Three great brand tools come together.

3 great ideasImportant disciplines combine in a powerful branding approach.  Sometimes it’s just a matter of timing that familiar techniques and technologies can be sparked by a catalyst arriving at the right moment. Not only does the time have to be technically right, but the intellectual and cultural environment needs to be open to the opportunities.

The three branding disciplines I’m thinking about are semiotics, grounded theory and big data.

Semiotics

Semiotics provides us with an approach based upon cultural and societal meanings and the signs and signifiers that point to them. Currently there is a movement to understand emotional significance rather than declarative knowledge about brands and how deeper meanings are embedded in the brand narrative.

A semiotic approach to branding and brand development needs an analytic understanding of the cultural environment that a brand and its consumers inhabit. We need to discern the history, myths, metaphors and symbols that shape the consumers’ world and behaviour.

The major challenge has been the difficulty in finding our way into the data. As much of the meaning is unconscious, traditional research using primary survey techniques is not effective. Asking for views and opinions is of little value as people won’t or can’t answer truthfully – this is not because they want to mislead, but they honestly can’t access those deeper meaning.

Grounded Theory

This is where grounded theory comes in. Grounded theory is a very different qualitative approach. Rather than beginning with a series of questions we are looking for answers to, we approach the data without a theory. It is an ethnographic approach collating all the data we can from the environment. This may include published information, commentary from the media surrounding the subject, observation of the environment and practices, visual images, perhaps video, film and advertising, historical data, songs – in fact the whole cultural tapestry.

What the practitioner is looking for are patterns – recurrences of structures across a wide range of data. There is no pre-conceived theory but we are looking for codes and meanings that are emergent from the data.

As you can imagine, sourcing and amassing the masses of data necessary and then applying meaningful analysis can be a daunting and very labour-intensive task. This was the case in the past, but now we have the final piece in the jigsaw – big data.

Big Data

It is now possible to access amazing volumes of data from a mass of sources – textual, visual and auditory. Equally importantly there are now the analytical tools to process and understand the data – to look for those illusive and emergent codes and recurrences. One of the significant advantages of ‘big-data’ is its cultural richness.

Bringing together these three threads provides us with an approach to branding which allows us access to deep emotional understanding. We can get to grips with the deep meanings that drive the human essence of markets.

Top tips for international branding.

Building brands in your own market takes time, application and sheer hard work.

The world today is a small place – brands have to exist and work on a much bigger stage. This may appear a daunting prospect, but there are a few simple things that it’s critical to get right. Once these are addressed export branding becomes a much more manageable activity.

The fundamental point to remember is that every market is different. Not just the far-flung and exotic markets, but even those closer to home with whom you may perhaps share a common language. The underlying variable is culture. Cultural norms, values, narratives and mythologies go to make up what a market actually is.

The more time you devote to understanding these subtleties the more successful you are likely to be. Peoples’ main attachment to brands and key influencer of choice is emotion. The semiotics of your brand is bound up in shared emotional and cultural values. In turn these are manifest in language, symbols, colours and the whole catalogue of brand communications.

What’s the value of a brand? Not a lot say Amazon.

Amazon-logo-700x433I’ve written a lot about brand valuation and how many businesses under-value their brands. Now one of the most powerful brands, Amazon, claim their brand isn’t worth that much.

One issue with brand value is its contentious status so far as balance sheets are concerned. Although a good deal of work has been done to standardise brand valuation in accounting practices, it usually only becomes manifest on sale, acquisition or transfer. This is just where Amazon came unstuck and found itself in the US Tax Court.

There has been a good deal of discussion concerning international corporate giants using subsidiaries overseas to make the most effective use of favourable tax environments. Like Starbucks and Google, Amazon followed a well-worn path to Europe – Luxembourg to be precise. So far so good.

Obviously the Amazon brand was important as the parent company transferred some of the associated intellectual property to the subsidiary for a fee.  However, in the view of the IRS, the fee was not enough. Amazon undervalued their own brand!

Why would they do this? Simply to reduce their tax bill in the US choosing a move favourable regime in Europe.

The details are now the meat of argument for the tax lawyers. For brand specialists and marketers it presents some important issues. The trial should aid the clarification and status of brand valuation. Moreover, it should help identify the position of a brand and its associated intellectual properties as corporate assets.

If Amazon succeeds in defending its own low valuation, it would be interesting to see how it would argue reversing that position should it wish to sell.

This case will be watched with interest, not by just accountants and tax lawyers but also by brand owners and marketers.

Brand Valuation – “Do you want to be seriously rich?”

Gold_BarsValuation of brand equity matters to all businesses – how to value it and why protect it.

My first grasp of what brand valuation meant came to me not through a marketer but from a wise accountant.

I was running a marketing services business and we’d had a few good years. Going through my year-end accounts, my accountant asked, “Do you want to be seriously rich?”

“Silly question,” I thought. But he explained: if I was enjoying the day-to-day business, happy to take a good salary and dividends from time to time – then, I would take one route. However, If I wanted to realize some serious wealth from the business I would have to think differently. At some point I would have to look at perhaps selling all or part of the business – perhaps privately or as shares, or maybe a franchise.

If I wanted to take some value out of the business, I would have to think like a buyer and work out where the value lay.

It was not in the fixed assets – as a service company we had virtually no plant, machinery or stock. Current assets would vary. All we had was whatever cash in hand sat in the bank.

He pointed out that an important part of any value would lie in the intangibles. It would be about the name, the reputation – in the brand.

I had been using the brand as a promotional tool, but up to that point had not seen it as an asset.

This is a position many medium size companies are likely to find themselves in. It is only when a business is considered for acquisition that thought is given to the brand and its valuation. However, consideration of the value of brand equity is important for all size businesses, and throughout their progress. It ensures that the owners and managers protect and polish the intangible assets just as they would the tangible ones. Then, should the time come to realize some equity from the business it will be in the best possible position.

Let’s be realistic – for small businesses and those in the early stages of their growth, the real worth of the brand may represent only a very small fraction of the total company worth. However, companies grow: even the biggest brands started small. It’s never too early to think about brand valuation.

How do we value our brand?

As you can imagine there is a good deal of discussion around this tricky subject and there are half a dozen approaches. In practice there are three key approaches but most valuation uses one of three approaches – or often a combination of one or more.

Cost-based valuation

This method includes approaches such as ‘creation cost’ or ‘investment cost’ – calculating the amount that has been invested in bringing the brand to its current market position. On it’s own, this is problematic as it takes no account of value – has the investment been wisely spent? It is also difficult for a new brand which may have had strong fortuitous growth with low cost.

Another approach in this category concerns ‘replacement valuation’ – what would it cost to build a brand to the current position from scratch.

Market-based valuation

These methods look at comparisons based upon reported values in the marketplace based upon such approaches as P/E multiples or turnover multiples. There are obvious issues here if the brand is innovative where comparisons are difficult. Again there needs to be a good deal of maturity of both the brand and its market sector.

Income-based valuation

These approaches try to assess the income generated by the intangible assets. There is a good deal of estimation required but if approached rigorously should provide a perspective with some ecological validity.

There is the price premium method which considers the premium the brand can command over an unbranded product.

Royalty relief makes a theoretical assumption that the business does not own the brand and estimates the cost to license the brand from another party.

The excess earnings method looks at the profits over and above accounting for all tangible assets and attributes that excess to the value provided by the brand.

Other methods in this category include income split and incremental cash-flow methods.

Know your value

It may seem like a distant issue, but brand value needs nurturing if one day it is to be realized. It may not appear on your balance sheet yet, but a wise owner should keep an eye on the brand equity and make periodic estimates of its worth.

As John Stuart, Chairman of Quaker said at the beginning of the 20th century –  

‘If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and trade marks, and I would fare better than you.’

 

Tesco and five kinds of brand damage.

Financial, sales-revenue and profit reversals usually correlate with brand damage, though not necessarily to a serious extent. The public is often sympathetic to market conditions and we have seen many retailers struggling through, without permanent brand damage.

Tesco_signHowever some forms of damage can be more serious and enduring, and recently we have seen poor Tesco stumble from one hole to another. Sales revenue damage was compounded by mishandling possibly questionable management activities.

It’s probably a good time to consider the five major categories of brand damage in the light of the benighted retailer’s problems.

1. Market environment damage

Sometimes no blame can be attached to the organisation for issues beyond its control. Particularly political and legislative changes can impact business and the brand and the company may be trapped in negative activity,

Cultural and technological issues can also have damaging impacts. However, it can be argued that a well-managed brand should be constantly monitoring the market environment to remain in touch and relevant.

2. Accidents, incidents and events

Traffic police often say ‘There are no accidents, only incidents’ – the inference being that all accidents are avoidable. Events can be seriously and often terminally damaging.

We can look at the brand damage following in the wake of BP’s catastrophe in the Gulf of Mexico, or Toyota’s string of recalls. These ‘events’ are rarely blameless and damage is inevitable – the distinguishing feature is how a brand faces up to such a catastrophe. Openness, acceptance and swift responses can do much to restore a brand’s reputation where denial, obfuscation and attempts to cover up will only compound the problem.

3. Neglect, complacency and hubris

This kind of brand damage often follows a period of undoubted success. It is where a brand sits back, assumes that it has arrived at its place in the sun and believes it has a right to its position. This often leads to the previous form of brand damage as complacency dulls the belief that ‘something might go wrong’.

In the Tesco example, for decades the business was hardworking and innovative – a pioneer of online shopping, exploiting multi-channel trading and pushing the boundaries of a food market retailer. Did it grow fat, lazy and complacent? It has been suggested that part of the malaise was not being sufficiently sensitive to economic and market changes, and lack of clarity in its brand positioning – leading to shrinking market share.

In such a case, there is often an emotional disconnection – a complacent brand, like a complacent person, stops reaching out and the important emotional bond with the audience is damaged.

4. Incompetence and mishandling

It goes without saying that incompetence in brand management will be penalised. Well-meaning fumbling may not be taken too seriously if the brand has sound core values, however.

Mishandling is often the product of misunderstanding what is important. We have already looked at damage due to events and incidents. These are typical areas where a strong hand on the tiller is required to handle the aftermath.

We have recently seen the tragic events surrounding the Virgin spacecraft test-flight – we also witnessed the exemplary way Richard Branson responded. A stark comparison with Tesco’s response to falling figures.

5. Malpractice, malfeasance and dishonesty

This type of serious brand damage is the result of the actions of individuals or groups within a business. It may be rogue elements or it may be with the approval and complicity of management. We have seen examples of corrupt individuals in the financial sector – here swift action from the board can go some way to mitigate the potential damage. In other cases is may be institutional malpractice – here brand damage can spread beyond individual organisations to whole sectors.

Sometimes this can strike at the very core values of a brand and the damage may be terminal. The example which springs to mind is that of Anderson Consulting and the Enron scandal. The implied brand value of probity was brought into question and the result was the demise of a brand.

We wait to see if this type of damage was involved in the Tesco episode. If so, we can expect a costly and crippling degree of brand pain. Perhaps for a grocery retailer corporate rectitude is not a core value, but we can be sure other brands will be queueing up to fill the moral void.