-tries-its-hand-at-digitally-revealing-its-redesigned-continental-gt/ . It seems that the key is to generate initial interest and let consumers help create buzz and keep customer interaction.

Brand creates what is known as intangible value. This reminds me of what Rory Sutherland presented in his talk - advertising adds value to a product by changing perception, rather than the product itself. What makes a brand valuable? I think it’s all about consumers’ perception. Brands offer an extra value – an intangible value – to the consumers. That value becomes the major motivation for consumers to purchase the tangible product.  

Brand gives a product a distinct identity and differentiates it from others. A brand not only identifies a particular product, but it also reminds consumers of the value that differentiate the product from others. Of course, the products must have underlying benefits and differentiation in the first place (why bother branding cattle if it does not have good quality). Once the consumers can associate a brand with the value (both intangible and tangible) of product, then they will routinely buying the brand they like without spending much time evaluating and making decision as they do with the new products.

Brands have several functions. Brands facilitate customer acquisition, ease repurchase, increase retention rates, distinguish offering attributes, insure authenticity, provide consumer status, fulfill personal lifestyle values, and reduce revenue volatility. In many product categories, the brand name, rather than the product itself, is now a primary basis of choosing one product over another.

In the automotive industry (that I’ve done a lot of research this week), intense competition have resulted in about the same quality products, and the brand is the primary characteristic distinguishing the products. For example about one-half of Asian-American adults believe foreign cars outperform American cars, while most white retiree Americans prefers American cars. A consumer chooses Toyota because it offers dependability, quality, and value, while another consumer chooses BMW because it offers driving excitement, performance, and fine engineering.  I chose Toyota when I started graduate school here twelve years ago because of its value and reliability. It still looks and runs so well that I have no need to change to a new one yet.

I think brand should be on the balance sheet. Brand is an intangible asset and should be recognized on the balance sheet as other assets are, so that it represents the true economic assets of the company. Even though there is still uncertainty around brand valuation, having brand on the balance sheet gives company the ability to manage and treat the brand like other assets. One drawback is that currently there is not much consistency in brand-valuation and reporting brand values. Nevertheless, the economic use approach seems to be a viable approach for assessing the economic value of brands. As stated in the brand valuation article, if there is more consistency in assessing and reporting brand values, the corporate asset values would become more transparent.