An article in The New Straits Times today caught my attention. The article is about a recent study carried out by Brand Finance Plc an ‘independent brand valuation and strategy advisory firm’ from the UK. Quoting from the article, “London-based Brand Finance calculates the value of brands based on the “royalty from relief” approach, which assumes that a company does not own its brand name and it would have to pay to license it from a third party.”
I need some help here. Does anyone know exactly what this means?
I think it is similar to the methodology Simon Anholt uses for his nation brands index. I think it means: “If a nation did not have a brand, how much would it have to pay to get the same brand it has now?”
I asked a brand guru from the USA what he thinks it means and his answer was rather unhelpful, he said: “Basically, what it means is that somebody pulled a number out of their a***!”
Does anyone agree or disagree with either of these interpretations?
Brand Finance chief executive David Haigh went on to say, “London-based Brand Finance calculates the value of brands based on the “royalty from relief” approach, which assumes that a company does not own its brand name and it would have to pay to license it from a third party.”
Err, OK. What does that mean? I think it means this is NPV net present value, or a dollar in hand today is worth more than a dollar expected tomorrow. You calculate an income stream over X number of years. The further out the income stream, the less it is “worth” in today’s dollars. Then you just add all those years together to get your NPV.
If I am correct, then what happens when you get a General Motors situation? In 2003 General Motors was worth $4.86 Billion. In 2008, the organisation was valued at $0.32 Billion.
I have another question, how do these valuations benefit customers?
3 thoughts on “Brand valuations”
Usually someone is compelled to come up with some sort of brand valuations. It can even come from the company’s Brand M’ment section to justify their effort. IMHO we cannot rely to much with these Brand Valuations. What holds true is the customer is the one who will decide to value the brand. One day the brand can be highly valued. The next day it can mean nothing especially with fast paced social media.
Thanks for taking the time to post a response. IMHO brand valuations mean very little to the people who build the brands, the customers. I mean when was the last time you went into a supermarket and looked at the cereals or washing powders and said to yourself, “Hhmmn, I wonder which one has the highest brand equity?”
Again, I agree with you, it’s the relationship with customers that is key and a brand can be built quicker than ever before but it can also be destroyed quicker than ever before.
Just a corporate feel-good factor for brand owners and stakeholders. Worthless to the customer. Brand Finance has been peddling this for some time. A valuation they did on brands in the United Arab Emirates came up with highly debatable conclusions. They get away with it by being politically correct when assessing a nationally significant brand or two.