Tag: brand valuation

Approaches to Brand Valuation

Interesting article on brand valuation on 4hoteliers.com website. First off all the author is corectly placing the brand as a independent category among the intangible assets of a company:

Brand and relationship intangibles: these include trade names, trademarks and trade symbols, domain names, design rights, trade dress, packaging, copyrights over associated colours, smells, sounds, descriptors, logotypes, advertising visuals, and written copy. In addition, associated goodwill (the general predisposition of individuals to do business with one brand rather than another brand) should be included.

Then the article si focusing on several approaces to brand valuation:

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Best Global Brands by Value – 2006

The previously announced Interbrand & BusinessWeek 2006 Best Global Brands by brand value is finally out with no major movements in the top 10.

Brand value is calculated as the net present value of the earnings the brand is expected to generate and secure in the future for the time frame from July 1, 2005 to June 30, 2006. To be considered the brands must have a minimum brand value of US$2.7 billion, achieve about one third of their earnings outside of their home country, have publicly available marketing and financial data, and have a wider public profile beyond their direct customer base.

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4 Brand Valuation Methods

Value has different meanings to different people. The objective of the valuation is determined by its use. Some of the more common valuation approaches are market based/direct measurement method; brand communication investments based method; awareness and franchise valuation method; finance based/indirect measu- rement method; excess-earnings method and relief-from-royalty method.

The simplest direct measurement is to add all the brand’s communication investments, adjusted for inflation. An additional adjust- ment is sometimes made to account for and reward the risk taken by past managers. This adjustment is called the discount rate and it is used to compute the net present value of the successive investments, that is, what they are worth today. The method is simplistic and overvalues the brands; but brand buyers use it for that very reason. It also penalises brands that do not advertise heavily.
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New Global Brand Valuation Study

Despite its dominance, Interbrand/BusinessWeek global brand league table has inherent weaknesses. This is not news to anyone who works in branding: most marketers accept that the Top 100 is an imprecise but important approximation of global brand equity.

But all this is about to change. Next month global agency group WPP will launch an alternative brand valuation league table that will directly challenge Interbrand’s calculations. The system has been masterminded by chief research officer Andy Farr and his marketing quant jocks at Millward Brown Optimor (MBO).

Here are some insights into this soon to be revealed WPP study:

  • WPP’s annual Brandz survey questions more than 650,000 consumers and professionals in 31 countries.
  • The results are analysed to create a combined diagnostic and predictive tool that evaluates the strength and growth potential of brands.
  • Respondents are asked to compare more than 21,000 brands in 300 categories from sectors including long purchase-cycle brands, FMCG, retail and e-commerce and services.
  • Each respondent is asked to evaluate brands in a competitive context from a category they shop in.
  • Their responses generate scores for levels of bonding with a brand, its advantage over rival brands, brand performance and relevance to consumer needs.
  • Consumer loyalty and claimed purchasing data are used to generate a ‘brand voltage’ score, indicating the brand’s potential.

More here

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Evaluate Your Name

When re-branding a business or a product or when you set up a new one and have to come up with a brand new name you should find a way to evaluate among different options that might come up in order to choose the best one out of them. Here I just stumble upon and interesting tool to dissect potential names into the nine categories to make it easier to understand why name work or don’t work, and to more easily weigh the pros and cons of one name versus another:

Appearance – Simply how the name looks as a visual signifier, in a logo, an ad, on a billboard, etc.

Distinctive – How differentiated is a given name from its competition. Being distinctive is only one element that goes into making a name memorable, but it is a required element, since if a name is not distinct from a sea of similar names it will not be memorable.

Depth – Layer upon layer of meaning and association. Names with great depth never reveal all they have to offer all at once, but keep surprising you with new ideas.

Energy – How vital and full of life is the name? Does it have buzz? Can it carry an ad campaign on its shoulders?

Humanity – A measure of a name’s warmth, its “humanness,” as opposed to names that are cold, clinical, unemotional. Another – though not foolproof – way to think about this category is to imagine each of the names as a nickname for one of your children.

Positioning – How relevant the name is to the positioning of the product or company being named, the service offered, or to the industry served.

Sound – Again, while always existing in a context of some sort or another, the name will be heard, in radio or television commercials, being presented at a trade show, or simply being discussed in a cocktail party conversation.

“33” – The force of brand magic, and the word-of-mouth buzz that a name is likely to generate. Refers to the mysterious “33” printed on the back of Rolling Rock beer bottles for decades that everybody talks about because nobody is really sure what it means. “33” is that certain something that makes people lean forward and want to learn more about a brand, and to want to share the brand with others. The “33” angle is different for each name.

Trademark – As in the ugly, meat hook reality of trademark availability. All of the names on this list have been prescreened by a trademarked attorney and have been deemed “likely” for trademark registration.

Read more about it here

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Brand valuation – 7 applications

Since seven seems to be the magic number which relates with brand value and brand valuation let’s check seven applications of brand valuation:

External investor relations
Mergers and acquisitions were the original driving force for brand valuation. Now many successful companies use brand valuation as an ongoing business performance indicator: to help ensure that brand strength is reflected in share value.

Internal marketing management
Brand valuation is increasingly being used as a management tool in leading organizations. For example: brand valuation figures can be used to evaluate new product and market development opportunities, to set business objectives or allocate budgets.

Internal royalty rates
Across a large organization there may be many affiliates, subsidiaries or divisions that make use of any particular brand. As the profit potential of brands becomes more clearly understood more companies are charging royalties, across their business operations, for the use of these brand assets.

Licensing and franchising
Where companies allow outside organizations to use their brand, on a licensing or franchising basis, a brand valuation can lay the foundation for appropriate charges.

Tax planning
As the management of brands as financial assets becomes more sophisticated, so tax authorities around the world have started to take an interest in how these assets are managed. The result is that more and more international organizations are planning the most cost-effective domicile for their brand portfolios and are organizing their tax affairs with their brands in mind.

Securitized borrowing
Even in the conservative world of banking, the asset value of brands has been recognized. As a result brands have been used to secure loans, especially in the US, where companies such as Disney have borrowed significant amounts of money against their brand name.

Litigation support
Brand valuations have been used to support litigation against the illegal use of a brand name (as a basis for calculating damages, for example) and also in cases of receivership, to prevent the assets of the business being undervalued.

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7 elements of brand valuation

The [tag]Interbrand[/tag] model of brand strength is a useful framework to consider the performance of your own brand. Consider these seven points and you should get a better sense of the strength of your own brand, as well as some ideas on how to move forward.

Market: 10% of brand strength. Brands in markets where consumer preferences are more enduring would score higher.

Stability: 15% of brand strength. Long-established brands in any market would normally score higher, because of the depth of loyalty they command.

Leadership: 25% of brand strength. A market leader is more valuable: being a dominant force and having strong market share matters.

Profit trend: 10% of brand strength. The long-term profit trend of the brand is an important measure of its ability to remain contemporary and relevant to consumers.

Support: 10% of brand strength. Brands that receive consistent investment and focused support usually have a much stronger franchise, but the quality of this support is as important as the quantity.

Geographic spread: 25% of brand strength. Brands that have proven international acceptance and appeal are inherently stronger than regional brands or national brands, as they are less susceptible to competitive attack.

Protection: 5% of brand strength. Securing full protection for the brand under international trademark and copyright law is the final component of brand strength in the Interbrand model.

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Evaluate Your Brand

Brands are the most valuable assets that many companies have, representing a substantial portion of a consumer company’s overall market value or equity. Also, because it is becoming increasingly more difficult to sustain competitive product or technological advantages, it is likely that brands will continue to grow in importance and significance.

This is the introduction of an interesting PDF from GfK Custom Research and PriceWaterhouseCoopers, entitled “What Are Your Brands Worth?“, dealing with subjects as:

  • Advanced Brand Valuation Model
  • Psychological Brand Strength
  • Brand Isolation Module
  • Brand Forecast Module
  • Brand Risk Module
  • Brand Strategic Option Module
  • Case Study: Euro Max Petroleum
  • Determination of Brand Value
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