An associate of mine and I have kicked off a program to schedule speeches in front of financial analyst groups in support of my upcoming book, as there are topical and structural issues about how brands are conceived and valued that should be very troubling to anyone who hopes to accurately assess the health of companies that do business with consumers.
Well, actually we've been emailing, mostly and, so far, the first few responses we've gotten have not been encouraging. For instance, we've heard "...it's not the sort of thing our members would be interested in" at least twice.
What could they be more interested in instead?
The financial community has always had an arms-length relationship with branding. It's slotted in as an intangible, or goodwill component on a company balance sheet, which makes it an exception to most anything else that is measured and attributed to (or debited from) estimates of corporate value.
Analysts, like the executives they haunt, like to use the word brand to reference or explain lots of things that aren't dependably explainable, like awareness, momentum, buzz, and any word that has a future tense to it. These are all reasonable, qualitative observations about human behavior and society in general, but they're certainly not primary sources of information like the other data used in financial analysis.
So brands can get mentioned as a reason to consider a stock or not, but branding is rarely, if ever, used as the pivot upon which to move trades.
Which is a good thing, considering what's going on in economies around the world these days.
Price pressures both real (energy costs) and imagined (lack of confidence) are daring consumers to spend less, and do so less often. If those intangible numbers had any value beyond the confines of the .xls in which they've been placed, now would be the time to prove it.
Only they don't.
Luxury brands aren't doing necessarily much better than lesser aspirants. Near-luxury brands are doing lots worse. The brands that charge less for the privilege of buying their packaging and underwriting their advertising are selling more than those that do. So it turns out that all that intangible value may very well be, well, intangible, at least in a down market.
I wonder if this isn't just a topical issue, but perhaps a glimpse into a structural shortcoming: irrespective of market direction, if brands can't be depended upon for added price or sales reliability in a bad economy, what are those valuations predicting in a good one?
For instance, might a prudent experiment be to rank companies in a particular industry category in terms of how much they spend on intangibles, and see how they're performing (sales, not how analysts are valuing one anothers' picks). Another corollary to explore might be to study prices over the past, say, 6 months or year, and see if "better" brands have held the line of prices any better than others.
Brands can and should matter to how we understand and predict corporate performance, only now we’re seeing that they're just nice-to-have references in annual reports and in newspaper quotes. Now could be the time for the financial community to come up with an inventive, new definition of what goes into branding, and perhaps agree on a methodology to assign values to companies...values that are tangible useful to them, to reporters, and to the working shlubs like yours truly who buy and sell the stocks.
Obviously, with my book coming out, I have some specific thinking in this regard, and would love to help jumpstart the brainstorm.
But first, somebody has to pick up the phone.
Recent Comments