Recently, an industrial client asked a question I had never considered before: What is the value of a company’s visual identity? The request came as part of an acquisition process, and he was involved in discussions aimed at determining this value, partly as a component of the acquisition price, and partly to assess whether to continue with or drop the acquired company’s visual identity.
While coming up with a definitive answer to the question is probably beyond any consultant’s capability, I was able to help him think about the issue – and some of those insights are shared below…
What is a ‘visual identity’?
Let’s start by defining ‘visual identity’. I’ll use the definition provided by businessdictionary.com:
“Visible elements of a brand, such as color, form, and shape, which encapsulate and convey the symbolic meanings that cannot be imparted through words alone. In a broader (corporate) sense, it may include elements such as building architecture, color schemes, and dress code.”
While seldom encountered in isolation, a visual identity is one of the first interactions a person has with a brand. The more clearly defined, uniquely executed and relevant the brand’s identity appears, the more likely people are to move further along the buying process.
Visual identity contributes to awareness of the brand – and people’s perception that the company is a major player (the more often they notice consistently presented visual identity, the stronger they perceive the company to be in the marketplace). And it’s an asset that needs to be maintained and invested in every single year.
What’s it worth?
Just how much is a B2B company’s visual identity worth? There is, of course, no single correct answer to the question. But determining some sort of answer requires us to collect data and find comparable transactions that together can provide the basis for a logical and intellectually sound valuation.
Accountants and venture capitalists are likely to consider the cost of a company’s umbrella brand (of which visual identity is part) from perspectives ranging from total cost to build the asset, allocation of goodwill and direct income from the asset, to replacement/conversion costs and similar.
Many business people believe a visual identity is too integral to a company to make it possible to assess the extent to which it contributes to revenues. And they’re probably right. Marketers can, however, use the list below to think about its possible value:
- The amount of differentiation of the company’s visual identity in comparison with competitors (the less differentiated, the lower the value)
- How much the target audience likes the elements of the visual identity
- The level to which the visual identity has been clearly defined
- The complexity of the visual identity (how many elements, how uniquely designed)
- The level of consistency with which visual identity has been communicated
- The amount of exposure to the company’s visual identity
- The ability of target audiences to recognize the company through the components of its visual identity
- The extent to which visual identity contributes to the company’s reputation as an important market player
- The nature of the business – visual identity is extremely valuable for Coca-Cola, for example.
- Does the visual identity enable a brand premium?
- Does using the visual identity of the acquiring company increase the value of the target company in the minds of its audiences?
- How copyable/defensible is the visual identity? Are its elements registered as a trademark, can it be easily confused with others in the same industry, how many years has it been in place?
- Who is the acquirer? A competitor, for example? The visual identity’s value will vary by its applicability in relation to the new owner.
No free lunch
This list certainly gets us closer to a figure, but if I were part of the company being acquired, and we had built up a strong visual identity over time, I’d probably be asking key questions such as “What it would cost to restore the same recognizability and positive brand sentiment after changing a crucial element of the visual identity such as color?” Or “What’s the cost of implementing a new visual identity across corporate assets from premises to websites, vehicles, vessels and more?”
I’d remind the acquiring company, too, of Dr. Paul Martin Lester’s classic study, “Syntactic Theory of Visual Communication”, which demonstrated that people only remember 10% of what they hear and 20% of what they read, but about 80% of what they see and do!