Even for business to business companies, brand value is usually the largest component in a company's market value. As reported annually in Business Week, the value of the Coca-Cola brand is 58.9 percent of the market capitalization of the entire company and the IBM brand is 39.1 percent of the market cap. Still, for the most part, in today's capital markets the value of brands is greatly underestimated. These facts are not only important to large corporations and famous brands. In fact, the same proportions apply to small and medium-sized companies (SMB), both public and private.
When a company is getting attention, the brand is seldom addressed and research by Max Brand Equity has shown that there are many reasons for that, including:
- Top Management does not understand how brands accrue value, or how to build it.
- Brand building is more complex than just advertising or new products.
- Brand building is perceived as expensive because it is viewed largely as a function of advertising.
- Many people view brand building as a lengthy job and they do not have the patience to tackle it.
The fact is, brands are a key part of a company's value, even in Business to Business environments. In anything other than pure commodities, which are few in number, brands can often be more important in some consumer driven businesses.
In many cases, in trying to maximize the market value of a company, the action to take is to put focus on the brand as with any other element of the company and it might merit even more attention than all other elements combined. Experience and study shows that effort directed into brand development may give more leverage than comparable efforts put into other areas. This can take far longer to have an effect if left to inexperienced hands.
Senior, experienced people, with both brand and general management expertise, are used so they can implement a phased plan that will get quick results in some areas, while developing a living plan that has a cumulative effect.
"CEOs and owners of many companies are leaving money on the table by either not recognizing the value of the brand, or not knowing how to grow that value," said Richard Guha, Partner in Max Brand Equity, ex- P&G and Mars, Inc. executive, former CMO in Fortune 500 companies and ex-President of Reliant Energy Retail.