Brand Communication Strengthens Brand Value
By Christian Fuchs, Director, Frankfurt
cfuchs@golinharris.com


More and more companies want to distinguish themselves as a brand. But how do they communicate this general orientation? Many of these companies acknowledge, with a view to potential clients, the importance and necessity of appropriate usage of communication tools. They therefore specifically invest in Corporate Identity, PR and/or advertisement.

However, to what extent brand communication is able to influence the value of a company is often disregarded. At this, many other target audiences must be factored in - staff, media, opinion leaders, associations, action groups and all that make investment decisions.

Indeed, investors seldom reveal that not only do they orient by hard facts and profit forecasts, but they also take into account the image, which was created by the continuous and appropriate blend of brand communication tools. But surveys show the often-unforeseen high impact of brand value on a company's market value. According to PriceWaterhouseCoopers, the brand value/market value ratio for industrial goods is around 18%, while short-term consumer products hit an average 62%. Brands can account for up to two-thirds of market value, like Beiersdorf or BMW for example. The embodied brand value expresses the present value of prospective profits that are solely generated by means of brand presence. This means, the stronger brand presence is embedded in target audience, the more communication is able to strengthen the company's value.

Brand value measurement pays off
Another aspect plays an important role in the accretion of company value: the measurable brand value, especially in comparison with other brands and during nondiscriminatory evaluations. In the last couple of years, many methods have been taken root that not only affect investor relations work, but also the planning of marketing budgets, mergers and acquisitions as well as leveraged buyouts. At the same time the demand's price elasticity can be ascertained.

The market value's intangible components are taken alongside its physical brand attributes into account. "Goodwill" (the difference between potential purchase price and book value of a company and its brand portfolio) thereby plays a crucial role. However, only few from over 20 different evaluation methods, like the cash-flow-method, are accepted even by international financial reporting standards (IAS/IFRS). In order to chose the right evaluation method, a company is well advised to define the purpose and value of an analysis before committing itself to a very time-consuming and costly measurement of its own brand value.