Brand valuation is the job of estimating the total financial value of the brand. Like the valuation of any product, or self review, a conflict of interest exists if those that value the brand also were involved in its creation. The ISO 10668 standard sets out the appropriate process of valuing brands, and sets out six key requirements:
Brand valuation is distinguished from brand equity.
Traditional marketing methods have examined the price/value relationship in terms of dollars paid. Some marketers believe customers perceive value to mean the lowest price. While this may be true for commodities, some branding techniques are moving beyond this evaluation.
Brand valuation emerged in the 1980s. Early firms involved in providing brand valuations included British branding agency, Interbrand led by John Murphy and Michael Birkin, who are credited with leading development of the concept. In 1989, Murphy edited a seminal work on the subject: Brand Valuation - Establishing a true and fair view and in 1991, Birkin laid out a brand earnings multiple model of brand valuation in the book Understanding Brands.
There are three main types of brand valuation methods:
In real estate appraisal, the cost approach is one of three basic valuation methods. The others are market, or sale comparison, and income. The fundamental premise of the cost approach is that a potential user of real estate won't, or shouldn't, pay more for a property than it would cost to build an equivalent. The cost of construction minus depreciation, plus land, therefore is a limit, or at least a metric, of market value.
This section does not cite any sources. (October 2014) (Learn how and when to remove this template message)
In this approach a comparison with the market is done. For example if a person wish to buy a property in place A, it is quite likely that the price of neighborhood would be checked before arriving at conclusion on the existing property, leading to an approach based on the market. This valuation method relies on the estimation of value based on similar market transactions (e.g. similar license agreements) of comparable brand rights. Given that often the asset under valuation is unique, the comparison is performed in terms of utility, technological specificity and property, having also in consideration the perception of the asset by the market. Data on comparable or similar transactions may be accessed in the following sources:
This approach measures the value by reference to the present value of the economic benefits received over the rest of the useful life of the brand. There are six recognised methods of the income approach.
Common purposes are:
Interbrand classifies these uses of brand valuation in three categories:
The recent rise of brand valuation practice led to the multiplication of valuation companies. These companies not only rank brands but also sell them some recommendations for them to improve their portfolio and brand value. The most reputed companies are Interbrand, Millward Brown and Brand Finance.