brand value

Epic Brand Fail!

Epic-brand-failure

I read in a recent New York Times article (published October 15, 2012) that a Blackberry user, Rachel Crosby, said she no longer takes out her BlackBerry at parties and conferences, and in meetings she hides it beneath her iPad for fear clients will see it and judge her. “I am ashamed of it,” she said. Ouch! That is so not cool. We know BlackBerry’s troubles over the last four years and its drought of innovation since its supernova days and a market cap of $78 billion (June 2008). Today, it’s at $4.4 billion and the brand is in free-fall.

The connection between a corporation’s value and brand is not covered by standard accounting practices. As Roy Sieben, partner at SB Partners accounting firm explains, “Generally accepted accounting principles do not report the value of internally generated goodwill (as opposed to purchased goodwill) despite the fact that such goodwill can be a significant part of a corporation’s overall value.”

Luckily, there are firms (Interbrand) that measure the value of brands and rank the top 100. The results are a striking reminder to all of us in business of how important brand is to the long-term of the business assets that we are building.

In 2012, guess who was #1? No, not Apple; it was Coke, coming in at a value of $77.8 billion, up 8% from 2011. Apple was a close #2, at $76.8 billion, up 129%. And guess who was down at #93? Blackberry at $3.9 billion, down 39%. Another tech competitor, Microsoft, was #5 at $57.8 billion, down 2%.

Not surprisingly, in this group, there is a general correlation between the company’s market capitalization and brand value. Between January 2011 and November 2012, the up or down change in market cap is mirrored in 2012’s brand value:

Apple: Market cap rose from $296 to $510 billion and brand value jumped 129%
Blackberry: Market cap crashed from $34 to $4.4 billion and brand value fell 39%
Microsoft: Market cap dropped from $238 to $227 billion and brand value fell 2%
Coca-Cola: Market cap rose from $152 to $162 billion and brand value rose 8%

Accountants may not put brand value and innovation on the balance sheet but you can probably get pretty good odds from any savvy investor that a strong brand and continuous innovation are intangible items to be considered “on” the balance sheet. Leaders of the most successful corporations know it.

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Will Twinkie Survive Head-In-The-Sand Brand Management?

Twinkies

Strong brands can outlive management ignorance

If ever there was a living–or dying–example of brand management’s lack of foresight, insight and innovation it is the venerable, and now vulnerable, Twinkie. The brand will probably survive but only after it is sold at a basement-bankruptcy price and then receives a significant investment in remaking its contents and brand.

The question is: Where was Hostess management’s head while the low-carb and healthy diet trend was marching past them like the Santa Claus parade. If you believe, like I do, that brands are “living things” that touch and delight consumers’ lives, then you will see this as an unnecessary financial and brand travesty.

Twinkies have delighted customers for 82 years (that’s a sustainable brand) and yet top management ignored all the signposts on the highway to decline. In 2004, a Globe and Mail article chronicled some history. In the 1970s there was the Atkins Diet, which promoted low-carbs, then came the South Beach and Zone diets (and now it’s gluten-free diets). A study showed over 40 million U.S. consumers were on low-carb diets and “… 61% of Canadians were limiting their carb intake … and sales would surge to $30-billion.” I see that as a market serving up endless opportunities for what I call “simple-adaptive” innovation–just make small adaptations to what you are already doing. Where was Hostess during this march to produce more low-carb products?

My guess – they had no idea how to innovate and no clue how brand value and the bottom line are connected. Today, they blame unions and spin other lame excuses, when in reality they failed to take the simplest of steps to innovate. What were they thinking when, in 2008, baker and entrepreneur Angie “Bakerella” Dudley became an overnight sensation with her “Cake Pops” – a simple, ingenious extension of a traditional product? Angie’s idea reflected the world around it – a shift to healthier lifestyles (smaller portions) and easy access for people on the go – “look ma, no fork!”

For me, the demise of Hostess is a blinding glimpse of the obvious. There was no innovative or entrepreneurial thinking inside the encrusted, status quo thinking of a sleep-at-the-switch corporation with its head stuck in the flour. And yet, the Twinkie brand might survive if a new company buys the brand and adds a large dose of innovation to its recipe.

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What is a brand and why should it matter to you?

Branding Insights
One of a series by John Paulo Cardoso, Spyder Works Chief Creative Officer

Brand-why-it-matters

As Michael Eisner says, “A brand is a living entity — and it is enriched or undermined cumulatively over time, the product of a thousand small gestures.”

I love that quote because it takes branding out of MBA seminars and puts it directly in your loading dock or on the desk of your sales rep or in your next e-mail to a supplier.

Brand is the culmination of everything an organization believes in, stands for and aspires to be. It must have real value and meaning for customers… and for everyone else. In essence, a brand is what you believe in (values), what you do (offer) and what you say (message).

A brand is not a logo. It exists in the minds of the marketplace. The visual aids like a logo, colour, typeface and design are the visible cues of your brand that ignite your customers’ emotions and how they feel about your business. A great brand is the consistently positive feeling that your customers, suppliers and employees enjoy when they deal with your company.

A more concrete way to think of it is to replace the word ‘brand’ with ‘reputation’. Through the process of creating a brand, we’re personifying a company. Why do we need to attach human characteristics and behavior to a company?  Simply because we want our customers to have a real relationship with our business so that they will have positive feelings when they think about our products, services or stores.  In other words, ‘branding’ is the management of our reputation in the marketplace.  It’s how we manage those thousand small gestures.

 

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