Champion Brands Build Greater Shareholder Value

Bryan DumontBryan Dumont is president of APCO Insight, the opinion research group at APCO, and is based in Brussels.

This year, APCO revealed a new and more comprehensive model for thinking about corporate brand value: Champion Brand. This model brings together the many different theories around reputation, brand relationships, trust and authenticity, and shared value into one comprehensive model. We believe the Champion Brand’s “Four As” – Alignment, Authenticity, Attachment and Advocacy – will become the new standard for measuring and creating the most valuable and most enduring corporate brands for the 21st century. Our analysis of the relationship between the Champion Brand model and the financial value of the world’s largest companies shows that being a Champion Brand leads to a greater return for shareholders.

We applied a traditional market value of equity econometric model to predict the market capitalization of the top 569 corporate brands at publicly-traded companies. This model uses traditional financial metrics, including assets, liabilities, earnings, sales and market share to explain the variance in the market capitalization of a company at a given point and time. Looking at the data points for 2012, we see that these financial factors can predict 75 percent of a company’s market capitalization.

In order to determine whether or not the Champion Brand model can help explain market capitalization beyond these financial factors, we added the Champion Brand Index into the mix. The Champion Brand Index is a combined rating from 0-100 that is derived from the metrics in the Champion Brand model. The Champion Brand data come from a groundbreaking survey of nearly 80,000 people across 14 countries that evaluates 569 of the world’s largest companies. When the Champion Brand Index is added to the traditional market value of equity model, we can predict 84 percent of a company’s market capitalization – an increase of 9 percentage points beyond traditional financial metrics.

Further, the analysis shows a statistically significant relationship between the Champion Brand Index and market capitalization at the 99% confidence level. Specifically, we see that for every one-point increase in a company’s score in the Champion Brand Index, acompany’s market capitalization increases on average by $1.5 billion. That means when all of the other financial factors are treated equally, being a Champion Brand gives companies a $1.5 billion market value premium.

Companies that can demonstrate how they align with the expectations of stakeholders, behave in a way that is authentic to their vision and values, build emotional attachments, and become advocates for their stakeholders won’t just be admired; they’ll create real financial value for both shareholders and the greater economy.

Posted on June 5, 2013 By Bryan Dumont
Categories  Reputation and tagged , , , , ,
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