I was on my commute into London this week and spotted a high speed (at least relative to the other traffic on the M25 motorway round London in rush hour) convoy consisting of two Brinks-Mat armoured trucks with a three car police escort.
I know that in some countries that sort of sight would not be unusual, but it is rare in the UK – I don’t recall ever seeing such a convoy for high value goods as opposed to prisoners, VIPs or nuclear materials.
I wondered what it could be that deserved such special attention (and inconvenience to everyone else on the road) until I then saw a news story about the Dutch Government relocating it’s gold reserves from the USA and Canada.
Apparently, the Dutch have decided that “increasing geopolitical unrest” makes it unwise to keep their gold on the other side of the Atlantic, so 27 tonnes, worth US$3.79 billion, have been moved to London inro the care of the Bank of England.
As the Gold Standard was abandoned as the basis for underwriting the value of most currencies in 1971, there is no particular reason for a central bank to hold onto physical gold as far as I know – it is just part of the overall picture in terms of giving people confidence in a government and its currency.
As we have all witnessed in recent months, many other factors have a much greater impact on the perceived risk of lending to a particular company including how they manage their economy, the stability of government and whether they’re at war this week or not. These intangibles have more impact than how much gold you have, and whether it is stored in New York or London.
That then linked across to some research that we are currently doing in ICDP related to the factors that influence market share of specific car brands. We have already considered influences like the size of the dealer network, and then there are some fairly obvious and tangible factors like the product offer and the commercial proposition.
However, one area that we are currently debating internally is the brand value which has to be one of the most intangible factors there can be. How do you measure the value of the BMW brand to a customer compared to the Ford brand? Some years ago this was a very meaningful comparison at least in the UK market as the BMW 3 series at one point reached the #1 sales position, aided by the fact that the monthly payments were the same as a Ford Mondeo.
That in turn was driven by residual values (RVs) which favoured the BMW and meant that under a PCP agreement, the buyer was funding a lower depreciation than for the Ford. Positive sentiment towards BMW meant that the RV remained strong even when there was a high level of discounting when new. In our current research, a first glance at the RVs across brands shows quite a tight spread, so does brand value diminish as a car ages?
If we switch to retail, then the brand value of a dealer or repairer is also key. This allows a dealer to be less dependent on discounting to sell a new or used car in what has become a very transparent market, and given that trust is a key driver of customer retention for aftersales, it also directly supports that behaviour.
People talk in general terms about ‘good’ dealers or repairers, but what they are effectively referring to are all the intangibles that drive buying behaviour – the quality of the staff and how the experience feels to customers, both face to face and increasingly in digital communications. This all gets translated into what the accountants call the ‘goodwill’ that can be applied when buying or selling a business.
It’s inevitable that the seller will always talk this up, just as much as the buyer will challenge that it exists, but we can all agree that it is important.
Combining both manufacturer and retail, we then have perhaps the ultimate test – the entry by Ferrari into totally unrelated fashion goods and the high end boutiques through which to sell them.
They currently have two stores in London and New York within which you will find no cars, but plenty of clothing and handbags at prices that will make even the most ardent Ferrari fan wince.
Why would anyone buy such products compared to those available from more conventional brands such as Chanel or Louis Vuitton? Because of the brand value that Ferrari has built up over years – totally intangible, but highly valuable.
Few of us will ever have the chance to build a brand as valuable as Ferrari, but we all need to be aware of the influence that our behaviours have on brand – whether that is the decision within a manufacturer to push more stock into the market at period end, of a dealer to prioritise sales volume at the expense of the customer experience, or a repairer to compromise on standards to make a bit more margin on one repair. We don’t need the Bank of England to store the positive outcomes of avoiding these behaviours, but it is definitely more than worth it’s weight in gold.
