One of the biggest changes affecting business over the past 50 years has been the rise in importance of intangible assets, including brands. They typically account for between 30% and 70% of company's market value, but in certain market sectors, such as luxury goods, this figure can be higher. Experts agree that value of intangibles has trebbled over the past 30 years. There is according to these experts, an 'Intangible Revolution' so company's should prepare to demonstrate the value of their brand-building activities.
What are Intangible assets?
- Technological assets (patents, copyright, know-how)
- Strategic assets (licences, natural monopolies)
- Reputational assets (Company, product and service brands)
- Human resources (skills and flexibility of employees)
- Organisation and culture (values that shape commitment and loyalty of employees)
Source: Value-Based Marketing, by Perter Doyle. (Wiley 2000)
And now new accounting practices such as the IFRS3 on 'Business Combinations' requires listed companies to break down the value of intangible assets into 5 categories to highlight value of brand acquisitions, rather than group them under 'goodwill'. Some time soon we may see 'Brand Equity' in the Profit and Loss to highlight the marketplace i.e. the place where the profit arrived, rather than what to spend its money on.
So where do you start?
- Clearly articulated market overview showing opportunities, view of competitors and perceived advantages
- The Strategy
- Critical value creating activities; brand, innovation, customers, people, supply chain, environmental
- Financial performance
'Most companies start at (4) and work backwards, with very few articulating at the front end, what drives their financial performance.' according to David Phillips, senior partner at PwC.
Acknowledge: Jane Simms, The Marketer Apr 2007
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