• by Pat LaPointe , Op-Ed Contributor, August 25, 2009

Like moths to a flame, marketers are attracted to published rankings of brand value to see how their brand compares to those of key competitors, and how much it went up or down year-on-year. These rankings cater to both the basic human instinct of the need for comparability and to marketers' desire to "prove" that their investments are creating tangible shareholder value.

The appetite for brand valuation data is so strong that multiple respectable agencies now publish annual rankings of the world's most valuable brands -- including Interbrand, Millward Brown, and Brand Finance.

But there's a slight problem. The valuations of the same brand differ wildly across the three rankings.  Not by the odd 20%, but by as much as a factor of 4.  Even taking into account the dynamic nature of today's markets, it is hard to rationalize why the value of Coca-Cola should vary from $45 billion to $67 billion,  depending on whose 2008 ranking you read.

We recently analyzed several years of data from the different ratings services and found dramatically different estimates of the value of individual brands.  In the 2008 survey, the average difference between the low and high figure for each of 53 common brands was around 100% . In 2007, the average high-to-low difference was (only) 85%. 

However, the most troubling thing of all is the lack of agreement between the three agencies about whether the value of individual brands is increasing or decreasing from year to year.  For nearly half of the brands that were common to the three rankings in two years, the ratings services disagreed about whether the value of those brands had risen or fallen over the previous year. 

The most important implication for marketers is that it takes an expert to truly explain the differences underlying the valuations derived from each methodology. Each agency has a strong rationale for its preferred approach. But they can't each be right, can they? So if it's not clear why one brand is valued substantially higher/lower than another or whether brand value has gone up or down, then considerable care should be taken when using the numbers in conversations or reports. Credibility can be lost much faster than it is gained.

Even assuming that your organization is financially savvy enough to identify the valuation methodology that is most appropriate to your brand context (industry structure, company culture, competitive dynamics, etc.), you still need to anticipate how to account for potentially substantial swings in valuation from one year to the next. At some point it will most certainly happen, and when it does it can be very difficult to forensically trace the differences back to specific causal factors -- a task which is often far more qualitative than the quantitative nature of the valuation process would lead one to believe.

In light of the above, it is only the bravest or foolhardiest of marketers who would set KPIs for themselves or their department based on year-to-year changes in the absolute or relative valuation or ranking of their brand. The unexplained variations can be demoralizing and cause very perverse thinking about prioritizing actions.

It is understandably human to be attracted to rankings and ratings to see how we stack up to others. But sometimes, we need to rise above our instincts and apply our brains.