Customer surveys show that the number of high-performance value-creating brands is diminishing across the board. Yet at the same time, businesses and financial markets keep raising brand valuations. The result? A brand bubble that could erase large portions of intangible value in your company and send another shockwave through the global economy.
The Brand Bubble provides both analysis and solution.
Excerpt
The Impending Brand Bubble
Now, another bubble is hiding in our economy. This bubble represents $4 trillion dollars in S&P market capitalization alone. It’s twice the size of the subprime mortgage market. And it accounts for over one-third of all shareholder value. Credible evidence suggests that financial markets think brands are worth more than the consumers who buy them. The constantly rising valuation of major brands is creating a brand bubble, one that could erase large portions of intangible value in firms and send a shockwave through the global economy.Figure 1.1 illustrates the typical value exchange between brands and consumers. In essence, the multiples that markets place on brand value overstate actual consumer sentiment, so the value creation that brands bring is greatly exaggerated. That is, Wall Street is long on brands; consumers are short on brands.
Fissures are forming in the pillars of brand equity. This conclusion is based on our research of fifteen years of brand and financial data from Y&R’s BrandAsset Valuator (BAV), the world’s largest study of consumer attitudes and perceptions on brands. Working with professors from several leading business schools, we’ve identified a growing divergence between brand valuation and brand speculation. Our data indicates that investors are irrationally overvaluing brands, and that if leading companies don’t take steps to change their approach, more than a few of them might soon experience dramatic declines in market value.
Of course, this is not to suggest that some stellar brands are not genuinely outperforming the market and setting new standards in customer loyalty and financial performance. But in most cases, these are precisely the brands that serve as examples of what other companies must do to inject value back into their own brands. These are the brands consumers swoon over, tell their friends about, and buy time and time again. These are the brands that drive a company’s stock beyond the estimates of financial experts. These are the brands that create surprise earnings quarter after quarter.
The problem is these stellar brands are becoming fewer in number. In today’s changing consumer climate, exceptional brands are just that — exceptions. Most of the brands lining our supermarket shelves, hanging from department store racks, or touting their superiority on television are experiencing a rapid diminution of perceived value. Consumers are simply falling out of love with a majority of brands they buy.
This warning about the prices of assets such as brands being in decline is, without doubt, contrary to what most people believe. Just as with equities and property in past bubbles, the market values of brands have been consistently rising for decades. Even in today’s recessionary climate, brand valuations reports continue to proclaim consistently rising brand values each year. How then is a brand value collapse possible? Thousands of brands have experienced large and long-term successes driving their corporate stock in a continuous upward pattern, enriching executives and investors alike. What exactly is the nature of this bubble? Are we talking about a simple market correction that will be forgotten in a few months or a year? And, if that is so, then why bother with it?
In reality, this is not a simple market correction. Our research foretells a significant loss of value for many brands that will jolt business and investors alike. Markets, being about expectations, have pushed brand values to unsustainable levels, where the earnings potential imputed to thousands of brands far outstrips their value to the consumer. These expected future cash flows that brands are expected to account for have grown to become a dominant force in driving total business value. But their future value is unsustainable when we uncover and analyze the true state of most brands today.
As CEOs search for future pathways to growth, their brands now account for a growing proportion of total enterprise value. This means their brands are making bigger promises of future earnings. Are those earnings going to be there in the future? Have most companies properly discounted the risk on their rising brand values?
When future earnings are in question, it’s more than a brand problem; it’s a business problem. Most of the discussion surrounding the tectonic shifts in the digital, consumer, and media landscape has been held at the marketing and brand level. By examining these phenomena through the lens of brand value, we can see how new consumer behaviors are causing widespread perceptual damage to the values of all but a handful of brands. Let’s begin by examining the origins of the brand bubble . . . .
Nincsenek megjegyzések:
Megjegyzés küldése