Understanding Group Behaviour on Social Web
Internet has given way to new means of communication and interaction between people situated across the globe, breaking down the barriers of distance, time and borders. Technology has made it possible for people not only to talk to one another, but participate in a lot of activities together as a group. Thus group activities or […]
Designing and Managing Value Networks and Marketing Channels
A normal way of functioning for a company is to procure raw materials, use its expertise in creating the product and then distribute to the customer. Companies have to convert this supply chain into a value network as to develop and maintain partnership with different stakeholders. Value Network and Marketing Channel A network which creates […]
Brand Association – Meaning and its concepts
Brand Associations are not benefits, but are images and symbols associated with a brand or a brand benefit. For example- The Nike Swoosh, Netflix sound, Film Stars as with “Lux”, signature tune Ting-ting-ta-ding with Britannia, Blue colour with Pepsi, etc. Associations are not “reasons-to-buy” but provide acquaintance and differentiation that’s not replicable. It is relating […]
Collaborative CRM – Meaning and Advantages
Collaborative CRM deals with synchronization and integration of customer interaction and channels of communications like phone, email, fax, web etc. with the intent of referencing the customers a consistent and systematic way. The idea is not only enhancing the interactions but also to increase and improve customer retention and liberty. Collaborative CRM entangles various departments […]
The Media and its Contributions to Social Movements
The previous articles in this module discussed how the media plays a prominent role in acting like a watchdog in democracies. This article looks at how media can be a force for good in oppressive regimes and how a vigilant and alert media can help the citizenry overthrow unpopular and repressive rulers. The best example […]
Brands have a certain value in the market as well as in the balance sheets of the organization that owns the brand. This is a matter that has been agreed upon by the industry. The accounting of the brand value and the methodology for calculation of the brand value is widely debated.
When organizations pay a huge premium or goodwill to acquire a brand, it becomes a strategic decision. However accounting for the premium paid is a matter that is discussed and debated by many in the industry.
No doubt accountants would like to assign a tangible value to every asset owned by the company and brand value paid to acquire a particular brand and the business is also considered to be an asset. One of the systems followed by UK based business organizations is that they capitalize the entire value paid for acquiring the business and the same is depreciated over a period of time.
Interbrand, the branding company has proposed a different method of accounting for the brand value. This method as well as the other methods that are proposed by industry experts take into account the future sales potential of the brand as well as its current market share to arrive at a definitive figure in terms of brand equity or brand power.
Accordingly one of the models followed by the industry accounts for the net profit earned by the brand in the last three consecutive years in terms of value. To this, is added a score that is derived out of measuring certain key factors associated with the brand like brand leadership, market share, trend, loyalty etc.
Certain weightage is given to each of the factors and the total score is then converted into a certain value with the help of a multiple that is again derived out of a market study conducted for that particular sector.
Similarly there are several other models and methods that have been proposed by experts in the industry. All of the models use a combination of qualitative and quantitative factors to arrive at a measurable value in terms of Brand Equity. Some of the well known models are Brand Equity Index, Consumer Brand Equity Brand Asset by Longman Moran and Leo Burnett, Conversion Model Equity Monitor etc. The factors included in the above vary from Quality of the brand to Customer attitude, perception, market share, price band, durability etc.
A reasonable model to measure brand equity becomes essential not only for the accountants but for the business Organization that is looking out to buy a brand. Valuation of a brand and fixing the right price or premium for the brand needs a proven methodology and model that can guide the decision making. It is also true that one model cannot satisfy the finance and accounts personnel as well as the business managers, for each one’s perceptions and purpose of evaluation is different.
When brands are key to the growth and business strategy of the Organizations, the decision makers would definitely need proven and strong models to guide them for decision making. Besides the models they would need to analyze the brand equity from many other points of view of product portfolio, growth potential of the brand to see if a particular brand is the right choice for them.
If there exists a strategic synergy between the brand and the buyer’s business needs, then the brand value is likely to change and the buyer might find that he is required to pay a premium over and above the perceived brand value.
At what price does it make sense to acquire the brand is a decision that is critical to the buyer. Brand value models can certainly aid him in this decision making process.
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