AMMAN -- Valuing a company's brand name is a difficult task. It is usually calculated as the net present value of earnings that a specific brand is expected to generate in the future.
Public companies in the US are now required to record the value of intangible assets -- such as brands -- on their balance sheet when they are acquired. These would be reviewed annually to see if there is any impairment in their brand value.
Some brands increase in value over time, and the practice of slowly writing off goodwill, as a charge against earning, is inapplicable.
The global branding consultancy, Interbrand, which issues yearly values for leading brands around the world, argues that brand value represents on the average around 60 per cent of the company's stock market value.
For example, Coca Cola is ranked this year as the most valuable brand in the world with a brand value of $67 billion, accounting for around 57 per cent of the company's market capitalisation.
It is followed by Microsoft at $61 billion, IBM at $53 billion, Disney at $27 billion, McDonald's at $25 billion, Nokia at $24 billion and Toyota at $23 billion.
To bring the analogy home, a brand name is the difference between paying less than $1 for a hamburger sandwich at a local outlet and paying $2 at McDonald's for the equivalent food and still think it is cheap.
Increasingly Jordanian companies are showing greater interest in the value of creating recognisable brands for their products and services.
It is only natural for investors in the local stock market to direct capital to companies they are familiar with. It is precisely here where many listed companies fall short.
The reason that only few of them have brand value to speak of, is partially due to the fact that most of the listed companies do not produce consumer goods, where brands play a dominant role, but are engaged in the production of basic commodities and in the provision of services such as banking, insurance, telecom and others.
Several companies still operate under conditions of monopoly or managed competition and hence are less in need for an established brand name.
Many listed companies did not invest in building strong brand characteristics and opted to have such identifications as Jordan or Jordanian dominating the names of their brands.
Others use general themes in their names such as "Arab," "National," "International," "Ahli," "Royal," "Commercial," that do not help establish unique brands. As a rule, the more identifiable the brand, the stronger it is.
Nevertheless, there are several exceptions. Nuqul Group with its recognisable "Fine" products has been a major branding success across the region. Aramex, Fastlink, Al Hikma, Blue Fig, JWAICO, MobileCom, etc. are examples of well-known brands.
Unfortunately, most of the these companies are still dominated by families and very few of them are listed on the local stock exchange which makes it difficult to assess the effect of their brands on investors' demand.
Brands do not have to be products and services only, they can be people and countries as well.
A few years back, no one would have thought of buying pharmaceuticals, processed foods or textiles from Jordan. However, today, the Kingdom has been able, through professional export control and promotional practices, to position itself solidly in the regional and international markets.
Korea is a good example where not so long ago the "Made in Korea" label meant something totally different from what it means today, with direct impact on the marketability of that country's products.
His Majesty King Abdullah has had a major impact on promoting Jordan in the international market place which helped boost the country's reputation as a tourism centre and an attractive business destination.
The spread of satellite television in Jordan has had a noticeable impact on shaping consumers' behaviour. Jordanian consumers have become more aware of what is available in the regional and international market place, and as such more brand conscious.
TV advertisement and marketing campaigns helped develop an association between brands and the average consumer. Local companies must, therefore, improve the competitiveness of their products to capitalise on these sentiments.
There is no doubt that the average consumer would buy a local brand as long as it is up to his perceived high standards.
Branding also allows a company to better market its other products. The concept of supportive brands, has proven successful in Jordan. Local companies have developed supportive brands to confront competitors without altering price.
"Smile" for example, is a less expensive brand of tissue paper than "Fine" introduced by Nuqul Group to combat the influx of new inexpensive brands to the market.
Building a brand is a lengthy process and comes at high costs that will pay off mostly in the long run. With brands, perception is more important than reality. If a brand is made to look important or "cool," people would think it has to be pretty good and would like to be associated with it .
Companies tend to create an emotional attachment with consumers through their brands, helping them to capture a larger market share.
For example, increasingly more French consumers are hanging out at Starbucks cafes and more Germans are drinking Budwiser beer. Both are American brands that have become significantly more valuable in the past few years.
While it is true that consumers in Jordan seek a lot more information today than what they used to do before, it would be an overstatement to say that the choice process has now become more rational.
Consumers tend to behave irrationally sometimes and indulge in post purchase rationalisation to justify their decisions. There is often an emotional link to the brand they buy, which explains why they are willing to pay a premium for it.
It is precisely this attachment that Jordanian companies should build over the years to increase market share and maintain competitiveness.
The successful brand is the one capable of becoming a "lovemark," inspiring "loyalty beyond reason" among consumers.
By Henry T. Azzam
© Jordan Times 2004
