Valuing global, local brands

Published in Business Friday, Philippine Daily Inquirer, May 27, 2016

THE GLOBAL corporate sector was rocked by news that Warren Buffet’s Berkshire Hathaway bought 9.8 million shares of technology giant, Apple, valued at $1.07 billion.

Buffet, reputedly the world’s most astute investor, is known to shy away from technology stocks and yet he bought into Apple which was ranked the most valuable brand in 2015 by Interbrand.

The acquisition was seen as an overwhelming vote of confidence in the company’s prospects, thus raising Apple’s shares by 3.7% after the news was released, arresting a decline in share value triggered by the global economic slump, particularly in China.

On the local front, Gokongwei-led Robinsons Retail Holdings Inc. announced the purchase of a 51 percent stake in The Generics Pharmacy, the largest generics drugstore chain with over 1,800 branches nationwide.

Back in 2010, the big news was Jollibbee Foods Corp’s purchase of a 70 percent interest in Mang Inasal Philippines Inc. for Php3 billion.

JFC completed in April the purchase of the remaining 30 percent, this time valued at Php2billion.

What makes these acquisitions significant is the familiarity of the brand names and how big conglomerates are attracted to family and owner-founded and managed brands.

Brands versus commodities

Strategic Brand Management expert Kevin Lane Keller states that brands are not just a name, term, sign or symbol used to identify the product.

Aside from identifying marks, brands have awareness levels, reputation, prominence and other attributes that differentiate them from a product or commodity which serve the same functional need.

In brand speak, the sum of attributes are referred to as the brand’s equity, and is proprietary to the brand.

No other product, while serving the same need or belonging to the same category can lay claim to these brand equities.

Often followers are perceived to be copycats. What makes a brand different from products with names and logos is its intangible asset value that makes investors and customers want to buy the brand at a much higher value compared to parity products that serve the same functional need.

Consumers are willing to pay more for good reputation brands because these brands trigger functional, emotional and social status associations as well as an affirmation of correct product purchase.

Brands are an extension of the buyer. Brands evoke images of exclusivity or values that personify the buyer like being an artsy or practical and smart buyer. Commodity products and services have no image associations.

Investors on the other hand are primarily interested in brands that (1) are certain to provide a stable future net revenue for a lengthy period of time; (2) have a strong loyalty consumer base not driven by price but by other positive values associated with the brand; (3) offer room for growth or expansion spurred by the brand’s equity associations; (4) complement their existing product line or conglomerate, among others.

World’s most valuable brands

Interbrand, the world’s leading brand valuation company has released its list of most valuable brands for 2015.

The brands come form different sectors such technology, fast moving consumer goods, automotive, luxury, fashion and finance.

In rank and value, the top 20 world’s most valuable brands include: (1) Apple, $170.276 Bn; (2) Google, $120.314 Bn; (3) Coca Cola, $78.423Bn; (4) Microsoft, $67.670 Bn; (5) IBM, $65.095Bn; (6) Toyota, $49.048Bn; (7) Samsung, $45.297Bn; (8) GE, $42.267Bn; (9) McDonald, $39.809Bn (10) Amazon, $37.948Bn; (11) BMW, $37.712Bn; (12) Mercedes Benz, $36.711Bn; (13) Disney, $36.514Bn; (14) Intel, $35.415Bn; (15) Cisco, $29,854Bn; (16) Oracle, $27.283Bn; (17) Nike, $23.03Bn; (18) HP, $22.975Bn; (19) Honda, $22.975Bn; (20) Louis Vuitton, $22.50Bn.

Commodities in the same category of the world’s most valuable brands are not even a tenth in size or value of these brands yet these brands serve the same functional need. The willingness to pay for brands at a raised price than commodities is proof of the intangible asset value of brands and is the result of sustainable brand building and management.

Moving from commodity to brands

Building a brand is no easy task and requires sustained effort.

The best time to invest in brand building comes when (1) consumer research shows a high intent to purchase the product; (2) there is accessible distribution; (3) product supply is not a problem; (3) the business owners are intently focused in leaving a legacy that can be passed on from one generation to the next; (4) business owners realize a brand is a hedge against competition; and (5) there are resources to build and manage a brand.

Many business owners claim to want to build a brand but experience cold feet soon as they realize the process and costs involved.

Five steps to build and manage a brand

Some steps to build and manage brands include: One, have a clear and focused brand direction by identifying what you would like your brand to stand for in the minds of consumers; Two, differentiate the brand’s identity and story from other products and brands serving the same need; Three, concentrate on satisfying the customer; Four, get expert assistance in building and managing brands; Fifth, refresh and reinvent the brand to suit both current and future consumers. Having your product advertised on television, radio, print, and outdoor media is not a guarantee of successful branding without the brand having a differentiating story to tell and where over time, the brand earns the respect of consumers and conveys a pride of purchase among its buyers.

The writer is Chief Brand Strategist of MKS Marketing Consulting and is an alumna of Oxford University’s SAID Graduate School of Business Strategic Leadership Executive Education and Stanford Graduate School of Business Strategic Marketing Executive Education. De Asis is also an alumna of the Ateneo Graduate School of Business and a PhD graduate of the De La Salle Graduate School, Taft Campus. Reach the author who is also a member of the Global Strategic Consulting Network at karenvdeasis@gmail.com

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