Literature for the business leader published by SchmidPreissler International Strategy Consultants, The Lion’s House, D-83703 Gmund am Tegernsee, schmidpreissler@schmidpreissler.de, www.schmidpreissler.de

 

 

 
 

SchmidPreissler Brand Equity+Performance©  Programm

 
 

Issue: 05/200

Next Issue: Week 22/2007

 

 

Excerpt of further issues topics: Brand Equity and Brand Strategy, Brand Equity and Brand Diffusion, Brand Equity and Company Success, Brand Equity and Sales and Acquisition of Brands or Companies, Brand Equity and Marketing Investment

 

 

 

 

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Can The Resistance Towards The Calculation Of A Monetary Brand Equity Really Be Attributed To An “Insufficient Measurements Procedure”?
Franz M. Schmid-Preissler

Insufficient measurement procedures – this is the result of a study recently conducted with the collaboration of “Handelsblatt” – prevents many businesses from seeing more in a monetary brand equity than just an operational “nice to have”. To all intents and purposes those questioned would be interested in knowing the value of their brands. However, making brands part of the balance sheet is something the overwhelming majority disapproves of.

We think this is a massive deficit. Brands, as long as they are true brands and not just names, words or labels, often account for more than half of company assets. Actually, there are even cases where the complete corporate value consists of the brand equity. Is it really justifiable for such values to stay hidden?

In the past, the monetary brand equity was, in general, only established upon sale or acquisition of a company. Today we suggest putting the whole brand leadership under the primacy of the monetary brand equity. Why?

Markets today are characterized by the market power lying in the hands of the consumer, especially during intense competition. Stagnating and saturated markets, growing globalization, increased competition on the European domestic market, critical and enlightened consumers and barely distinguishable products are the basic conditions every company faces today. The technological advancement is moving more rapidly. Increasingly shortened product life cycles, a quickly dwindling innovational edge, rapid developments in general and a world that is getting increasingly smaller, just to name a few, are typical characteristics of our time, which companies have to adjust to in their brand leadership.

Generating enough knowledge about ones brand is a significant basis for the economically successful development of the brand: Recognize deficits early on, follow the pace of the market, being able to take up changes in the societal value system, tap into new potential, all of this is only possible, if those responsible for the brand have enough information at hand, that they can base reasonable and efficient decisions on.

What would be the sense in investing for years and even decades into brands, spend lots of money on creativity, innovation, protection, research and development, service, communication and more, without knowing, which monetary value is generated and which return-on-investment has to be accrued from this equity.

Brands react very sensitively to changes of all kinds – positive as well as negative. And only the knowledge of the monetary brand equity leads to making the position a brand holds in the market visible. It makes the power with which a brand is anchored at its position measurable and interpretable. If you do not know the monetary brand equity, it is up to those involved to assess the productivity of the brand and to decide which activities they derive from this decision. Only the knowledge of the brand equity reveals the contribution of the brand to the earnings. In many cases the contribution of the brand is seen in achieving a higher operating margin than without brand. But a successful brand leadership today and in the future requires a more fundamental comprehension.

Brand equity should not be understood and depicted as a mere phenomena in the heads of consumers. Its value has to be known as a monetary value and it should be utilized as such for a return-on-investment. This conclusion, if taken seriously, should lead to considerable changes in the investment policy all the way to financial accounting. Short-term this may be connected with a lot of costs and difficulties, but long-term this is going to offer considerable advantages for many businesses.
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Editor: Dipl. Vw. Christina Schmid-Preissler - Assistant Editor: Regina Seago

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