Académique Documents
Professionnel Documents
Culture Documents
PASSAU
0
Marc Fischer
MASB Winter Board Meeting, Chicago,
March 11-12, 2010
Methods of Brand
Valuation:
What is Known
Featured Project: Measuring Brand Value
1
• What‘s in a brand name?
• Measuring brand value – Metric
characteristics and methods
• Discussion
2
• What‘s in a brand name?
• Measuring brand value – Metric
characteristics and methods
• Discussion
3
A shortcut for tangible and intangible values
4
A guarantee for quality
Always better
5
A delivery on a promise
I’m lovin’ it
6
Brands are more than the product
in percent
Gustation test for soft drinks
Blind Not blind
65
51
44
23
12
5
8
... which makes them distinctive
9
Brands also have a face
10
... and stand out from the croud
11
Brands create value for the company!
Price index
1 Liter = 1,137
1 Liter = 282
1 Liter = 100*
* Average
Source: Kaufhof, Mai 2007
12
Are there limits of price stretching?
13
„We gave up selling motor bikes. We sell a way of life. The bike is an
add-on for free!“
(Jeffrey Bluestein, CEO)
14
Brand value arises in the head of the customer
Brand value
Sources: according to Ailawadi, Lehmann, and Neslin (2003); Fischer (2007); Shocker and Weitz (1988);
Simon and Sullivan (1993)
15
• What‘s in a brand name?
• Measuring brand value – Metric
characteristics and methods
• Discussion
16
There is a jungle of brand valuation models ...
Interbrand-
Model BBDO-Model Incremental
EPG
Semion-Model
Historical
costs GfK-Model
17
… which do not converge at all
BRAND VALUE
EUR millions
AC Nielsen 958
BBDO 386
Semion 173
+450%
Source: Special issue absatzwirtschaft 2004
18
Brand valuation models need to fulfill their purposes
• Mergers and
acquisitions
• Financial reporting
Key questions • Decision support for
brand management
• Litigation support
Valuation • ...
• What is the purpose
of valuation? purpose
• Analysts/ • Corporate
Investors brand
• Management • Umbrella brand
• Customers • Brand portfolio
• Employees • Monobrand
• Retailers • ...
• ...
19
We need standards for brand valuation
MMAP
characteristics of an • Purchase price allocation in acquisitions,
mergers, and sales of businesses
ideal metric
• Annual impairment tests for recognized
brands
• Reporting to tax authorities
• Litigation and insolvency proceedings
Characteristics of an
ideal accounting • Communication to investors
metric • Securitized borrowing
20
The vast majority of characteristics of MMAP and FASB ideal metrics
are congruent
General accounting Interpretation/co MMAP characteristics
qualities mponents of an ideal metric
(SFAC No. 2/1980) (FASB 1980) (MASB 2006)
- Predictive value 1. Relevant
• Relevance
- Feedback value 2. Predictive
- Timeliness 6. Sensitive
- Verifiability 3. Objective
• Reliability
- Representational 9. Transparent
faithfulness
- Neutrality
8. Causal
• Benefits > Costs
Specific to each 10. Quality assured
catalogue
21
Derived critical criteria for brand valuation
• Understandability
• Simplicity (can be applied by non-
experts)
• Benefits > Costs • Cost-effectiveness
• Reflects the brand value chain
• Causal
(includes intermediate marketing
outcomes)
22
Process of brand value creation
Costs/investment
Marketing program
Marketing Capital
Cost of
& other expendi-
Perceived Brand capital
expenditures tures
Price price knowledge
performance
Brand
aware-
ness
Perceived
Product product Brand Discounted
image Customer Brand
performance future cash
response revenues
flows
Utility Including brand
maxi- equity-related
Perceived mization revenues:
Distribution transaction
performance - Price premium
Brand - Volume premium
choice Financial
brand equity
Perceived
Communi-
information
cation
performance • Retention of customers
• Acquisition of new customers
• Re-acquisition of lost customers
24
Alternative brand valuation methods of the income approach (1/3)
25
Alternative brand valuation methods of the income approach (2/3)
(Multi-period) Estimation of present Intuitive logic & relevant • Not easy to implement as it
Excess value of cash flows requires to be complete in
earnings attributable to the identifying all relevant
method brand after deducting tangible and intangible
cash flows arising assets
from all other tangible
• Subject to error and high
and intangible assets
costs when valuing all other
required to operate the
intangible assets that are
business
difficult to measure
26
Alternative brand valuation methods of the income approach (3/3)
27
A top-down premium profits method that includes intermediate
marketing outcomes and is cost effective Main contribution of
marketing experts
Discounted cash
flow (DCF) : Tax payments (in EUR)
of brand (in EUR)
Operating expenditures (in EUR)
* Brand image measures the brand perceptions relative to relevant competitors. A value of one
represents an image that is not different from the market average.
• Discussion
29
Issues to be discussed
• Other issues/questions?
31