NEWS13 October 2022

Strong brand value a ‘critical’ asset, says IPA report

News Trends UK

UK – Having a strong brand is a “critical strategic asset” and investment in brand value should be seen as worthwhile, according to a new report commissioned by the Institute of Practitioners in Advertising (IPA).

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The Brand Finance Report, which was released at the IPA EffWorks conference on Wednesday, found that the top 50 brands in the UK delivered 30% higher returns in 2021, but brands that had a high brand value to equity value ratio had a figure of 80%.

The report said this shows that strong brands are a critical strategic asset that deliver value, with their budgets an investment rather than a cost.

The findings are based on analysis of the Standard and Poors 500 and data from the FTSE 100 benchmarks.

Other findings included that strongly branded companies recovered quicker from financial crises and retain their performance, according to analysis of data from 2012, 2018 and 2020.

Global data also demonstrated that strongly branded companies pay 3% less on their debt, and 1.7% less in the UK, according to the report.

Intangible assets were now equivalent to half of total organisational value, and the global value of these assets rose 23% to surpass $74 trillion post-Covid-19.

Top growing companies invested 2.6 times more on intangibles than low growers across sectors, the report added, with the gap rocketing to between five and seven times in sectors such as financial services.

The total value of UK intangibles dropped in 2020, contrary to the US, China, and Germany, with the value of the top 50 global brands growing 17% between 2021 and 2022, while the top 50 UK brands grew 11%.

The report said that return on brand investment could be improved by focusing on familiarity and consideration.

Annie Brown, general manager UK consulting at Brand Finance, said: “UK businesses are facing inflated energy prices, global supply chain issues, changes due to Brexit, the fallout from Covid-19 and the uncertainty of a new political landscape with economic turbulence.

“Cutting marketing budgets may seem like a simple fix to help weather these challenges, but now is not a time for brands to lower the quality of their goods and services or risk reduction in familiarity and consideration.

“Those brands who keep their nerve and ensure the strength of their brand are more likely than ever to come through the other side from any disruption not only quicker but stronger and more profitable.”

Janet Hull, director of marketing strategy at IPA, added: “We have always believed that intangible assets are a critical pillar of competitive advantage and value creation.

“It is gratifying to see that commentators and specialists around the world are now focusing more on this vital area of investment, not cost.”