OPINION: Even the best brands won't last indefinitely
Let us be reminded by investors of the old adage that “revenue is vanity, profit is sanity, cash is reality”.
Everybody believes they know something about branding and most have strong opinions about many brands - and it is their right to do so.
As every company chief executive and their employees should know: the customer is king and, as the saying goes, beauty lies in the eye of the beholder.
Late last year the latest World Brand rankings were announced. There were few surprises.
Top 10 Most Valuable Brands:
9. Ping An
Amazon increased its value by 17.5percent and Google up by 11.9percent while Apple lost as much as 8.5percent in brand value.
The first four companies are US companies and so is number seven and eight. Korea is a surprise contributor at number five and China has three companies in the top 10.
No South African company made it into the top rankings, although we are well aware that homeboy Elon Musk’s Tesla is now worth more than Ford and Chrysler combined.
Tesla is racing ahead as the fastest-growing brand with a brand value of $12.4 billion (R186.7bn), up 65percent on last year’s valuation.
The electric vehicle innovator began sales to customers in further reaches than ever before, including China, Australia, the UK and several markets in Eastern Europe. Ferrari remains the world's strongest brand on the Brand Strength Index (BSI) with a score of 94.1 (out of 100), with an Elite AAA rating.
The embodiment of luxury, Ferrari continues to be admired and desired around the world, and its outstanding brand strength reflects this.
Via Naspers, the company Tencent is watched closely by fund managers and they come in as the 27th most valued ranked brand in the world.
Great brands need great leaders. They set and direct brand purpose and balance short and long-term financial returns. Their role is to gauge the mood of external stakeholders and ensure that all internal stakeholders behave in a way that is consistent with optimising purpose and profit.
Tencent’s chief executive, Ma Huteng, made it to the esteemed fourth place in the Brand Guardianship Index 2020. With a bit of a stretch one can find the JSE connection to this man.
Branding is not just talking a good story, it must deliver on its promise. This is something Uber is battling to do as its brand value dropped by one third, down 32percent to $15.3bn, forcing it to share the ride with five fastest-falling brands in the ranking.
An example of talking a good story in my view is what Absa claims: “For our customers, we will create unprecedented, seamless experiences to engage and delight them.”
In my experience, my closest Absa branches and a nearby ATM were closed and delight was the furthest from my mind. I am aware that while dealing with fraud perpetrated on accounts certain staff mislead the reporting staff by supplying a false reference code.
Absa have lost many clients to other banks such as Capitec and it is because they do not delight their customers, they just write nice-sounding words in their annual report.
Where does our own country South Africa stand?
We are a proud nation and want to compete with the best. Our Top Brands, with a brand valuation, are made up of MTN at R44.2bn, Vodacom at R27.5bn, FNB at R19.4bn, Absa at R18.9bn and Standard Bank at R18.5bn. Capitec is quickly closing the gap and its brand value is at R6.8bn.
Recently I had the most pleasant surprise with my 13-year old BMW GS1200 motorbike. The vehicle broke down and I took it in for repairs.
I was told BMW (West Rand branch) would require an extra few days to replace up to five parts that were on the BMW (Germany) re-call list.
I find it absolutely amazing that BMW is so proud of its brand it is prepared to repair parts not as yet defective on the motorbike. This was done without them being asked to do so and there was no expectation of such a service to be performed.
A brand does not last indefinitely. Internally generated intangibles’ value cannot be properly and fairly determined, so under GAAP they are not to be placed on the balance sheet (one can have a seriously long discussion about this on another day).
General Motors announced on Monday it would scrap struggling Australian car brand Holden, with engineering, design and sales operations to be wound down in the coming months.
The more than 150-year-old company created Australia’s first local mass-produced vehicle and was a dominant brand in the country for decades, becoming a cultural touchstone Down Under.
Company chief executive Julian Blissett said GM had come to the realisation it was unable to make the “significant investment” required for Holden to be competitive and profitable in the long term.
We can just hope our own Eskom does not reach the same conclusion.
Corrie Kruger is an independent analyst.