A study conducted by Interbrand also shows that a strong corporate brand could add 5-7% to a company’s stock price in a bull market, and mitigate losses in a down market. Debashish Mitra, Head-Marketing, Mercedes-Benz India gives us a similar view when he talks to 4Ps B&M, “Investing in a firm from just financials point-of-view is nothing but looking for short-to-mid term gains. It’s always the brand that is the long term asset for a company and subsequently for an investor,” he tells 4Ps B&M. His industry colleague, Sandeep Singh, Deputy MD, Toyota Kiloskar agrees with him and feels that brand reputation and market returns go hand-in-hand. According to him, if there is a hit on the brand, a company could lose grip on the market and vice-versa. He recalls when Toyota posted a loss in the last fiscal, its share prices too went down at the bourses. But it was brand Toyota that quickly managed to regain the lost investor sentiment.
At the same time, a research done by Corporate Branding Partnership LLC, a UK-based consulting firm, during the two-day stock market crash in the US in October 1997, revealed that while companies with strong brands regained their losses in just two days, companies with weaker brands failed to recover. Thomas J. Madden (from University of South Carolina), Frank Fehle (from Barclays Global Investors) and Susan Fournier (from Boston University) did a similar study (Brands Matter: An Empirical Demonstration of the Creation of Shareholder Value through Branding) in 2006 and found that if one had invested $1,000 in August 1994 in the 111 strong-brand companies (as per the Interbrand World’s Most Valuable Brands), this investment would have more than quadrupled into $4,525 by December 2000. The same $1,000 investment in the overall stock market would have turned into $3,195 by end of the year 2000.
“Therefore, when making investment decisions, it would be completely irrational for shareholders to ignore what has an effect on the value of their investments,” says Hubert Gatignon Professor of Marketing, INSEAD.
Certainly, a company which has strong brands in its product portfolio is usually more resistant to economic stress and as such can provide a more reliable and stable forecasting in terms of revenues and profits. Given this, brands are increasingly treated as any other asset producing demonstrable results for shareholders. “One of the main pillars of a company is its brand value. Most investors while doing valuation keep it in mind. Because the higher the brand value, potentially higher is chance to book profits. It becomes even more critical in a wired world, when, one wrong report in the social media, and your brand’s value might plummet. Along with your profits,” agrees Anindya Banerjee, Senior Creative Director, Publicis India.
At the same time, a research done by Corporate Branding Partnership LLC, a UK-based consulting firm, during the two-day stock market crash in the US in October 1997, revealed that while companies with strong brands regained their losses in just two days, companies with weaker brands failed to recover. Thomas J. Madden (from University of South Carolina), Frank Fehle (from Barclays Global Investors) and Susan Fournier (from Boston University) did a similar study (Brands Matter: An Empirical Demonstration of the Creation of Shareholder Value through Branding) in 2006 and found that if one had invested $1,000 in August 1994 in the 111 strong-brand companies (as per the Interbrand World’s Most Valuable Brands), this investment would have more than quadrupled into $4,525 by December 2000. The same $1,000 investment in the overall stock market would have turned into $3,195 by end of the year 2000.
“Therefore, when making investment decisions, it would be completely irrational for shareholders to ignore what has an effect on the value of their investments,” says Hubert Gatignon Professor of Marketing, INSEAD.
Certainly, a company which has strong brands in its product portfolio is usually more resistant to economic stress and as such can provide a more reliable and stable forecasting in terms of revenues and profits. Given this, brands are increasingly treated as any other asset producing demonstrable results for shareholders. “One of the main pillars of a company is its brand value. Most investors while doing valuation keep it in mind. Because the higher the brand value, potentially higher is chance to book profits. It becomes even more critical in a wired world, when, one wrong report in the social media, and your brand’s value might plummet. Along with your profits,” agrees Anindya Banerjee, Senior Creative Director, Publicis India.
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Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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