Last week iconic car brand, Ferrari listed its shares on the
stock exchange. At the end of its first
day of trading the car’s share closed at $55 (sh200,000) valuing the company at
$10b ( sh36 trillion) or about half the size of the Uganda economy.
Compared to other car companies like America’s GM, which is
valued at $50b, Ferrari only made 7,000 cars last year compared to the ten
million cars GM rolled out last year.
This an astounding metric because if we say each GM car
accounts for $5,000 of the giant car makers market value and using a like for
like comparison Ferrari, the company, should be worth about $35m.
Using simple arithmetic this would suggest that Ferrari the
company is selling at more than $9b premium to its industry worth.
"The almost 100 year company – it was founded in 1929, has made a name for itself by producing machines while elegant are the byword for power and performance, a strong heritage that is unmatched by any other car maker. The combination of these has also meant that Ferrari’s sell at huge premiums a situation that has been managed very well by its owners up to this point....
It’s safe to say with a price tag of between $190,000 and
$400,000 (sh720m and sh1.4b) there are probably no legitimately rich Ugandans
who can own a brand new Ferrrari.
However the lesson for us, individually and corporate
entities would be how to create value that people will be willing to pay
exorbitant asking prices for.
Straight off Ferraris are not a con job.
They deliver performance encased in a design while jaw
dropping to look at is tasteful and refined. The experience of driving it or
being driven in one (I hear) never disappoints. This almost orgasmic experience
they have then gone on to market by being the most successful team in formula
racing history, as if we needed any more reminding.
They have tied down the constituent parts of a brand –
awareness, experience and association to ensure loyalty.
And then the final stroke of genius is that they have
limited supply finally they have limited supply by producing a only a few
thousand cars annually .
Applied to personal or corporate brands it’s clear that
first you have to be able to deliver, deliver a service or product that is
almost beyond reproach and even exceeds expectations. Essentially your offering
should speak for itself, preferably get people in gaping awe of you.
But that’s not enough because it’s not true often enough, that
if you build it they will make a beaten path to your door. So you need to
create awareness about your expertise or the quality of your product.
"Ferrari has shown that succumbing to the temptation of cutting margins and going for a mass product need not be the way to enhance you or your product’s value to the market. Aiming for high end niches that recognise good value and are willing to pay for it is a viable option...
Of course you can be out of business long before the
discerning members of society appreciate your value proposition but no one said
good things come easy.
With Ferrari we are seeing the finished process, lost behind
the hype is the long nights, the periods of debilitating self-doubt and the
times when the company trode a lonely but unprofitable path driven solely by a
vision that had never been proven – at least with cars.
That the market is willing to pay such a premium for
Ferrari’s shares is testament to the success of this near century-old brand
building exercise. Its vindication of the founder Enzo Ferrari’s vision of
building a high performance luxury car.
The lesson for us is that we can be paid our full value if
we take our eyes off the money and focus on building a brand – personal,
corporate or even national. The money will come eventually.
