‘Brand equity’ doesn’t exist in the boardroom
For brand marketers and communicators, brand equity is all about orchestrating the intangible relationship between brands and their stakeholder groups. Naturally, these are often customers or clients, and increasingly other audiences such as employees, suppliers of products, services and capital, and society as a whole. The extent to which brands generate more preference, loyalty or ultimate value, is referred to as brand equity. Looking more in-depth, this can be split into brand drivers, the ingredients that make up brand equity. Marketers around the world are educated to understand these mechanisms and to operate them in real life – the science and art of marketing.
In the boardroom however, brand marketers and communicators do not always have a seat. On the contrary, most boards consist of non-marketers or no marketers at all. More often, the common denominator for backgrounds of board members stem from finance, business and increasingly also from IT and digital. Also, the boardroom ‘speak’ is financial and factual language and not marketing speak. It’s the language of the capital markets, the economy and 100% captured in systems for financial reporting; be it IFRS, FASB or US GAAP or whatever regulations apply for a listed company.
The appearance of the brand in a balance sheet
So, here’s the thing. In a balance sheet, ‘brand equity’ is not visible, it doesn’t show. You can see ‘Brand’ under Intangible Assets at the left top of a balance sheet. And you can see ‘Equity’ under Capital at the right top of a balance sheet. For both ‘Brand’ and ‘Equity’, the financial community has been working for hundreds of years to create a framework of definitions – so practitioners understand exactly what’s what (the first book on this was by L. Pacioli in 1445!). They are two different things altogether for this community.