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:
Marketing leaders across various industries point to brand differentiation as their top challenge in 2005. Industry consolidation and buyer caution put a premium on brand leadership. Yet marketing budgets are barely growing and traditional brand building has fallen prey to the demands for quantifiable sales results. Buyer skepticism tunes out the constant chatter of me-too marketing claims. And the mergers and acquisitions reshaping the industry confuse buyers even more about who can do what for whom.
Real differentiation is possible, however, for companies willing to invest creatively in ongoing programs to build and promote a compelling story. Specifically, there are five investment areas that separate today’s brand leaders from the rest of the pack:
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.
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.
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.
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.