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VALUATION OF BRANDS

Why are Brands Valuable?

A brand is a name or a symbol - and its associated tangible and emotional attributes - that are intended to identify the goods or services of one seller in order to differentiate them from those of competitors. A brand designates a product or service as being different from competitors' products and services by signaling certain key values specific to a particular brand. Brands provide a security of demand that the supplier would not enjoy if they did not own the brand. This security of demand means a security of future brand earnings.

Why are Brands Valued?

Although public perceptions of brand valuation are often focused on balance sheet valuations, the reality is that the majority of valuations are now actually carried out to assist with brand management and strategy. Companies are increasingly recognizing the importance of brand guardianship and management as a key to the successful running of any business.

APPLICATIONS OF BRAND VALUATION


• BRAND MANAGEMENT AND DEVELOPMENT.
  A brand valuation study throws light on the strengths and weaknesses of the brand as also the opportunities available and threats, if any. Decisions like what should be the target consumers group, what amount of resources should be allocated to brand management or where do the strategies lack in adding value to the brand often seem very simple to be taken based on a brand valuation report.
  
  
• BENCH MARKING OF COMPETITORS.
  Brand valuation brings to light the price premium the brand commands over competitors or even the other way round. This helps an enterprise in handling competitors and can accordingly plan strategies to thwart competition.
  
  
• MONITORING VALUE YEAR ON YEAR.
  Monitoring growth of brand value, market share, contribution of brand to total profits etc is facilitated by valuation of brand.
  
  
• BRAND CONTROL.
  A comprehensive valuation of various brands of an enterprise can help in analyzing which are the strong and weak brands. The enterprise can then focus all its resources on the core brands and can also take decisions regarding discontinuing or shelving of relatively less profitable brands.
  
  
• BRAND LICENSING.
  Often brands are licensed or leased between enterprises or within a group between sister concerns. Valuation of brand can help in pricing decisions regarding such deals.
  
  
• TAX PLANNING.
  
  
• MERGERS AND ACQUISITIONS.
  For determining shareholder value at the time of mergers or acquisitions, often brand and other intangibles are value and the values are incorporated in books. Incorporating values of intangibles also helps in thwarting hostile takeover attempts.
  
  
• JOINT-VENTURE NEGOTIATIONS.
  Joint venture negotiations used for synergising utilities often involve sharing of brands of venturing enterprises. Such negotiations would be rendered meaningless without a concrete value for the brand.
  
  
• EXPERT WITNESS - EVALUATING THE ECONOMIC DAMAGE OF TRADEMARK INFRINGEMENT.
  Registration of trademarks or fighting legal battles against infringements thereof can be facilitated by a monetary valuation.
  
  
• FINANCING AND INSOLVENCY - SECURING FUNDS THROUGH IDENTIFICATION OF VALUE OF INTANGIBLE ASSETS.
  A strong brand or a huge goodwill can often command more respect in financial circles than tangible assets. Banks and financial institutions often insist a professional valuation of intangibles when granting credit against the collateral security of tangible assets of an enterprise.