Why you need Brand Valuation?

Brand Valuation as a concept is the net value of all a business’ tangible as well as intangible assets. Brand valuation is a method to estimate of the overall value of the brand. Brand valuation is a technique to evaluate the brand value based on financial performance, brand equity, customer perception etc.

In the past, brand valuation was based only on the value of Tangible assets but in 2005, after the International Financial Reporting Standards (IFRS), accepted that along with the tangible assets the intangible assets like brands and other acquired intangible assets would also be valued on the balance sheet of the company. This comes after the backdrop of 1988, wherein the proper brand valuation measures came into existence and with time a popular saying came into picture which said, if a company was divided and one person had all the land, brick and mortar and the other had the brand name, trademark etc. then the later would be more beneficial. As a part of brand management, brand valuation helps understand the overall brand equity of a company.

Brand Valuation Approaches

Brand valuation are three main approaches for brand evaluation and brand evaluation models are the same as the models for measuring Tangible assets. They are:

Cost Approach
Market Approach
Income Approach

These are the models/methods by which the brand is valued and in today’s market a brand value carries great importance and there should be proper experienced people doing the brand valuation as that would talk about the Total Asset Value of the company.

Why you need Brand Valuation?

Brand valuation has been by far used for many purposes by companies.

1. Mergers and Acquisitions

Usually, a company or an organization does not pay the book value while acquiring another business entity. Now the difference between the paid acquisition price and book value is known as Goodwill. Goodwill can be defined as the value of a business entity which is not directly attributable to its tangible assets and liabilities. Estimating the financial value using brand valuation of a brand helps us to determine the premium over book value that a buyer should be paying.

2. Licensing

One of the approaches to take advantage of the value of a solid brand is by broadening or permitting the brand. It is feasible for both the licensor and the licensee to profit financially from an authorizing course of action. The licensor profits by another wellspring of income that requires minimal capital speculation. The licensee benefits by having a lower channel, publicizing and client obtaining costs.

3. Financing

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4. Brand Reviews

Usually, brand investment reviews entail the comparison, across brands and against competitors of hard measures, such as sales and market share, and soft measures, such as reputation and awareness. For some brands, it is also important to determine financial value. Brand valuations allow companies to gauge their return on brand investment and to develop appropriate investment strategies across a portfolio of brands.

5. Budget Allocations

The marketing mix is utilized by advertisers who must settle on choices about the assignment of spending plan and assets. Organizations can now more precisely gauge the blend of promoting vehicles required to expand both spending proficiency and advertising viability. For a few organizations, brand valuations are a basic component of the marketing mix.

Let’s imagine you’re negotiating the acquisition or merger of a major brand. If you were taking over Coca Cola, you would be buying a lot more than the recipe for a caffeinated cold drink. You would be benefiting from the name, logo and other brand elements that consumers instantly recognize and trust.

Brand value is a fairly modern phenomenon. In the past, consumers relied on product quality and value to make purchasing decisions. The advertising boom of the 1960s turned certain businesses into brand names.

With the emergence of modern marketing, companies could choose to associate themselves with positive characteristics such as style, elegance, trustworthiness, security and innovation. This is essentially building a brand – a key element of any marketing strategy today.

Pretty much everyone agrees a strong brand is valuable – the tricky part is putting a number on that value.