Brand valuation methods and practice

BRAND VALUATION
METHODS & PRACTICE
Prof. (DR.) R. Bakshi (Ph.D.)
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teaching and training. Illustrations and screenshots are property rights of respective companies as applicable.

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© Prof.( Dr.) R. Bakshi- No part of this ppt presentation can be used for any other purpose apart from classroom teaching
and training. Illustrations and screenshots are property rights of respective companies as applicable.

BRAND DEFINED
Name Definition of Brand
American
Marketing
Association
Name, term, sign, symbol, or design, or a combination of them, intended to
identify the goods and services of one seller or a group of sellers and
differentiate them from those of competitors.
Landor A brand is a promise. By identifying and authenticating a product or service it
delivers a pledge of satisfaction and quality
Leuthesser A brand is a products additional value (for its customers) compared with what
would be the value of another identical product without the brand
Author A Brand is the result of the flow of perception that makes it the reputational
capital of the firm
1. [Wood, L., (2000), “Brands and Brand Equity: Definition and Management”, Management Decision, Vol. 38, No. 9, pp 662 - 669
2. [Weinberg G. S., (2003), “The Price to Pay For Peace: Corporate Language and Culture at A South African University” Language
Matters, Vol. 34, No. 1, pp 57 – 71

BRAND AS ASSET
While considering brands as assets, the role of brand
management changes radically to strategic and visionary from
tactical and reactive
1. With this strategic view, marketing becomes a part of the
strategy that creates and manages customer insights that are
linked to brand management issues.
2. The emphasis shifts to strategic measures lie brand equity
components viz. awareness, associations and customer
loyalty.
3. Strong brands can become the basis of competitive advantage
and long-term profitability for moving ahead.

BRAND AS ASSETS
Schmalenbach Business Review |Brand Valuation and Control: An Empirical Study |
Authors:Thomas Günther & Catharina Kriegbaum-Kling 2001,Volume 53, Issue 4, pp
263–294|

SOME BRAND TRANSFER PRICES IN INDIA
Date Purchaser Seller Brand Sale Price(Rs
Million)
Mar-08 Tata Motors Ford Motors Land Rover, Jaguar 9430
Oct-06 Tata Steel Corous Corous 50840
Feb-06 Mittal Steel Arcelor Arcelor 9307
Dec-02 United Breweries Guinness UDV Gilbey's Green
Label
600
Dec-02 East Asiatic Pifzer Protinex 350
Sep-02 Raymond Colour Plus Colour Plus 600
Jun-02 Ranbaxy P&G Healthcare Verdatide 250
Jun-02 Dr. Morepen Yash Pharma Lemolate 110
May-02 Desai Brothers ADF Foods Mothers Recipe 60
Dec-01 Morepen Labs Reckitt Piramal, Burnol 90
Sep-01 Zydus Cadila Kopran Aten 950
Source:
Developed by
Author

BRAND VALUE CONCEPTUAL FRAMEWORK
Journal of Brand Management | May 2007, Volume 14, Issue 5, pp 380–395 | The theoretical separation of
brand equity and brand value: Managerial implications for strategic planning | Authors: Randle D Raggio &
Robert P Leone

BRAND VALUATION
Emerged in the 1980s, it is the job of
estimating the total financial worth
(value) of the brand.
In other words it is the process of
establishing a true and fair financial
market worth of a brand”

BRANDS AS SEPARABLE ASSETS
Source: The recognition and
measurement of brand assets:
an exploration of the
accounting/marketing interface |
Nevine El-Tawy & Tony
Tollington | Journal Of Marketing
Management | 2008 | 24 (7-8) |
pp. 711-731

ESTIMATING PROFIT CONTRIBUTION
 Brand sale comparison
(multiples)
 Price premium
 Demand driver / brand
strength analysis
 Gross margin comparison
(Economy of scale technique)
 Operating profit comparison
 Royalty relief
 Excess cash flows
 Excess margin
 Competitive equilibria
analysis
 Comparison with the
theoretical earnings from the
equivalent unbranded product
 Arbitrary constant coefficients (
‘ Factor )
 Formulae based on accounting
data
 Proportion of loyal clients as %
of total client base
 BEV Q TM (Brand equation
method)
 Valuation of corporate
reputation based on CAPM
 Per cent of market cap
attributable to corporate brand

CONTRIBUTORS TO BAND VALUE
Brand
Value
Brand
Equity
Channel
benefits
Product
Service
Benefits
Price

USE OF BRAND VALUATION
Source: Strategic brand
valuation: A cross-
functional perspective
| Business Horizons |
Author Karen
S.Cravens & Arthur
Andersen | 42 (4)
|1999 | 53-62
Brand
Valuation
Financial
Reporting
Acquisition or
Merger
Strategic
Brand
Management
Corporate
Strategy
Brand
Portfolio
Evaluation
Evaluation of
Managers

APPLICATION OF BRAND VALUATION
Source: Developed By Author
Accounting Applications Marketing Applications
1. Recording and disclosing
the value of the brand in the
financial statement of the
firm
2. Tax planning
3. Mergers and acquisitions
4. Capital Markets
1. Brand and marketing
budget determination
2. Brand portfolio review
3. Brand architecture
analysis
4. Brand extension planning

POTENTIAL BENEFITS AND CONCERNS
Benefits
1. Greater value from corporate
partners, alliances, and
policymakers
2. Increased respect and resources for
brand-building activities
3. Greater logo and slogan discipline
4. Elucidation of key brand value
drivers and future brand-building
activities
5. Monitoring and impact measurement
of brand-building activities
6. Recruitment of employees,
increasing employee pride and
retention
7. Increase in leverage with
policymakers
Disadvantages
1. Brand valuation does not
measure efficiency or impact
2. Public knowledge of brand
values may demotivate
customers
3. Distraction from the core brand
mission
4. No single, standardized method
accepted

TRADITIONAL BRAND VALUATION MODEL
Source: Journal of Product & Brand
Management | 1992 | Reinventing
the brand: bridging the gap
between customer and brand value
| Stan Maklan & Simon Knox
Core
Functionality
Added
Value
Service
Emotional
Value

Formulary
Approaches
Market
Based
Approaches
Cost Based
Approaches
Income
Based
Approaches
FUNDAMENTAL APPROACHES
Brand valuation is more
comprehensive than a costing
technique because it relates to
outcomes and incorporates
projection of future income and
cash flows
Source: Strategic brand valuation: A cross-functional
perspective | Business Horizons | Author Karen S.Cravens
& Arthur Andersen | 42 (4) |1999 | 53-62

BRAND VALUATION MODELS: COMPARISON
Journal of Brand
Management | 2009 |
Volume 17, Issue 1, pp
39–61| A taxonomy of
brand valuation
practice:
Methodologies and
purposes | Authors
Gabriela Salinas & Tim
Ambler

COMMERCIAL VERSUS ACADEMIC ORIGINS
Journal of Brand Management | 2009 | Volume 17, Issue 1, pp 39–61| A taxonomy of brand
valuation practice: Methodologies and purposes | Authors Gabriela Salinas & Tim Ambler

POSITIONING SELLING PRICE BASED ON BRAND
VALUE FRAMEWORK
Source: Chasing brand value: Fully leveraging brand equity to maximise brand value
| Authors Randle D. Raggio & Robert P. Leone | Brand Management | 16 (04) |pp 248–
263 | 2009

STAKEHOLDER–BRAND VALUE MODEL
Source: Finding sources of brand value: Developing a stakeholder model of brand equity
| Richard Jones | Brand Management | 13 (01) |pp 10–32 | 2005

INTEGRATED MODEL OF BRAND VALUATION
Source: Integrated
Model of Brand
Valuation | Author Indr
Jucaityt & Regina
Virvilait | 2007 |
Economics And
Management | 12

BRAND VALUATION INDUSTRY
Journal of Brand Management |
2009 | Volume 17, Issue 1, pp 39–
61| A taxonomy of brand valuation
practice: Methodologies and
purposes | A7uthors Gabriela
Salinas & Tim Ambler

PROVIDERS
“Technical” practices
 Absolute Brand
 AUS Consultants
 Brand Finance
 Consor
 BBDO /
 Ernst &Young
 Intangible
 Business
 Houlihan
 Advisors
“Management” practices
 AC Nielsen
 BBDO
 Brandient
 Equilibrium
 Consulting
 Future Brand
 GfK
 Icon Brand
 Navigation
 Interbrand
 Millward Brown
 Optimor
 Prophet
 Villafañe & Associates

BRAND FINANCE CONCEPTUAL MODEL
Source: European Journal
of Management and
Business Economics |
Valuing brands under
royalty relief methodology
according to international
accounting and valuation
standards | Author: Gracia
Rubioa, Conrado M.
Manuelb, Francisco Pérez-
Hernándezc | 2016 | 15 |
pp 76–87

BRAND FINANCE METHODOLOGY
Source: http://brandirectory.com/methodology
Accessed on: 02.02.2018|03.50 PM IST

BRAND FINANCE 2018 - TOP 10
No Brand Name Worth in (ml) USD
1 Amazon 150,811
3 Apple 146,311
4 Google 120,911
5 Samgsung 92,289
6 Facebook 89,684
7 AT&T 82,422
Microsoft 81,163
8 Verizon 62,826
9 Walmart 61,480
19 ICBC 59,189
Source:Global 500 2018 The annual report on the world’s most valuable brands| Brand Finance
Available at:
http://brandfinance.com/images/upload/bf_global2018_500_website_locked_final_spread_02.02.
18.pdf
Accessed on : 07.02.2018 | 4.13 P.M. IST

MILLWARD BROWN BRANDZ METHODOLOGY
Source: http://www.valuebasedmanagement.net/methods_brand_asset_valuator.html
Accessed on: 02.02.2018 09.41 PM IST

MILLWARD BROWN BRANDZ 2018 - TOP 10
No Brand Worth in (ml) USD
1 Google 286,258
2 Apple 278,919
3 Amazon 165,256
4 Microsoft 155,404
5 Facebook 151,201
6 Visa 121,692
7 AT&T 114,915
8 McDonald 110,266
9 IBM 102,129
10 Marlboro 91,507
Source:http://www.millwardbrown.com/brandz/top-us-brands/2018
Accessed on: 07.02.2018 | 4.46 P.M. IST

INTERBRAND’ S BRAND VALUATION MODELS
Source: The International Brand Valuation Manual A Complete Overview and Analysis of Brand Valuation
Techniques, Methodologies and Applications, 2009, Author Gabriela Salinas, John Wiley & Sons, Ltd.,
Publication

INTERBRAND’S 2017 - TOP 10
No Brands Worth im (ml) USD
1 Apple 184,154
2 Google 141,703
3 Microsoft 79,999
4 Coca-Cola 69,733
5 Amazon 64,796
6 Samsung 56,249
7 Toyota 50,291
8 Facebook 48,188
9 Marcedes-Benz 47,289
10 IBM 46,829
Source: http://interbrand.com/best-brands/best-global-brands/2017
Accessed on : 07.02.2018 | 4.28 P.M. IST

BRAND STRENGTH ASSESSMENT (INTERBRANDS)
© Prof.( Dr.) R. Bakshi- No part of this ppt presentation can be used for any other purpose apart from classroom teaching and
training. Illustrations and screenshots are property rights of respective companies as applicable.
Source:Grow Change Grow , Interbrands Best Global Brands 2017
Available at: http://host.msgapp.com/af2/viewPage.aspx?f=168&c=95993&d=87
Accessed on : 09.02.2018 | IST 9.34 AM

SCORE TABLE OF INTERBRANDS
Min Max
Leadership The greater the ability of the brand to function as a market leader and hold a dominant market share, the higher the
score it will receive on this factor.
0 25
Stability The greater the ability of the brand to retain its image and consumer loyalty over long periods, the higher the score it
will receive for this factor.
0 15
Market Brands in growing and stable markets with strong entry barriers are more valuable than brands in markets more
exposed to changes in technology or fashion.
0 10
Internationality An international brand is considered stronger than a regional or domestic brand. 0 25
Trend The greater the ability of the brand to remain relevant and consistent to consumers, the higher the score it will
receive on this factor.
0 10
Support Brands that receive support and are consistently managed earn higher scores than those without any organizational
investment. In order to evaluate this factor, amount and quality of brand investment is taken into account.
0 10
Protection The stronger and broader the legal trademark ’ s protection, the higher the score it will receive on this factor. 0 05
Total Score 100
© Prof.( Dr.) R. Bakshi- No part of this ppt presentation can be used for any other purpose apart from classroom teaching and
training. Illustrations and screenshots are property rights of respective companies as applicable.
Source: Based on Seetharaman et al. (2001), Kerin and Sethuraman (1998) and Haigh (1994) .

INTERBRAND PROCESS
Step One
Revenue Generated by the Branded
Product
Less: Cost of Sales
Equals: Gross margin
Less: [Marketing Cost +
Depreciation + Other Overheads
+ Central Cost Allocation]
Equals: Earnings Before Interest and
Taxes (EBIT)
Less: Interest
Equals: Earnings Before Taxes (EBT)
Less: Tax
Equals: Net Operating Profit After
Tax (NOPAT)
Step Two
Total Capital Employed
Less: Working Capital
Equals: Fixed capital employed for
manufacturing the product [FEMP]
Less: FEMP X [Ongoing interest
rate in the market]
Equals: Capital Charge
Step Three
Net Operating Profit After Tax
Less: Capital Charge
Equals: Intangible Earnings
Then the intangible earnings is multiplied with a figure obtained from the ‘S’
Curve, which is discussed later, in order to obtain the brand earnings

INTERBRAND MULTIPLIER (S-CURVE)
Source: https://static.seekingalpha.com/uploads/2017/8/13/43033076-15026793331193602.png
Accessed on: 02.02.2018| 10.50 PM IST

SIX FACTORS CONTRIBUTING TO BRAND VALUE©
Source: Developed By Author
Brand
Value
HonestySatisfaction
DesignPrice
EndorsementPromotion

SIMPLIFIED BRAND VALUATION METHODOLOGY©
Source: Developed By Author  k = number of sub brands under the
same brand umbrella j= 1,2,….,n
and i = 1,2,…,6}
 wik represents weights assigned to
the factors (viz Honesty, Satisfaction,
Price, Design, Endorsement,
Promotion) on a scale ranging from 0
to 1
 fik represents the average scores on
the factors (viz Honesty, Satisfaction,
Price, Design, Endorsement,
Promotion) computed using a scale
ranging from 1 to 5
 mjk = Monthly Unit Sales of the kth
Brand
 ∂ij Differential Contribution per Unit
of the Brand

ENHANCE BRAND VALUATION AT RECESSION
Journal of Brand Management |
2009 | Postscript: Preserving (and
growing) brand value in a downturn
| Randle D Raggio & Robert P.
Leone | 17 | 84-89

Source: Dec l5,2004 Marketing News | American Marketing Association
Available at: search ebscohost database

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