That’s an intriguing question. The answer: both made acquisitions where more than 80 percent of the value received was intangible.
Ford paid $2.5 billion for Jaguar, only $500,000 of which was for tangible assets—plants, equipment, etc. General Mills purchased Pillsbury in a transaction where an estimated 92 percent* of the total value was deemed intangible.
These transactions do not represent some type of anomaly. Intangibles like brand value are strong contributors to the value of the stock market. The 2015 Annual Study of Intangible Asset Market Value from Ocean Tomo estimated 87 percent of the S&P 500 market value was intangible, up from 17 percent in 1975.
Unfortunately, accounting rules make it difficult to find true intangible brand value on corporate balance sheets. The real value is much more clearly revealed by acquisitions like those made by Ford and General Mills.
There is a distinct strategic implication for companies: branding needs to be a financial decision made at the highest levels of the organization, not an advertising one. Brand spending should drive sales transactions and margin enhancement and must be considered the driver of a balance sheet asset.
Companies achieving the best brand-driven financial outcomes carefully plan and are relentless in pursuit of excellence in program implementation. They understand the emotional needs and purchase motives of buyers throughout the value chain, build customer-centric cultures and align their employees in the delivery of brand value.
If you are missing any the ingredients needed to accelerate brand financial results, our team at The Bloodhound Group have decades of management experience making great things happen. Check out the Services section of our website for details on how we can help you build your brand strategy.
* The Physics of Brand, by Aaron Keller, Renee Marino, and Dan Wallace, copyright 2016 and published by How Books