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?