Brand Valuation by Faculty of Economics in Osijek

APPROACHES TO BRAND VALUATION?

Traditional approaches fall into three categories: research-based, financially driven and economic use

Research Based Brand Valuation Approach

Research-based approaches use consumer research to assess the performance of brands. Research approaches do not put a financial value on brands; instead, they measure consumer’s perceptions. Through different methods of statistical modeling, these measures are arranged either in hierarchical order, to show degrees of relationship towards the brand (from awareness to preference and purchase). The disadvantage of this model is they fail to link macro indicators with the financial performance of the brand( prolonged summers increase cool drinks sales without affecting brand perception)

Financially Driven Brand Valuation Approach

Financially driven approaches In contrast to research-based approaches, financially driven approaches do not research consumer behavior but are based on financial performance of a certain brand. Financially-driven approaches includes

? Cost-based approaches - define the value of a brand as the aggregation of all historic costs incurred while bringing the brand to its current state. The disadvantage is that there is no direct correlation between the financial investment made and the value added by a brand.

? Comparables - This approach is used to arrive at a value for a brand by observing and valuing comparables of different brands.?

? Premium price – premium price is the price paid by a buyer for the brand. The flaw in the method is that brands is not necessarily to obtain a price premium but rather to secure the highest level of future demand.?

Economic Use Brand Valuation Approach

The brand is valued in each segment according to the following elements:

Financial analysis – includes identification and forecast of revenues and earnings from intangibles for each of the distinct segments

Demand/market analysis – assesses the role that the brand plays in driving demand for products and services in the market

Brand earnings – licensing the brand to subsidiary companies and other income due to the brand

?Competitive benchmarking - looks at the competitive strengths and weaknesses of the brand to measure the likelihood of expected future earnings