Brand Management

Brand Evaluation

Areas To Be Covered:

How to examine the issue of evaluating the health of brands Dynamics and concept of brand equity and brand valuation Methods used in evaluating the brand Challenges involved in the evaluation of the brands
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Brand Management

Intangible Assets

Intangible assets like goodwill, trademarks, patents, management expertise, formulas, copyrights, brands and so on, have no physical substance, nevertheless, they are perceived as crucial in creating value Increasingly the majority of business value is derived from intangibles, and brands are one of the most important of them because of their far-reaching economic impact Brands have a powerful influence on customers, employees, and investors, and in a world of abundant choice, such influence is crucial and strategic for commercial success and creation for shareholder value
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Brand Management

Brand Equity

The concept of Brand is usually associated to Brand Equity (Rust et al. 2004) Brand Equity is the sum of a brands distinguishing qualities and is sometimes referred to the intangible value that accrues to a company as a result of its successful efforts to establish a strong brand From a marketing point of view, brand equity is the measure of customer loyalty to a brand (Brand Loyalty), (Aaker 1992, 1996)
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Brand Management

Brand Equity

Financially, brand equity is the value of a brand as a financial asset in balance sheet, proprietary brand assets (e.g. patents, trademarks, copyrights, channel relationships) (Brand Value) (Verbeeten et al 2006) From the production point of view, brand equity is the description of the product image that customers (real and prospect) hold (Brand Image) (Aaker 1992, 1996)

Brand Equity = Brand Value + Brand Loyalty + Brand Image

Brand Management

Brand Value

Value has different interpretations From a marketing or consumer perspective it is the promise and delivery of an experience From a business perspective it is the security of future earnings

Brand Management

Brand Equity Growth

Increase in Brand Awareness through different promotional techniques Consumers perception of its values based on

Functional and Psychological benefits Unique or distinguishable feature of the product Price differences or the balance between the price and the risk taken to switch from one brand to another (Toyota and iphone)

Brand Loyalty
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Brand Management

Brand Awareness Elements

Brand Recognition

Consumers ability to recall previous exposure or experience with the brand. For e.g. Have you seen this brand before?

Brand Recall

Consumers ability to retrieve the brand from memory when given the product category as a clue or a hint. For e.g. What brands of personal computers are you aware of ?

Brand Management

Brand Awareness Elements

Brand Dominance

This identifies the brand in a specific product category. For e.g. Which brand of tea do you drink most often ?

Brand Knowledge

This evaluates the consumers interpretations of the values linked to a brand. For example To what extent do you agree or disagree that the following cars have high accelerations?

Brand Management

Young & Rubicams Brand Equity Growth Model

Focus on four key elements: Differentiation: Unique attribute

1.

2.

Relevance: Brand should serve the individual needs

Esteem: The Customer should respect the brand Familiarity: The Brand should be a part of customers daily life
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3.

4.

Brand Management

Young & Rubicams Brand Equity Growth Model .

B r a n d V i t a l i t y B Unrealized Potential Leadership

NEW
A D

Eroding Potential

Brand Stature
Brand Management 11

Young & Rubicams Brand Equity Growth Model .

Brand vitality (Differentiation + Relevance) provides the potential for brand equity growth Brand Stature (Self Esteem + Familiarity) measure the brands current strength When the Brand owners can either maintain the brands as niche brands or invest to build brands esteem to move into quadrant C.
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Brand Management

Young & Rubicams Brand equity growth model...

Brand Management

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Young & Rubicams Brand Equity Growth Model

Helps managers to understand the concept of brand equity and highlights the areas that need attention over short and long run Comparison between the company and its competitors suggests appropriate strategies necessary to increase the brands equity and protection against competitors
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Brand Management

Methods of Measuring the Financial value of a Brand

Historic Costs Premium Price Market Value Consumer related factors Future earnings discounted to present day values
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Brand Management

Historic Costs

Costs such as marketing, R&D, and advertising expenditure are considered from the initial stage Problem related to this model is the value of 100year old brand will be more than 20-year old brand, so it should be adjusted for inflation

also fails to account for qualitative factors like managements expertise, quality of the advertisement and managements culture
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Brand Management

Premium Price

The Price difference between the branded and the unbranded product multiplied by the volume of sale of the branded product represents the brands value

It is sometimes harder for companies to find the value of the generic product. This Method also assumes that all brands use a price-premium strategy

Brand Management

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Consumer related factors

Financial value of the brand is also based on recognition, esteem, and awareness It is very hard to quantify the information about these aspects For example, GUCCI or Armani are high status and valuable brands, but what brand value should be input in the financial statements of the company
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Brand Management

Discounted Future Cash Flows or Inter-brand method

A Brand owner computes the current and the future cash inflows to be generated by the brand The future cash flows are discounted or brought to its present level by using a rate of interest or discount rate to adjust for risk and inflation It is assumed that the discount rate is given by the Brand Multiple

Brand Management

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Discounted Future cash flows or Inter-Brand method:

Brand Multiple =

Brand Equity / Brand Profit

Brand Equity or Value Brand Value = Brand Profit x Brand Multiple

Brand Management

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Top ten most valuable brand. Rank them according to your preference

Google Microsoft Coca-Cola IBM McDonald's Apple China Mobile General Electric Vodafone Marlboro
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Brand Management

Top ten most valuable brand (in billions)

1. Google - $100.0 2. Microsoft - $76.3 3. Coca-Cola - $67.6 4. IBM - $66.6 5. McDonald's - $66.5 6. Apple - $63.1 7. China Mobile - $61.3 8. General Electric - $59.8 9. Vodafone - $53.7 10. Marlboro - $49.5

Source: www.indusrtyweek.com

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Bipolar Views on Brand Evaluation

Conservative approach says if the brand value is included in the financial statement of the company, it will violate the consistency and the reliability of accounting principles and procedures

Pragmatic or Practical approach says if the brand value is not included, the stakeholders will not get the correct idea about the financial capability of the company. If a valuable asset is capable of generating wealth for the company, it should be included in the balance sheet
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Brand Management

PRESENTED BY:
ADITI TYAGI PGDM (FT) SECTION: A & C ROLL NO. : FC10121