Valuing a brand as a corporate asset has been an accepted practice for some time. From an investor’s viewpoint, one of the issues was a lack of a standard methodology for arriving at a brand valuation. Things are getting a little more standardised but there are a number of possible approaches.
There are methods based upon marketing investment: these may either measure historic expenditure on brand communications, or try to equate projected communications investment with estimated brand awareness as a measure. Another approach is the excess earnings method which seeks to evaluate the additional income due to the brand. A third approach is that of ‘relief from royalty’ which takes the standpoint that if the organisation did not have the brand it would have to license it, so it attempts fo calculate the fee.
All these methods could provide acceptable models of brand valuation which is important if the company wishes to sell itself or its brand. My concern, however, is that they don’t go far enough in terms of ‘Evaluation’. Using the old adage, ‘You don’t fatten a pig by weighing it’, how can we generate information we can actually use to improve brand performance and earnings?
One view which may help us is that of Advanced Brand Values (ABV) which seeks to combine the psychological strength of a brand in its audience’s mind with accepted accountancy approaches (Hupp & Powaga 2004).
Brand valuation has its place, and that is with the accountants and financial analysts – for us brand practitioners who want to build and improve brand performance we need ‘brand evaluation’.