Brand
valuation techniques originally developed in response
to mergers and acquisitions activity: valuing
the brands owned by a company to help calculate
the true value of the business.
Since
then other applications of brand valuation have
developed into important strategic management
techniques.
Here
are the seven key applications of brand valuation:
External
investor relations
Mergers and acquisitions were the original driving
force for brand valuation. Now many successful
companies use brand valuation as an ongoing business
performance indicator: to help ensure that brand
strength is reflected in share value. (And in
many markets the relevant accounting standards
allow brands to be shown as assets on the balance
sheet.)
Internal
marketing management
Brand valuation is increasingly being used as
a management tool in leading organizations. For
example: brand valuation figures can be used to
evaluate new product and market development opportunities,
to set business objectives, allocate budgets and
to help measure performance and reward staff.
Internal
royalty rates
Across a large organization there may be many
affiliates, subsidiaries or divisions that make
use of any particular brand. As the profit potential
of brands becomes more clearly understood more
companies are charging royalties, across their
business operations, for the use of these brand
assets.
Licensing
and franchising
Where companies allow outside organizations to
use their brand, on a licensing or franchising
basis, a brand valuation can lay the foundation
for appropriate charges.
Tax
planning
As the management of brands as financial assets
becomes more sophisticated, so tax authorities
around the world have started to take an interest
in how these assets are managed. The result is
that more and more international organizations
are planning the most cost-effective domicile
for their brand portfolios and are organizing
their tax affairs with their brands in mind.
Securitized
borrowing
Even in the conservative world of banking, the
asset value of brands has been recognized. As
a result brands have been used to secure loans,
especially in the US, where companies such as
Disney have borrowed significant amounts of money
against their brand name.
Litigation
support
Brand valuations have been used to support litigation
against the illegal use of a brand name (as a
basis for calculating damages, for example) and
also in cases of receivership, to prevent the
assets of the business being undervalued.
