Jonathan Knowles notes that different disciplines often come at brand equity from different perspectives. For the sake of clarity he lays out three ways of looking at brand. He uses exemplars from marketing, finance, and accounting, although, of course no discipline is monolithic — many marketers might take the finance perspective, etc…
He outlines a common marketing perspective, namely that brand equity is about winning hearts and minds. Success translates into a preference for the brand. There is clearly nothing wrong with this perspective but it differs from the financial perspective which is about driving cash flow. A successful brand is one in which customers act in beneficial ways towards the brand — they buy more of the brand and pay more for it. Accountants tend to take a more prosaic view of brand and often equate it with a trademark. Success is a brand which would command large licensing fees.
Clearly it will be hard for people coming from these three perspectives to agree to a single valuation approach. When looking at valuation a marketer might argue for purchasing propensity to matter while for a finance person actual behaviours need to be judged. Many accountants seem wedded to historic cost (maybe they also like to churn their own butter and burn witches). That said there is a benefit to discussing the divergent ideas, even if it will be hard to get agreement. Asking marketers to explain their approaches helps flush out their casual model — how exactly is an investment in marketing expected to aid the business?
Knowles suggests that the actual valuation is often less important than the act of valuation. Undertaking a valuation encourages people to think through the drivers of business success. He notes that clients insist that the actual valuation (i.e. a number) matters at the beginning of the process but by the end “their need for a valuation model has disappeared. What I take from this is that most clients are primarily interested in discipline and transparency in the process; the role of the valuation model is to achieve this.” (Knowles, 2008, page 26)
There is a bit of a “journey is the thing” aspect to this argument and it makes a lot of sense. It is useful to remember that being forced to think deeply about our plans by people with differing perspectives can help us improve our thinking which can be at least as important as the output of the process.
Read: Jonathan Knowles (2008) Varying Perspectives on Brand Equity, Marketing Management, Pages 21-26, July/August