Upload
aditi-tyagi
View
225
Download
0
Embed Size (px)
Citation preview
8/3/2019 Brand Valuation (1)
1/25
Brand Evaluation
Brand Management
8/3/2019 Brand Valuation (1)
2/25
Areas To Be Covered:
How to examine the issue of evaluating the healthof brands
Dynamics and concept of brand equity and brandvaluation
Methods used in evaluating the brand
Challenges involved in the evaluation of the brands
2Brand Management
8/3/2019 Brand Valuation (1)
3/25
Intangible Assets
Intangible assets like goodwill, trademarks, patents,management expertise, formulas, copyrights, brandsand so on, have no physical substance, nevertheless,they are perceived as crucial in creating value
Increasingly the majority of business value is derivedfrom intangibles, and brands are one of the mostimportant of them because of their far-reachingeconomic impact
Brands have a powerful influence on customers,employees, and investors, and in a world of abundantchoice, such influence is crucial and strategic forcommercial success and creation for shareholder value
3Brand Management
8/3/2019 Brand Valuation (1)
4/25
Brand Equity
The concept of Brand is usually associated to BrandEquity (Rust et al. 2004)
Brand Equity is the sum of a brands distinguishingqualities and is sometimes referred to the intangiblevalue that accrues to a company as a result of itssuccessful efforts to establish a strong brand
From a marketing point of view, brand equity is themeasure of customer loyalty to a brand (BrandLoyalty), (Aaker 1992, 1996)
4Brand Management
8/3/2019 Brand Valuation (1)
5/25
Brand Equity
Financially, brand equity is the value of a brand as a
financial asset in balance sheet, proprietary brandassets (e.g. patents, trademarks, copyrights, channelrelationships) (Brand Value) (Verbeeten et al 2006)
From the production point of view, brand equity isthe description of the product image that customers(real and prospect) hold (Brand Image) (Aaker1992, 1996)
Brand Equity = Brand Value + Brand Loyalty + Brand Image
5Brand Management
8/3/2019 Brand Valuation (1)
6/25
Brand Value
Value has different interpretations
From a marketing or consumer perspective it isthe promise and delivery of an experience
From a business perspective it is the security of
future earnings
6Brand Management
8/3/2019 Brand Valuation (1)
7/25
Brand Equity Growth
Increase in Brand Awareness through differentpromotional techniques
Consumers perception of its values based on Functional and Psychological benefits Unique or distinguishable feature of the product Price differences or the balance between the price and
the risk taken to switch from one brand to another(Toyota and iphone)
Brand Loyalty
7Brand Management
8/3/2019 Brand Valuation (1)
8/25
Brand Awareness Elements
Brand Recognition Consumers ability to recall previous exposure or
experience with the brand. For e.g. Have you seen this
brand before?
Brand Recall Consumers ability to retrieve the brand from memory
when given the product category as a clue or a hint. Fore.g. What brands of personal computers are you awareof ?
8Brand Management
8/3/2019 Brand Valuation (1)
9/25
Brand Awareness Elements
Brand Dominance This identifies the brand in a specific product category.
For e.g. Which brand of tea do you drink most often ?
Brand Knowledge This evaluates the consumers interpretations of the
values linked to a brand. For example To what extent
do you agree or disagree that the following cars havehigh accelerations?
9Brand Management
8/3/2019 Brand Valuation (1)
10/25
Young & Rubicams Brand Equity
Growth Model
Focus on four key elements:
1. Differentiation: Unique attribute
2. Relevance: Brand should serve the individual needs
3. Esteem: The Customer should respect the brand
4. Familiarity: The Brand should be a part of customersdaily life
10Brand Management
8/3/2019 Brand Valuation (1)
11/25
Young & Rubicams Brand Equity
Growth Model .
11Brand Management
Unrealized Potential
B
Leadership
C
NEW
A
Eroding Potential
D
Brand
Vitality
Brand Stature
8/3/2019 Brand Valuation (1)
12/25
Young & Rubicams Brand Equity
Growth Model .
Brand vitality (Differentiation + Relevance)provides the potential for brand equity growth
Brand Stature (Self Esteem + Familiarity)measure the brands current strength
When the Brand owners can either maintain thebrands as niche brands or invest to build brandsesteem to move into quadrant C.
12Brand Management
8/3/2019 Brand Valuation (1)
13/25
Young & Rubicams Brand equity
growth model...
13Brand Management
8/3/2019 Brand Valuation (1)
14/25
Young & Rubicams Brand Equity
Growth Model
Helps managers to understand the concept ofbrand equity and highlights the areas that needattention over short and long run
Comparison between the company and its
competitors suggests appropriate strategiesnecessary to increase the brands equity andprotection against competitors
14Brand Management
8/3/2019 Brand Valuation (1)
15/25
Methods of Measuring the Financial
value of a Brand
Historic Costs
Premium Price
Market Value
Consumer related factors
Future earnings discounted to present day values
15Brand Management
8/3/2019 Brand Valuation (1)
16/25
Historic Costs
Costs such as marketing, R&D, and advertisingexpenditure are considered from the initial stage
Problem related to this model is the value of 100-year old brand will be more than 20-year old brand,so it should be adjusted for inflation
also fails to account for qualitative factors likemanagements expertise, quality of theadvertisement and managements culture
16Brand Management
8/3/2019 Brand Valuation (1)
17/25
Premium Price
The Price difference between the branded and theunbranded product multiplied by the volume ofsale of the branded product represents the brandsvalue
It is sometimes harder for companies to find thevalue of the generic product. This Method alsoassumes that all brands use a price-premium
strategy
17Brand Management
8/3/2019 Brand Valuation (1)
18/25
Consumer related factors
Financial value of the brand is also based onrecognition, esteem, and awareness
It is very hard to quantify the information about
these aspects
For example, GUCCI or Armani are high status
and valuable brands, but what brand valueshould be input in the financial statements ofthe company
18Brand Management
8/3/2019 Brand Valuation (1)
19/25
Discounted Future Cash Flows or
Inter-brand method
A Brand owner computes the current and thefuture cash inflows to be generated by the brand
The future cash flows are discounted or brought toits present level by using a rate of interest ordiscount rate to adjust for risk and inflation
It is assumed that the discount rate is given by theBrand Multiple
19Brand Management
8/3/2019 Brand Valuation (1)
20/25
Discounted Future cash flows or
Inter-Brand method:
Brand Multiple = Brand Equity / BrandProfit
Brand Equity or Value
Brand Value = Brand Profit x Brand Multiple
20Brand Management
8/3/2019 Brand Valuation (1)
21/25
Top ten most valuable brand. Rank
them according to your preference
Microsoft
Coca-Cola
IBM McDonald's
Apple
China Mobile General Electric
Vodafone
Marlboro 21Brand Management
8/3/2019 Brand Valuation (1)
22/25
Top ten most valuable brand
(in billions)
1. Google - $100.02. Microsoft - $76.33. Coca-Cola - $67.64. IBM - $66.6
5. McDonald's - $66.56. Apple - $63.17. China Mobile - $61.38. General Electric - $59.8
9. Vodafone - $53.710. Marlboro - $49.5
22Source: www.indusrtyweek.com
8/3/2019 Brand Valuation (1)
23/25
Bipolar Views on Brand Evaluation
Conservative approachsays if the brand value isincluded in the financial statement of the company,it will violate the consistency and the reliability ofaccounting principles and procedures
Pragmatic or Practical approachsays if the brand valueis not included, the stakeholders will not get thecorrect idea about the financial capability of the
company. If a valuable asset is capable ofgenerating wealth for the company, it should beincluded in the balance sheet
23Brand Management
8/3/2019 Brand Valuation (1)
24/25
PRESENTED BY:
ADITI TYAGIPGDM (FT)
SECTION: A & CROLL NO. : FC10121
8/3/2019 Brand Valuation (1)
25/25