Brand-Added Value

James Heartfield Jim at heartfield.demon.co.uk
Sun Dec 24 02:41:08 PST 2000


The Week ending 24 December 2000

Issues in the news:

With drinks' company Diageo's purchase of Seagram Brands like Absolut Vodka ahead of Xmas its stocks fell and rose - another chapter in the continuing business obsession with

THE ADDED VALUE OF BRANDS

Branding is key to contemporary business theory, which sees brands as wealth generators in their own right.

Interbrand estimates the additional value that brands bring to some big name products:

Brand Brand value $M Coca Cola 83,845 Microsoft 56,654 IBM 43,781 General Electric 33,502

Source: Interbrand/Citibank 1999

They also estimate the extent to which brands multiply the value of some key supermarket products:

Brand Multiple Coca Cola 4.95 Gillette 3.83 Louis Vitton 2.35

Source: Interbrand/Citibank 1999

'Where does the added value come from?' is a question that has troubled economists of every age. And the answers they give tell us more about the preoccupations and concerns of those times than it does the real answer to the question. Medieval folk in awe of the magically increasing wealth of merchants imagined that a philosopher's stone transmuted base metals into gold. East India company merchant Thomas Mun (1571-1641) persuaded the treasury that added value comes from selling 'more to strangers yearly than wee consume of theirs in value' - so they stifled domestic consumption and ended up strangling economic growth. French landlords had François De Quesnay (1694-1774) to argue that only agriculture is fructiferous, towns merely frittering wealth away. British industrialists commissioned the stockbroker David Ricardo (1772-1823), who incautiously explained that new value was created by exploiting labour - provoking labourers to demand the full produce of their labour.

The economic theories of where additional value comes from reflect the competing claims on the surplus, so landlords see land as productive of new value, industrialists industry and merchants' trade. In a sense additional value is a no-brainer: all societies above the level of Colin Turnbull's benighted Ik people produce more than they consume. In Britain in 1999 24 million people worked a sum total of 47 736 million hours. In that time they created first goods and services to an equivalent of their wages, £491.3 billion, and then an additional value of £787.4 billion for their employers. The economic form that the surplus takes depends on the conditions under which it is appropriated: as Tribute in ancient Rome, rents in feudal Europe, industrial profits under the factory system, as 'brand value' today.

In the eighties the dog-eat-dog conditions of recession led to a revival of the theory that profits are made by trade, with the twist that there was no new wealth, just a zero sum game in which one man's gain was another's loss - a perception enhanced by the way that corporate raiders like the late Sir James Goldsmith made more money breaking up industries and selling off their assets than they could producing goods. Lord 'two-dinners' Goodman despaired of what people would trade if productive industry went to the wall.

With the return of growth in the nineties, shadow chancellor Gordon Brown showed off his knowledge of the latest economics in a speech about 'neo-classical endogenous growth theory'. Deputy Prime Minister Michael Heseltine ridiculed 'Labour's brand new shining modernists' economic dream' punning on the speechwriter's name 'But it's not Brown's, it's [Ed] Ball's'. But Brown's re-focusing on growth won the day, and since 1998 the Office of National Statistics have recorded Gross Value Added in the economy. Value Added is calculated by comparing the difference between the value of input compared with output. Since all inputs - wages, raw materials, and machinery - are paid at cost, the Value Added remains the mysterious product it always was, except that the alchemy invoked to explain it today is not the philosopher's stone, but the bewitching powers of brands. Why brands get the credit tells us more about the preoccupations of our own time than it does about the mechanisms of wealth creation. In other ages, the qualities that were deemed to garner special reward were thrift, risk-taking intellect, or breeding. In our image conscious age, graphic design and logos are invested with the magical property of making something out of nothing.

For sure, brand theory balks at its own insubstantiality. In defining brands we are told that behind the power of the image lie such indefinables as customer loyalty, trust and networks. So Howard Schultz of Starbucks likes to think that he is not selling coffee, but a 'third space' between the public and private realms. Today's entrepreneurs are not 'lumpy-object purveyors', in Tom Peters phrase but selling an image, a dream. Former US Labour Secretary Robert Reich agrees, arguing that the economic successes of the future will be the 'Symbolic analysts' - a category so broad that it could include a semiotically astute pop star like Madonna, a futures trader, a politician or an advertising executive. It is flattering for businessmen like the Microsoft geeks making up Madonna's audience at the Fridge to imagine themselves also to be artists. This way greedy Fat Cats re-branded themselves as imaginative and creative people - not executives, but agents of change - thereby laying claim to the value added by their brands. In a collection Creativity Works, chancellor Brown reprimands artists and designers that 'creativity is not confined to any one sector of the economy', introducing such 'creatives' as the Chief Executives of Cadburys- Schweppes and of Tescos, alongside architect Daniel Liebeskind.

One argument is that brand value represents the added value brought by networks. Where every other social trend is towards greater individuation, the owners of brands flatter themselves that their symbols represent valuable connections, thereby laying claim to the cooperative efforts of their workforces - the company's most valuable asset, as the brand theorists have it. At home Nobby No-Mates is worth nothing, but as an employee in a branded company it is a different story. Businessmen are not just creative they are connected too.

The ubiquity of branding has provoked some criticisms, too. Cultural studies lecturers shiver with mixed indignation and self-satisfaction at the self-branding black teenagers, tattooed, or more wisely shaved, with the Nike Swoosh. Seattle demonstrators attacked Nike - while wearing the Nike Brand. In her spirited attack on corporate capitalism Naomi Klein champions the NO LOGO brand - but Muji have already beaten her to it. The anti-brand warriors are as much prisoners to the mystical power of brands as their targets. Tilting at windmills they trash McDonalds, as though the shop front were the source of all evil. Like those they criticize the anti-brand activists have a poor view of the consumer as a lifeless puppet of advertising and image. But however much the environmentalists might wish it, the condition in which, according to the Household Survey basics like food have been reduced to a mere 15 per cent of household expenditure in Britain, and cultural goods and services enhanced to 20 per cent is not going to be reversed - not without a savage assault on working class wages. The view that such consumer goods are not 'real needs' is otherworldly. If we are more than animals to be fed and watered, then we really do need those trainers, for all the social cachet they bring. -- James Heartfield



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