How much is Disneyland or Six Flags really worth?
How much is a theme park like Disneyland or Six Flags worth?
Accountants might look at a company’s stock price, or the value of its real estate, or the estimated value of the rides and facilities that stand upon that land. Customers might look at its ticket prices and – if they are smart – also consider the costs of parking, food and upgrades to decide if a park is worth visiting.
But none of these numbers account for what might be the most important asset for a theme park – the value of its brand. And that’s a problem. I know of no accurate, reliable way to put a number on brand value. As a result, managers, consultants and analysts too often discount the effect of a change on the company’s brand value, simply because they lack an easy way to account for it.
Every action that a theme park company makes results in either a deposit into or withdraw from its brand’s value. Great managers understand which they are doing when they make their decisions. Bad managers either do not think about brand value, or, worse, they mistake brand withdrawals for investments.
Consider stock buybacks. That is when a company spends its money to buy its own shares. That helps drive up the price of that stock and can help to boost a company’s value through higher market capitalization. But that is not an investment in the company’s brand value. I would argue that a stock buyback represents a rather substantial brand withdrawal, instead.
Investors do not determine the value of a company’s brand – consumers do. When consumers pick a destination without even looking at alternatives, that’s brand value. When consumers spend extra to go one place over someplace else, that’s brand value. When consumers save for something rather than deciding whether to make a purchase based on the money they have at the moment, that’s brand value.
A theme park that spends money to build great attractions in engaging environments, with friendly and skilled employees to serve guests, builds strong brand value because consumers will want to spend a lot of money to spend time in a place like that.
Time for Wall Street heresy: A company’s profit is a withdrawal from its brand value. Anything that diverts money from investments that build a company’s value to consumers represents a withdrawal from its brand value. Cutting training budgets, reducing operating hours, running fewer trains on a roller coaster during peak seasons, closing a show and not replacing it, and failing to keep good employees by raising their pay and benefits are all brand withdrawals.
Not all company spending rises to the level of a brand investment. An anniversary celebration, for example, can be a brand withdrawal if it relies upon nostalgia to draw fans to the park, as opposed to offering a new ride or show for them to enjoy.
That does not mean that anniversary celebrations are a bad thing. Every company needs to make a brand withdrawal from time to time, just as consumers needs to pull money out of their bank account now and then. Smart brand withdrawals can lead to future brand investments, such as when nostalgic parents bring their children to the park for an anniversary and then the kids fall in love with the place. Pulling profits out when construction costs are high can be smart if it allows a park to spend more – and get more – when construction costs are lower and investors are happy.
Brand value changes every day and with every interaction that the public has with a company. Brand value, ultimately, is the result of a company’s investment in its customers – not in Wall Street or private equity or family owners. Short-sighted investors will see brand value as an asset to be mined for their own profit. They will be happy to support managers who withdraw from that brand value on a regular basis. They will strip a company of its value, sell the remaining shell for whatever they can get and then move on to their next victim.
When a company's brand value hits zero, it loses its pricing power, its marketing resonance and all the customer loyalty that helped carry it through gas price increases, extreme weather, recessions, and other bad times. When the brand value hits zero, the end is near.
The companies that last for generations are one led by managers who invest in their relationship with customers instead of with finance vultures. That’s a tough ask when your company is lying injured by the side of the road. But it remains the only way to succeed – and survive – in any customer service business.
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