Brand Equity Consultants Fail Again

Back in mid 2011 I noted that Starbucks had been performing strongly.

I also noted the lack of consultants predicting this rebound. People who pitch these brand equity metrics claim they can predict future consumer behaviour and brand performance (even sharemarket performance). But evidence shows their predictions are lousy. I chuckled when BrandZ at long last caught up with the stock market and ranked Apple as the most valuable brand.

Back to Starbucks… when would the brand equity firms catch up?

Then mid 2012 BrandZ announced that Starbucks had made its list of top increases in brand value with a staggering 43% increase over their 2011 valuation.

Hardly much of a prediction when Starbucks had just announced their 11th consecutive record breaking quarter!

A few months later and BrandKeys listed Starbucks among their top improvers for 2012 up a massive 55 places in rank (but still far below Dunkin Donuts)!

Why would anyone pay for these brand equity metrics when they can read the news months (even years) earlier by just buying a newspaper?

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5 thoughts on “Brand Equity Consultants Fail Again

  1. Brandz does include predictive metrics but the Top 100 itself isn’t one – it’s a ranking based on current financial value of the brand. So if, as you note, Starbucks market performance had improved over the previous year, then it makes perfect sense for its valuation to have increased accordingly. It would be a pretty poor show if it hadn’t. Criticising a metric that isn’t intended to be predictive for not being predictive is a little strange.

    Brandz had Starbucks’ brand value growing 17% in 2010 and 40% in 2011 as well, so it’s also disingenuous to suggest this is something we’ve just cottoned on to.

    Looking at the predictive measure from Brandz (Voltage), scores were high in all markets we evaluated Starbucks in for 2009, 2010 and 2011 (they remain high this year too). So actually, we did predict the change and then reflected it in the subsequent annual rankings.

    • Andrew,

      To be predictive you have to predict the inflection points, ie when a brand changes trajectory. A backwards ‘predicting’ measure will also rise while the brand is moving up, and fall while the brand is moving down.

      That’s my point, BrandZ tells us what we already know.

      One also has to wonder if BrandZ really could predict stock market prices then Martin Sorrell would not be selling it as a service, instead he would be using it himself to become the richest man on the planet.

      This isn’t to say that BrandZ might not have potential, but for the world to trust it there needs to be independent disinterested review. It needs to predict brands’ changes in trajectory over and over. I offer you the resources of my Institute to do this for you, we could establish a steering committee of major marketers, and also academics from the International Journal of Forecasting.

      Byron

      • I love the smell of a strawman in the morning.

        I read with interest over on the BrandGym your response to some reasoned critique of your work – “If you are going to criticise someone, you need to take care to get your facts right.” Excellent advice, I feel.

        As I have already shown, Starbucks could scarcely be a worse example of Brandz’s inability to predict a change in brand performance. You used it anyway and strangely did so in reference to a measure that isn’t even supposed to be predictive. I did not come here to make outlandish claims about what Brandz can do, simply to correct the errors in fact that you had made in your original post.

        Your response seems to suggest that we are claiming to be able to predict every movement in share price. I have not implied that (or if you believe I did, it was not my intention) and Millward Brown does not claim it. We do not fancy ourselves as Biff in Back to the Future holding a Sports Almanac of future share performance. Voltage tells you the probability that your brand will gain or lose market share. As with any forward looking measure, it is not perfect (and again, we do not claim it is), I’m sure you would agree that there are many variables that influence market share that can intervene to disrupt any prediction, but we do get it right about three quarters of the time. Not perfect, but certainly good enough to claim it is right “over and over”. I am not aware of anything that does a better job of predicting share change.

        Of course, market share will often be related to share price but there are plenty of other factors involved especially for companies (unlike Starbucks) who house many different brands in different types of markets (this is one of the reasons brand-level valuation in the Top 100 is useful.) So it would be a bit silly for us to say we are able to forecast the stock market infallibly, so we don’t. Having said that, we have shown that a portfolio of shares based on information from the Brandz top 100 would have outperformed the S&P500 in every year since we began producing the ranking. Again, that isn’t to say you would have made only gains and not made any losses, but you would have performed better overall.

        Far be it from me to advise Sir Martin on his personal fortune – but I understand that he is doing reasonably well with WPP and their continued investment in (amongst many other things) Brandz. I believe doing well enough that it is probably prudent for him to continue with his current approach rather than speculate on stocks and shares, even with the potential for improved performance that information from Brandz may offer.

        It’s certainly encouraging that you feel Brandz might have potential and very generous of you to offer us the opportunity to hand over the world’s largest brand equity database for your Institute to take a careful and considered look at – but I think we’re reasonably happy with how we’ve managed to look after it since its origins back in 1998. There are those (like yourself) that may disagree with our philosophy, methodology or approach (or elements thereof) but I don’t think we are generally struggling for people’s trust. We are happy to explain what we do, show how we have validated it and allow people to decide for themselves. All of the information to do this is already in the public domain.

      • We wouldn’t want people to think you are dodging and weaving.

        I’m aware of the current information you’ve released that is supposed to ‘validate’ BrandZ – it’s woeful, miserable tests.

        How about you mine your current data and make some predictions for 2014, 2015. If you are able to (better than chance) predict changes in brands’ trajectories (in a metric of your choosing…sales, share, loyalty..whatever) I’ll send you a bottle of excellent Champagne and shout to all the world how good BrandZ is.

  2. Byron:
    Thanks for your insightful criticism that the BrandZ ‘validation’ is “woeful, miserable tests”
    I’m not sure how this applies to what Andrew alludes to – that the BrandZ top 100 outperforms the S&P 500. And has done so consistently. But this is your blog – I’m sure you’ll educate us.

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