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BRAND MANAGEMENT

- Dr. RAMKI

*Techniques Of Brand Valuation HISTORIC VALUATIONS

Investments pumped into a brand over a period of time.

e.g. GM would look at the R&D they have invested and amount spent on marketing and advertising. When taken over a period of time this would amount to a significant brand value

Contd.

*HISTORIC VALUATIONS Benefit of simplicity as it is easy to measure

Fails to capture the essential nature of the brand e.g. Blue Pepsi was launched and died

Many brands which were supported by huge brand building efforts but sank without a trace should be also valued high. e.g. Pastonjee Ice Cream

Contd..

*HISTORIC VALUATIONS

Should the whole period be taken into consideration for assessing brand value.

e.g. Lifebuoy came into India prior to 1902 while Coke is half a century old.

*Techniques Of Brand Valuation PRICE PREMIUM VALUATION

A price premium is the difference in price between a branded product and an unbranded equivalent productIt assumes that a price premium is the principal benefit conferred by a brand

Volume X Price Premium = Brand Value

Contd

*e.g. If Nirma sells 1 crore of washing powder cartons, its average sells at a rough price premium of 30%. There fore the brand in India is worth 30 lakhs. Volume(1 crore) X Price Premium (30%) = Brand Value (30Lakhs)DRAWBACKS Its is pointless if the associated cost of creating that premium are not met by the price chargede.g. Zodiac declares losses, now even at a premium they wll not be able to cover their cost.

Contd

*PRICE PREMIUM VALUATION There is no generic to judge against in the market. e.g. A brand which has monopoly

It is difficult to define what is generic e.g. A person will buy a local brand for the name of a national brand

*Techniques Of Brand Valuation ROYALTY PAYMENTS VALUATIONS

It is assumed that Company does not own the brand, but instead had to be license it from a third party brand owner. The royalties on turnover would be then payable to the third party for the privilege of using the brand

e.g. How much would be the brand value of Nescafe, or how much would Nestle pay for Nescafe. Contd

*ROYALTY PAYMENTS VALUATIONS The valuation is made by forecasting the likely value of earnings attributable to the brand, and then calculating the royalties that would be payable on this.

The limitation It does to little to illuminate the source of value created by the brand.

*Techniques Of Brand Valuation

MARKET VALUATION

The best means to place a value on a product or service is to look at the price a buyer is willing to pay i.e. the Market Value

e.g. On E bay we can get a clear price of a 1968 Ford Mustang i.e. what the buyer wants to pay Contd.

*MARKET VALUATION One difficulty with this approach Market values are influenced by expectations of future earnings and not all of those future earnings are related to the inner strength and weakness of the brand.