A few years ago, anoraks may remember, accountants and marketers
became locked in a debate about whether - and how - to put brands on the
Naturally, before you could do this, the industry had to arrive at a
mutually agreed way of valuing what are essentially intangibles with a
potentially infinite shelf-life. The arguments see-sawed around before
being consigned to an accounting standards committee or some such
Now, according to the aptly named Raymond Perrier of Interbrand (which
has obviously sniffed out a good thing), we have a result in the shape
of a new financial reporting standard, FRS10.
Since hardcore technical stuff gives financial illiterates like me a
nosebleed, I won’t pretend to be able to explain the finer details of
FRS10. Suffice to say that if you put a brand on a balance sheet, you
have to measure it every year to see whether its value has gone up or
Some brands lose value over time in a way that is related to their sales
performance, though not exclusively (eg Campari or Babycham).
But by its very nature, the science of brand valuation goes beyond sales
volume or market share and must include such ’soft’ factors as trust and
consumer perceptions of status, glamour and so on.
Now it would be simplistic to conclude that the mere act of valuing
brands in order to put them on the balance sheet means brand owners will
concentrate on value-enhancing advertising at the expense of promotional
work that shifts the product. Life just isn’t like that.
But the change should mean finance directors and senior management will
have to take the concept of brands more seriously. As the guardians of
the balance sheet, finance directors will be negligent if they do
Various management studies have shown that companies’ internal lack of
understanding of their brands is the biggest threat to their long-term
prosperity. So in the long term, this cultural shift could be the most
positive benefit to come from what is a mere technical change in
It is often said that Colman’s earns two-thirds of its profits from the
mustard people leave on the side of their plates. The same must apply to
soap powder makers such as Lever Brothers. Most people, I suspect, have
no idea what the right amount is and stick a bit more in for luck
(unless you bought the clothes-rotting Persil Power, in which case the
best thing to do was to use a bit less than you thought right).
As a consumer, one can only applaud Lever’s decision to launch the
Persil soap tablet, each of which (I hope) contains just the right
amount for one wash. Hooray. No more waste, no more froth bubbling out
of the machine.
But it’s a bit of a marketing conundrum. On the one hand, Lever has
given Persil a genuine point of difference, if not technically then in
terms of consumer value. On the other, how do you sell something that
threatens to cut into volume and, presumably, profits? Given its history
with Persil Power, it’s an acute dilemma for Lever.