A number of authors and consulting firms have proposed different methods for brand valuation. The different methods consider that a brand’s value is:
1. The market value of the company’s shares.
2. The difference between the market value and the book value of the company’s shares (market value added). Other firms quantify the brand’s value as the difference between the shares’ market value and their adjusted book value or adjusted net worth (this difference is called goodwill).
3. The difference between the market value and the book value of the company’s shares minus the management team’s managerial expertise (intellectual capital).
4. The brand’s replacement value
4.1. Present value of the historic investment in marketing and promotions.
4.2. Estimation of the advertising investment required to achieve the present level of brand recognition.
5. The difference between the value of the branded company and that of another similar company that sells unbranded products (generic products or private labels). To quantify this difference, several authors and consulting firms propose different methods:
5.1. Present value of the price premium (with respect to a private label) paid by customers for that brand
5.2. Present value of the extra volume (with respect to a private label) due to the brand
5.3. The sum of the above two values
5.4. The above sum less all differential, brand-specific expenses and investments. This is the most correct method, from a conceptual viewpoint. However, it is very difficult to reliably define the differential parameters between the branded and unbranded product, that is, the
differential price, volume, product costs, overhead expenses, investments, sales and advertising activities, etc.
5.5. The difference between the [price/sales] ratios of the branded company and the unbranded company multiplied by the company’s sales. This method is used by Damodaran to value the Kellogg’s and Coca-Cola brands.
5.6. Differential earnings (between the branded company and the unbranded company) multiplied by a multiple. As we shall see further on, this is the method used by the consulting firm Interbrand.
6. The present value of the company’s free cash flow minus the assets employed multiplied by the required return. This is the method used by the firm Houlihan Valuation Advisors.
7. The options of selling at a higher price and/or higher volume and the options of growing through new distribution channels, new countries, new products, new formats … due to the brand’s existence.
1. The market value of the company’s shares.
2. The difference between the market value and the book value of the company’s shares (market value added). Other firms quantify the brand’s value as the difference between the shares’ market value and their adjusted book value or adjusted net worth (this difference is called goodwill).
3. The difference between the market value and the book value of the company’s shares minus the management team’s managerial expertise (intellectual capital).
4. The brand’s replacement value
4.1. Present value of the historic investment in marketing and promotions.
4.2. Estimation of the advertising investment required to achieve the present level of brand recognition.
5. The difference between the value of the branded company and that of another similar company that sells unbranded products (generic products or private labels). To quantify this difference, several authors and consulting firms propose different methods:
5.1. Present value of the price premium (with respect to a private label) paid by customers for that brand
5.2. Present value of the extra volume (with respect to a private label) due to the brand
5.3. The sum of the above two values
5.4. The above sum less all differential, brand-specific expenses and investments. This is the most correct method, from a conceptual viewpoint. However, it is very difficult to reliably define the differential parameters between the branded and unbranded product, that is, the
differential price, volume, product costs, overhead expenses, investments, sales and advertising activities, etc.
5.5. The difference between the [price/sales] ratios of the branded company and the unbranded company multiplied by the company’s sales. This method is used by Damodaran to value the Kellogg’s and Coca-Cola brands.
5.6. Differential earnings (between the branded company and the unbranded company) multiplied by a multiple. As we shall see further on, this is the method used by the consulting firm Interbrand.
6. The present value of the company’s free cash flow minus the assets employed multiplied by the required return. This is the method used by the firm Houlihan Valuation Advisors.
7. The options of selling at a higher price and/or higher volume and the options of growing through new distribution channels, new countries, new products, new formats … due to the brand’s existence.
No comments:
Post a Comment