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18th February 2019

Quantifying a shipping company’s brand value

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How much is your company’s reputation worth?

To the extent that a company’s reputation impacts its ability to do business, the brand has a value, but quantifying this value is tricky and is often only considered after the brand has been damaged.

We hope that a brand is an asset, but brands can also become liabilities – drags on their companies. Think, for example, of the collapse of Ivanka Trump’s clothing brand – her product didn’t change rather the Trump name became politicized and therefore became a liability in many of her key markets.

For shipping companies, brands are less important than for consumer product companies, but the impact of a brand can still be significant, perhaps especially for third-party ship managers.
So how do we quantify the value of a brand? How do we ensure it is an asset rather than a liability?

We start by predicting the profits of the company in the absence of any brand. We might do this by looking at a basket of the company’s peers. As much as possible we need to control for confounding variables that would be expected to impact a company’s profitability (e.g. age of fleet, debt load, country of operation etc.).

Doing this accurately is challenging, but for our purposes we can work with reasonable estimates. From an estimated profit which has controlled for all factors other than brand, we can assume that the profit deviation from the expected is largely explained by the brand – put most simply, are customers willing to pay a premium and/or are employees willing to take a pay reduction to work with the company?

For example: If our company receives on average 10% more applicates for senior positions than other companies (with the same compensation, location, size, etc.) then we might assume that the excess is due to a positive brand. The value of the brand might be calculated as the amount that other companies would have to increase their compensation schemes by in order to attract 10% more applications. This increase multiplied by the number of positions at the company would be the value of the brand for recruitment.

Of course, the brand will also impact other areas including sales, ease of attracting capital, and time spent on regulator and vetting inspections. Calculating and summing each of theses values will be time consuming and potentially inaccurate.

More simply, we might look at a company’s expected profit when compared to a basket of it’s peers having adjusted for all confounding factors. Any over (or under) performance can be attributed to the company’s reputation. The value of the reputation then is the investment (or cost cutting) at another company that would bring the profit to the same level as our company.

For example: A company with a poor reputation, might need to invest in a fleet that was on average two years younger to achieve the same charter revenue as a company with a neutral reputation.

Another common approach for calculating brand value looks primarily at how much is invested in that brand – advertising, PR, design, etc. This approach is obviously appealing for marketing and communications teams as, based on this metric, the more they spend the better. However, it is far too simplistic to be used in isolation, but in combination with the approach detailed above it can provide some interesting results.

Very few maritime companies ever consider reputation loss when calculating the impacts of a vessel incident. But in many cases it is possible for the loss of brand value to exceed the total of all other loses combined – especially since the value of a shipping brand is almost never insured.

 

Dustin Eno

COO & Crisis Response Manager

T: +44 (0)20 3326 8467
E: dustin.eno@navigateresponse.com

dustin.eno@navigateresponse.com

Twitter: @dustineno

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