Measuring the Contributions of Brand to Shareholder Value

Since 1993 Young & Rubicam has invested over $ 130 million in collecting and interpreting data on consumers' perceptions of some 44,000 product and service brands in over 50 countries. At the core of Y& R's research effort is the BrandAssef Valuator (or "BAy"), a model that converts the firm's hoard of data on global consumer perceptions and behavior patterns into assessments of brand strength and value. When combined with the findings of independent research by academics in marketing and finance (using Compustat data on corporate operating and stock-price performance), the BAV's assessments of brand values can be used to quantify the contributions of brands to both corporate earnings and market values. One of the main findings of this research is that brands contribute to the market value of companies by increasing not only current earnings, but the priceto-earnings (P/E) multiples that investors assign to current earnings. Such increases in P/E multiples in turn reflect investors' expectations for lower risk, higher growth or both. At the same time, more recent consumer surveys (conducted in 2005-2007) provided indications of brand "erosion" even as the markets were pushing up share prices, presumably with the expectation that intangibles like brand would continue to drive operating earnings in the future. For the leaders of consumer-related corporations, the resulting "disconnect" between stock prices and brand values points to a continuing challenge for brand management. Building brand value is important for both finance professionals trying to increase shareholder value and marketers trying to build brand strength and increase sales and margin. The aim of the authors' research is to bring these two groups-finance and marketingcloser together by demonstrating the role of marketing strategy and brand equity in driving shareholder value.