Skip to main content

Some Unhappy Math On Brand Value

In 2008 Business Week magazine ranked Toyota's brand 6th globally, pegging a brand value (in millions) of $34,050. The methodology - from branding consultancy Interbrand - uses several factors:
  • Calculating the percentage of a company's sales falling under a specific brand.
  • Determining the earnings derived from that specific brand's power by removing operating costs, taxes and capital charges from earnings. What's left is earnings derived from intangible assets - brand power but also patents and management strength.
  • Estimating the brand's effect relative to the other two and discounting future earnings produces an estimated net present "brand value."
How have Toyota's recent quality issues affected the brand?

Until recently many Toyotas in the $20,000-to-$25,000 price range sold for a premium over sticker of as much as $2,000. Now, as reported in today's Wall Street Journal, they're selling for $500 below invoice, or $2,000 below retail. And that's with an additional $1,000 rebate from the Toyota wholesaler.

That adds up to $5,000 in lost revenue: the foregone $2,000 premium, an additional $2,000 discount from normal retail and a $1,000 rebate. $5,000 "lost" on a $25,000 car, or twenty percent.

I'll not bore you with the NPV math (not remembering how to do it anyway...) but a back-of-the-envelope calculation of a twenty percent revenue hit for, say, six months is (in millions) about $3,500, dropping right to the bottom line. $3.5 billion in in earnings and intangible brand value...gone.

Brand math looks great on the upside, doesn't it? Marketers love it. Accountants may not like it but, heck, they don't like anything. Maybe because what looks great going up comes down with a vengeance. And as much as accountants hate adding brand value to the balance sheet, they like taking it off even less.


Popular posts from this blog

Being Disrupted Ain't Fun. Deal With It.

Articles about disrupting healthcare, particularly those analogizing, say, Tesla's example with healthcare's current state, are frequently met with a chorus of (paraphrasing here) "Irrelevant! Cars are easy, healthcare is hard." You know, patients and doctors as examples of "information asymmetry" and all that. Well, let me ask you this: assuming you drive a car with a traditional internal combustion engine, how much do you know about the metallurgy in your car's engine block? I'll bet the answer is: virtually nothing. In fact it's probably less than you know about your own body's GI tract. Yet somehow, every day, us (allegedly) ignorant people buy and drive cars without help from a cadre of experts. Most of us do so and live happily ever after (at least until the warranty expires. Warranties...another thing healthcare could learn from Tesla.) Now, us free range dummies - impatient with information asymmetry - are storming healthcar…

Becoming Consumer Friendly In Five Easy Steps...Or Not

An article at offers hospitals 5 steps to becoming more consumer friendly.

If you still think there's a secret sauce to your hospital becoming more "consumer friendly," these 5 steps are as good a place to start as any.  Unfortunately, it's a little like that old Steve Martin comedy bit where he says he'll teach you how to be rich. The first step is to go find a million dollars.

Step 1 from the article is realizing that "...a Medicare beneficiary with chronic conditions is different from a young mom who brings her kids in for an annual check-up." This is market segmentation for beginners, and, yes, one size decidedly does not fit all. I'm sure your marketing team's been saying this for a while.

Steps 2-5: have a strategy, metrics, a champion and resources. OK. Hard to argue with any of those.

But those things, alone or together, won't overcome culture. They're important components to be sure, but insufficient without a …

Another Day, Another App, Another Satisfied Customer

How might health care providers use technology to turn customers' mobile phones into information displays and ordering devices? A few years ago, the NY Times outlined how retailers are doing it...
"(Designer Norma) Kamali is at the forefront of a technological transformation coming to many of the nation’s retailers. They are determined to strengthen the link between their physical stores and the Web, and to use technology to make shopping easier for consumers and more lucrative for themselves.

Cisco Systems, the supplier of networking equipment and services for the Internet, is also a leader in the field. The company’s Mobile Concierge system is capable of connecting customers’ smartphones to retailers’ wireless networks — so a shopper could type “Cheez Whiz” into a cellphone, then pinpoint its location in the store." Ms. Kamali's boutique installed a technology called ScanLife, "allowing people to scan bar codes on merchandise and obtain details about the…