The war in Ukraine, geopolitical tensions between China and America, in today’s uncertain and competitive world, brands bring stability to companies and consumers and possess considerable value. As symbols of identity, status and quality, brands have the unique ability to capture the imagination of consumers and to shape their economic choices. Whether in the luxury, sport, technology or fashion industries, brands play an essential role by influencing purchasing behaviours and creating lasting emotional links with their audiences.

Brands are not limited to names and logos. They are complex, multidimensional assets. They embody narratives, experiences and promises, and they are often considered as living entities. Well-known brands like Louis Vuitton have built a solid reputation over the decades by offering quality products, cultivating rich legacies and establishing strategic partnerships with influential personalities in order to reinvent themselves. Founded in 1854, the world-renowned fashion house that is Louis Vuitton has become more than a simple luxury brand; it represents a symbol of style, sophistication and timeless elegance.

The recent fashion show for Louis Vuitton’s men’s collection, led by the famous artist Pharrell Williams, was a major event in the fashion industry, attracting considerable attention and generating massive interest on social media. Thanks to his influence and unique sense of style, Pharrell Williams succeeded in strengthening the image of the Louis Vuitton brand by connecting it with contemporary culture and developing a new, more engaged narrative. This fashion show also showed how brands can use other intangible technological assets. Indeed, without the existence of social media and a communication strategy, the impact of the fashion show would have been more limited.

Brands thus show new economic dynamics in connection with the emergence of new intangible assets. After the Second World War, global economic development experienced extraordinary growth thanks to the reduction of trade barriers. Developed economies were able to concentrate on innovative economic sectors whilst purchasing less sophisticated goods and services from developing countries. This was boosted by technological progress in transport, communications and medicine, thus opening the way to unprecedented socioeconomic development.

In this new economic context, brands acquired enormous importance. Economists maintain that since the 1990s, the growth of developed economies is based on new economic forces. Consumer spending has changed, granting growing importance to key sectors such as education, research, medical care and corporate services. These new economic sectors have led to significant increases in investment in intangible assets, such as research and development, software, marketing and organisational changes.

So where does this development towards intangible assets come from? It a direct consequence of the intensification of global competition and the progress made in information technologies. Economists recognise that intangible assets, such as brands, play an essential role in economic growth. These intangible assets present unique characteristics: they are synergistic, not competitive, and their use by an individual does not affect their use by others. What is more, the initial cost of production is high, but their marginal costs are very low. Further, their use can be protected by rights of ownership or other legal means.

Modern companies, and in particular newly publicly listed companies, perfectly illustrate this change of paradigm. The latest cohorts of publicly listed companies present increasing risks compared with older companies, but also the prospect of greater gains. This trend can be explained by the fact that these new companies adapt models of activity based on intangible assets, such as intensive research and development, information technologies and databases. These assets are synergistic with brands. They concentrate on innovation and supplying services centred on the client rather than on simple manufacture of products. This transition towards business models based on intangible assets offers numerous economic advantages, but it also leads to an increase in specific risks to each company.

That is why it is essential to measure the value of intangible assets and in particular brands. Brands are complex intangible assets that require in-depth valuations based on advanced legal, economic, financial, sectoral and marketing knowledge. The rankings regularly published by advisory firms on the value of brands are testament to their importance to the modern economy.

Luc Paugam – Associate Professor, HEC Paris
Accuracy Talks Straight #8 – Academic insight