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: 07/200

Next Issue: Week 31/2007

 

 

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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Brand Equity as Reputation Factor for Money Market Companies
Franz M. Schmid-Preissler

When looking at their stock development, companies often question, why they are evaluated so low, even though the numbers are absolutely okay. Blame might be assigned quickly, especially when a weak stock quotation reflects a relatively weak performance compared to companies of the same industry. However, resignation does not further the cause.

Obviously, in such a situation, not only the financial data available is playing a role. Rather, companies acquire a reputation over the years due to their – reputed – nonfinancial characteristics.

Nowadays, the significance of the business reputation on the business performance is hardly ever questioned anymore. However, often it is overlooked, that not only consumers and the general public are forming an opinion on the current and future outlook of this company, but also financial experts such as banks, investors, analysts and the media.

Professional capital market participants are confronted with the challenge of having to evaluate the uncertain future development of a company. In general, pure fiscal numbers are not sufficient to determine the reputation a company enjoys on the money market.

However, what does constitute the reputation, if it is not pure financial numbers? The reputation of a company is based on a series of factors, of which the “brand” is most likely the most crucial, far ahead of the quality of management, industry development or corporate governance, just to name a few.

Professional capital market participants thus expect, in particular, a transparent disclosure of the company asset “brand” and a logical and conclusive analysis of this equity. The work of those responsible for brands greatly depends on this consequence, on relaying the financial value a brand possesses. As significant as the value of a brand may be as psychological phenomenon in the heads of consumers, in the perception of analysts and investors, this does not replace the importance of its financial value.

Brands possess the ability to expand and expedite the high potential for added value to a considerable degree. The corollary is that brands can be of high interest as securities for banks. Studies have shown that consumers react more quickly to a product launch as a result of a strong brand image. For instance, with personal computers IBM, Compaq and HP typically effect a three to five months quicker adaptation of a new computer generation than for instance brands with a weaker image, such as Zandan and they are thus able to expedite future cash flow. Lets look at brand diffusion. Many of the international and global fashion brands achieve fifty percent or more of turnover outside of their core businesses.

Company management is by no means exposed to the whims of the money market. In general, it can be rationally explained how businesses are evaluated and it can be attributed to their most valuable asset, the brand.

With the SchmidPreissler Brand Equity+Performance© Program we have developed a program that can calculate the monetary brand equity and it is based on brand equity earning interest. The “self-imposed obligation” to a return-on-investment results in brand equity being a largely practical value that is commensurate to a realistic “market value”.

 

 

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Editor: Dipl. Vw. Christina Schmid-Preissler - Assistant Editor: Regina Seago

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