Brand valuation

Brand valuation is the job of estimating the total nancial value of the brand. Like the valuation of any product,
of self review, or conicts of interest if those that value
the brand also were involved in its creation.[1] The ISO
10668 standard sets out the appropriate process of valuing brands, and sets out six key requirements:

the cost approach is that a potential user of real estate

won't, or shouldn't, pay more for a property than it would
cost to build an equivalent. The cost of construction minus depreciation, plus land, therefore is a limit, or at least
a metric, of market value.

2.2 The market approach

1. transparency,

In this approach a comparison with the market is done.

For example if a person wish to buy a property in place
A, it is quite likely that the price of neighborhood would
be checked before arriving at conclusion on the existing
property, leading to an approach based on the market.
This valuation method relies on the estimation of value
based on similar market transactions (e.g. similar license
agreements) of comparable brand rights. Given that often the asset under valuation is unique, the comparison
is performed in terms of utility, technological specicity
and property, having also in consideration the perception
of the asset by the market. Data on comparable or similar
transactions may be accessed in the following sources:

2. validity,
3. reliability,
4. suciency,
5. objectivity, and
6. nancial, behavioural, and legal parameters.
Brand valuation is distinguished from brand equity.

Brand value

1. Company annual reports.

Traditional marketing methods have examined the
2. Specialized royalty rate databases and publications.
price/value relationship in terms of dollars paid. Some
marketers believe customers perceive value to mean the
3. In court decisions concerning damages.
lowest price. While this may be true for commodities,
some branding techniques are moving beyond this
evaluation.[2]
2.3 The income approach
Brand valuation emerged in the 1980s.[3][4] Early rms
involved in providing brand valuations included British This approach measures the value by reference to the
branding agency, Interbrand led by Michael Birkin,[5] present value of the economic benets received over the
who is credited with leading development of the rest of the useful life of the brand. There are six recogconcept[6] and laid out a brand earnings multiple model nised methods of the income approach.
of brand valuation in the 1991 book Understanding
Brands.[7][8][9]
1. Price premium method estimates the value of a
brand by the price premium it generates when compared to a similar but unbranded product or service.
This must take into account the volume premium
2 Valuation methodologies
method.
There are three main types of brand valuation
methods:[10]

2.1

2. Volume premium method estimates the value of

a brand by the volume premium it generates when
compared to a similar but unbranded product or service. This must take into account the price premium
method.

The cost approach

In real estate appraisal, the cost approach is one of three

basic valuation methods.[1] The others are market, or sale
comparison, and income. The fundamental premise of

3. Income split method this values the brand as

the present value portion of the economic prot attributable to the brand over the rest of its useful life.
1

4
This has problems in that prots can sometimes be
negative, leading to unrealistic brand value, and also
that prots can be manipulated so may misrepresent
brand value. This method uses qualitative measures
to decide the portion of economic prots to be accredited to the brand.
4. Multi-period excess earnings method this
method requires a valuation of each group of intangible assets to calculate the cost of capital of each.
The returns for each of these are deducted from
the present value of future cash ows and when all
other assets have been accounted for, the remaining
is used as the value of the brand.
5. Incremental cash ow method Identies the extra cash ow in a branded business when compared
to an unbranded, and comparable, business. However it is rare to nd conditions for this method to
be used since nding similar unbranded companies
can be dicult.
6. Royalty relief method Assume theoretically a
company does not own the brand it operates under,
but instead licenses the use from another. The royalty relief method uses available data of similar arrangements in the industry and assigns the value of
the brand as the present value of future royalty payments.

Uses of brand valuation

Common purposes are:

value reporting
licensing
dispute resolution
legal transaction
accounting
strategic planning
management information
taxation planning and compliance
liquidation
litigation support
Investors presentation/ Shareholders report
Raising funds

REFERENCES

4 References
[1] Campaign for Independent Brand Valuation
[2] Knapp, Duane E. (2000). The Brand Mindset. New York:
McGraw Hill. pp. 2435. ISBN 0-07-134795-X.
[3] Georey Foster (1 October 1989). Theres No Accounting for Brands. Management Today.
[4] Tatiana Soto J. (April 2008). Methods for Assessing Brand
Value: A Comparison Between the Interbrand Model and
the Bbdos Brand Equity Evaluator Model. Diplomica Verlag. pp. 14. ISBN 978-3-8366-5872-0.
[5] Heather Farmbrough (16 July 1987). Birkins Brand of
Ambition. Financial Times.
[6] Frank Zeccola (9 September 2009). New Branding
Trends to Watch: Former Omnicom Vice-Chief Birkin
Says PR Trumps Others in Driving Brand Value, Points
to Mobile and Experiential Marketing as Future Focus.
Bulldog Reporter. Retrieved 16 March 2015.
[7] Debjoy Sengupta (23 May 2003). Infosys Brand Value
Up 3.18% In Fy03. Business Standard. Retrieved 6 April
2015.
[8] Chuck Pettis (2001). TechnoBrands: How to Create
and Use ?Brand Identity? to Market, Advertise and
Sell Technology Products. iUniverse. p. 211. ISBN
9781462099573. Retrieved 6 April 2015.
[9] Boersma, J.M. and Van Weelden (1991). Understanding
Brands. London: Kogan Page. p. 80.
[10] ISO 10668 and brand valuations: a summary | BVRs IP
Management & Valuation Wire

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Brand valuation Source: https://en.wikipedia.org/wiki/Brand_valuation?oldid=692734185 Contributors: Skysmith, Bearcat, Edcolins,

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