Brand Bubble Essay

3839 Words Aug 28th, 2013 16 Pages
nd bubbleWall Street values brands higher than Main Street. Watch out.


6 Spring 2009

John Gerzema
“Time destroys the speculation of men, but it confirms nature.” —Cicero, 106-143 B.C. As we leave behind 2008, the numbers are both historic and dismal. The S&P 500 declined by 38 percent, and almost 2 million jobs were lost. The median home price fell by 22 percent, while almost 7 trillion dollars in market value evaporated from the Dow Jones 5000 Index. Taxpayers funded $700 billion to bail out financial institutions, with another $17.5 billion to keep General Motors and Chrysler operating into the new year. The credit crisis intertwined virtually every economy and sector in the world, shattering consumer confidence to
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In early 2007 we identified another bubble, one twice the size of the residential subprime mortgage market and almost $4 trillion dollars of the S&P 500’s market capitalization. Again, this bubble was created by the reckless run-up of hype, devoid of underlying consumer logic. And, like complex derivatives, it was hidden in black boxes and proprietary modeling. Yet, in this instance, the assets at risk cannot be traded away or hedged against uncertainty. Rather, they are the fundamental drivers of competitive advantage for most organizations: their brands. Brand value accounts for approximately 30 percent of the market capitalization of the S&P 500 (Millward Brown Optimor, 2007). While this varies by sector, brand value as a percentage of a company’s market value has risen steadily from 5 percent 30 years ago. marketing research 7

The Brand

Executive Summar y
The BrandAsset Valuator (BAV) brand study found that, while brand valuations have risen steadily, consumers are selling brands short: Brand awareness is down 20 percent, brand esteem is sliding by 12 percent, perceptions of brand quality declined 24 percent, and trust in brands has eroded by almost 50 percent. The authors conclude that an entirely new approach to analyzing a company and managing its brands is needed to stave off the inevitable decline in brand value.

Brand Value
Today, the 250 most valuable global brands are worth

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