I’ve always been skeptical of goodwill on company balance sheets, often inflated during an acquisition spree. One justification for the value of these "assets" is brand equity; a recent analysis by CoreBrand on the value of AT&T’s brand placed it at nearly $15 billion, part of the reason that SBC, which acquired AT&T, took on the target’s name (see this recent Forbes article for more info on AT&T brand value and the decision to rebrand Cingular as AT&T). But is there a more pragmatic way to measure brand value? Are there real world examples? During a recent trip to London, I think I found an interesting example of brand value – at least as it applies to retail.
Money is the only product that doesn’t vary between sellers. Either it’s money or it’s not. On Piccadilly Street, near The Ritz Hotel, there are three providers of foreign exchange services within a quarter mile of each other, and their prices for exchange vary enough to make a point about brand value. Location is perhaps the most important variable in retail, and all of these foreign exchange dealers are within a three minute walk of each other – the two with the greatest difference in rates are just across the street from each other.
The three dealers, HSBC, The Change Group and $Global Foreign Exchange all offer essentially the same service. They change your currency from what you have to what you want, and charge a fee for the service. HSBC is a global bank, The Change Group is the largest independently owned forex retailer, and $Global is an independent dealer that has one location, a concession within a souvenir shop.
Which dealer would you expect to have the best price for foreign exchange 
(offer you the most British Pounds for Euro, for example)? Here’s what I learned last December. I had 500 Euro to change, and shopped all three locations the same afternoon. The Change Group quoted 1.72 Euro per Pound. HSBC quoted 1.61. And $Global, 1.5275. This is quite a spread. The resulting number of Pounds for my 500 Euro were Change Group, 290.70, HSBC, 310.56 and $Global, 327.33 – a spread of 36.63 Pounds Sterling, nearly 10 percent of my funds to be changed and enough to buy my dinner that evening.
Interestingly, this disparity is in some ways is counterintuitive. You would expect the bank to be an expensive but reasonable source of service, the global forex specialist to be the least expensive and the single outlet to be most expensive – with so little credibility as to be suspect. But if you put your brand marketer’s hat on, it becomes clear that brand equity and distribution equates to pricing power in the retail foreign exchange market, like nearly every other market on earth.
Our sole proprietor has to work harder to garner customers, so his pricing is better. The Change Group, with a global brand and presence, can command a higher price, because travelers recognize its brand and it has greater distribution than most other providers. HSBC provides a credible service with middling rates; the business is neither an embarrassment nor a focus.
The bottom line: in the most commoditized product line of all, money, pricing power exists based on brand and distribution. So, the next time you are tempted to reduce price to compete more effectively, ask yourself what you can do to increase the value of your brand so that you can command a premium. While I’ll always seek out the $Global kind of value, it’s operators like The Change Group that will have greater market share and profits. They’ve figured out how to create brand value for the ultimate commodity. It’s called service and distribution.
Notes for travelers: as always, it pays to know current exchange rate ranges. A good Web site to check before making your currency conversion is www.xe.com. $Global Foreign Exchange is my best bet among the group. Its proprietor is S. Ganesh, and is located inside the "Image" souvenir shop at 54 Piccadilly, London, W1J ODX. Telephone is +44 (0) 20 7493 0903. The Change Group is directly across the street at 164/5 Piccadilly as well as at seven other London locations – and on the Web at www.changegroup.com. The HSBC branch mentioned is located at 79 Piccadilly, and telephone is +44 (0) 84 5740 4404.
Thanks to citikey.com / The Local Data Company for images. Exchange rates were sourced week of December 10, 2006.
