Methods for Assessing Brand Value
A Comparison between the Interbrand Model and the BBDOs Brand Equity Evaluator model
©2007
Masterarbeit
105 Seiten
Zusammenfassung
Inhaltsangabe:Abstract:
In todays highly competitive business environment, companies have recognised the increasing importance of brands as one of their most important assets. However, now the discussion is how to measure the value of such an important asset and what makes this valuation important.
The purpose of this thesis is the critical comparison between two well-known brand valuation methods in order to choose the one that reflects the monetary value of a brand best possible. For this purpose, the methods are first analysed in relation to their compliance with the requirements for brand valuation methods. Secondly, the extent to which the methods can be applied for the different valuation purposes is also analysed. The two selected methods are the Interbrand model (from Interbrand Zintzmeyer & Lux) and the Brand Equity Evaluator model (from BBDO Consulting). Inhaltsverzeichnis:Table of Contents:
List of AbbreviationsIV
List of FiguresV
List of TablesVI
1.Introduction1
1.1Background1
1.2Purpose and Structure of the Thesis3
2.Foundation of Brand Valuation6
2.1Importance and Definition of Brand6
2.1.1Importance of Brand6
2.1.2Brand Definition8
2.1.3Brands as Intangible Assets and Generators of Value11
2.2Definition of Brand Value14
2.2.1Financial Approach15
2.2.2Behavioural Approach17
2.2.3Combined financial/behavioural Approach19
3.Selection of the Comparison Criteria for Brand Valuation Methods21
3.1Requirements for Brand Valuation Methods22
3.1.1Methodical Requirements22
3.1.2Covering Content Requirements23
3.1.3Relevance of Result Requirements24
3.2Scopes of Application of Brand Valuation26
3.2.1Internal Scope of Application27
3.2.2External Scope of Application30
4.Methods for Assessing the Brand Value37
4.1Classification of the Methods38
4.1.1Financial-oriented Methods39
4.1.2Behavioural-oriented Methods41
4.1.3Combined financial/behavioural Methods42
4.2Theoretical and Methodological Description of the Methods43
4.2.1Interbrand Brand Value Approach (from Interbrand Zintzmeyer & Lux)43
4.2.1.1Theoretical Foundation44
4.2.1.2Methodological Description46
4.2.2Brand Equity Evaluator Approach (from BBDO)51
4.2.2.1Theoretical Foundation52
4.2.2.2Methodological Description54
5.Critical Comparison of the Interbrand Model and the Brand Equity Evaluator Model59
5.1Contrast of the Theory and Methodology of the Valuation Models59
5.2Compliance with the Requirements for Brand Valuation Methods62
5.2.1Interbrand […]
In todays highly competitive business environment, companies have recognised the increasing importance of brands as one of their most important assets. However, now the discussion is how to measure the value of such an important asset and what makes this valuation important.
The purpose of this thesis is the critical comparison between two well-known brand valuation methods in order to choose the one that reflects the monetary value of a brand best possible. For this purpose, the methods are first analysed in relation to their compliance with the requirements for brand valuation methods. Secondly, the extent to which the methods can be applied for the different valuation purposes is also analysed. The two selected methods are the Interbrand model (from Interbrand Zintzmeyer & Lux) and the Brand Equity Evaluator model (from BBDO Consulting). Inhaltsverzeichnis:Table of Contents:
List of AbbreviationsIV
List of FiguresV
List of TablesVI
1.Introduction1
1.1Background1
1.2Purpose and Structure of the Thesis3
2.Foundation of Brand Valuation6
2.1Importance and Definition of Brand6
2.1.1Importance of Brand6
2.1.2Brand Definition8
2.1.3Brands as Intangible Assets and Generators of Value11
2.2Definition of Brand Value14
2.2.1Financial Approach15
2.2.2Behavioural Approach17
2.2.3Combined financial/behavioural Approach19
3.Selection of the Comparison Criteria for Brand Valuation Methods21
3.1Requirements for Brand Valuation Methods22
3.1.1Methodical Requirements22
3.1.2Covering Content Requirements23
3.1.3Relevance of Result Requirements24
3.2Scopes of Application of Brand Valuation26
3.2.1Internal Scope of Application27
3.2.2External Scope of Application30
4.Methods for Assessing the Brand Value37
4.1Classification of the Methods38
4.1.1Financial-oriented Methods39
4.1.2Behavioural-oriented Methods41
4.1.3Combined financial/behavioural Methods42
4.2Theoretical and Methodological Description of the Methods43
4.2.1Interbrand Brand Value Approach (from Interbrand Zintzmeyer & Lux)43
4.2.1.1Theoretical Foundation44
4.2.1.2Methodological Description46
4.2.2Brand Equity Evaluator Approach (from BBDO)51
4.2.2.1Theoretical Foundation52
4.2.2.2Methodological Description54
5.Critical Comparison of the Interbrand Model and the Brand Equity Evaluator Model59
5.1Contrast of the Theory and Methodology of the Valuation Models59
5.2Compliance with the Requirements for Brand Valuation Methods62
5.2.1Interbrand […]
Leseprobe
Inhaltsverzeichnis
Tatiana Soto J.
Methods for Assessing Brand Value
A Comparison between the Interbrand Model and the BBDO's Brand Equity Evaluator model
ISBN: 978-3-8366-0872-5
Druck Diplomica® Verlag GmbH, Hamburg, 2008
Zugl. Fachhochschule Osnabrück, Osnabrück, Deutschland, MA-Thesis / Master, 2007
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Printed in Germany
I
Table of Contents
L
IST OF
A
BBREVIATIONS
...III
L
IST OF
F
IGURES
... IV
L
IST OF
T
ABLES
... V
1
I
NTRODUCTION
...1
1.1
Background ...1
1.2
Purpose and Structure of the Thesis ...3
2
F
OUNDATION OF
B
RAND
V
ALUATION
...6
2.1
Importance and Definition of Brand ...6
2.1.1
Importance of Brand ...6
2.1.2
Brand Definition ...8
2.1.3
Brands as Intangible Assets and Generators of Value ...11
2.2
Definition of Brand Value ...14
2.2.1
Financial Approach...15
2.2.2
Behavioural Approach ...17
2.2.3
Combined financial/behavioural Approach ...19
3
S
ELECTION OF THE
C
OMPARISON
C
RITERIA FOR
B
RAND
V
ALUATION
M
ETHODS
...21
3.1
Requirements for Brand Valuation Methods ...22
3.1.1
Methodical Requirements...22
3.1.2
Covering Content Requirements ...23
3.1.3
Relevance of Result Requirements ...24
3.2
Scopes of Application of Brand Valuation...26
3.2.1
Internal Scope of Application...27
3.2.2
External Scope of Application...30
4
M
ETHODS FOR
A
SSESSING THE
B
RAND
V
ALUE
...37
4.1
Classification of the Methods...38
4.1.1
Financial-oriented Methods ...39
4.1.2
Behavioural-oriented Methods...41
4.1.3
Combined financial/behavioural Methods...42
II
4.2
Theoretical and Methodological Description of the Methods ...43
4.2.1
Interbrand Brand Value Approach (from Interbrand
Zintzmeyer & Lux)...43
4.2.1.1
Theoretical Foundation...44
4.2.1.2
Methodological Description ...46
4.2.2
Brand Equity Evaluator Approach (from BBDO)...51
4.2.2.1
Theoretical Foundation...52
4.2.2.2
Methodological Description ...54
5
C
RITICAL
C
OMPARISON OF THE
I
NTERBRAND
M
ODEL AND THE
B
RAND
E
QUITY
E
VALUATOR
M
ODEL
...59
5.1
Contrast of the Theory and Methodology of the Valuation Models ...59
5.2
Compliance with the Requirements for Brand Valuation Methods...62
5.2.1
Interbrand Model ...62
5.2.2
Brand Equity Evaluator Model ...68
5.3
Practical Application of the Valuation Methods...73
5.4
Evaluation and Conclusion of the Methods' Comparison ...77
6
R
ESUME AND
R
ECOMMENDATIONS
...83
B
IBLIOGRAPHY
...88
A
PPENDIX
...94
III
List of Abbreviations
BBDO
Batten, Barton, Durstine & Osborn
BEE
Brand Equity Evaluator
bn Billion
BSE
Brand Specific Earnings
BSS
Brand Strength Score
CAPM
Capital Asset Pricing Model
DAX Deutscher
Aktienindex
DRS Deutsche
Standardisierungsrat
EBIT
Earnings Before Interest and Taxes
EVA
Economic Value Added
GE
General Electric Company
HGB Handelsgesetzbuch
IAS
International Accounting Standards
IBM
International Business Machines Corporation
IFRS
International Financial Reporting System
NOPAT
Net Operating Profit After Taxes
NOPAT
BI
Net Operating Profit After Taxes Before Interests
PwC PricewaterhouseCoopers
RBI
Role of Brand Index
US-GAAP
US- Generally Accounting Accepted Principles
WACC
Weighted Average Cost of Capital
IV
List of Figures
Figure 1: Varied brand value results for Siemens, Deutsche Bank and Merck ...3
Figure 2: Structure of the thesis...5
Figure 3: Results of a blind test and open test between Pepsi and Coke ...8
Figure 4: Importance of intangible assets ...12
Figure 5: Understanding of brand valuation ...15
Figure 6: Classification and overview of brand valuation methods ...39
Figure 7: Influence of Brand to the Firm value ...44
Figure 8: Brand valuation procedure of the Interbrand model...46
Figure 9: S-Curve relationship between brand strength and its risk...49
Figure 10: Components of the BBDO's Brand Equity Evaluator ...52
Figure 11: Brand valuation methodology of the Brand Equity Evaluator...54
Figure 12: The BBDO Five-level Model ...55
Figure 13: Cash flow computation with the Brand Equity Evaluator...56
Figure 14: Calculation of brand value with the Brand Equity Evaluator ...57
V
List of Tables
Table 1: The contribution of brands to shareholder value ...13
Table 2: Required criteria for brand valuation methods ...26
Table 3: Scopes of application of brand valuation...27
Table 4: Requirements of brand valuation methods according to the
valuation purpose ...36
Table 5: Criteria to determine Brand Strength according to the
Interbrand model...48
Table 6: Example of brand valuation with the Interbrand method ...50
Table 7: Contrast of the Interbrand and Brand Equity Evaluator methods ...59
Table 8: Interbrand model in compliance with the requirements for brand
valuation ...62
Table 9: BEE model in compliance with the requirements for brand
valuation ...68
Table 10: Practical application of the Interbrand and the BEE methods ...73
Table 11: Evaluation of the Interbrand and the BEE methods ...78
Table 12: Weaknesses and Strengths of the Interbrand and BEE models ...81
1
Introduction
1
1 Introduction
1.1 Background
In today's highly competitive business environment, companies have
recognised the increasing importance of brands as one of their most
important assets.
1
However, now the discussion is how to measure the
value of such an important asset and what makes this valuation important.
For a long time, the value of a company was measured in terms of real
stakes; tangible assets were taken into consideration rather than intangibles.
It is now recognised, however, that the value of a business is not only inside
of the business, but also in the minds of potential buyers.
2
With the wage of
mergers and acquisitions, which started in 1985, the market prices of buying
a company was extremely high. Brands were developing into real stakes.
Companies were sold taking into consideration how valuable their brands
were. The famous case of Nestlé can be mentioned; Nestlé bought
Rowntree in 1988 for £2.4bn, nevertheless its market value of equity was
only £ 1bn. Nestlé wanted to enter the European market and saw a great
advantage in this purchase to get the already existent brand-loyal
consumers of Rowntree.
3
Nowadays, brands generate a large portion of a company's shareholder
value. According to a study made by PricewaterhouseCoopers (PwC) and
Sattler in 2005, the contribution from brand value to the total value of a
company has risen from 56% in 1999 (first study) to 67% in 2005.
4
This
makes clear that brand value importance is increasing.
From the shareholder-value perspective brands are value drivers for the
companies' success and the inversion made on a brand such as promotion
expenses are normally made in terms of Euros, therefore it should also be
1
cf. PWC Studie (2006). Praxis von Markenbewertung und Markenmanagement in deutschen Unternehmen: Neue
Befragung 2005. PricewaterhouseCoopers AG. Frankfurt am Main. Retrieved on 23
rd
February 2007 online in the
Internet: http://www.markenlexikon.com/d_texte/pwc_markenbewertung_01_2006.pdf. p. 8
2
cf. Kapferer, J-N. (1992). Strategic Brand Management: New Approaches to Creating and Evaluating Brand Equity.
New York. Free Press. p. 1
3
cf. Kapferer, J-N. (1992). Strategic Brand Management. pp. 264-265
4
cf. PWC Studie (2006). Praxis von Markenbewertung und Markenmanagement in deutschen Unternehmen. p. 8
1
Introduction
2
possible to measure the results of this inversion in monetary terms.
5
For the
marketing and sales department, the quantification of the brand value is also
beneficial because incentives can be given to managers according to their
performance and contribution to the increase of the company's value.
6
However, to quantify the value of a brand as an intangible asset is not an
easy task. In this respect, different methods were developed: financial-
oriented methods, behavioural-oriented methods, and a combination of
financial/behavioural methods. Nowadays, there is no standard method for
brand valuation. In fact, the number of methods available in Germany
amounts to more than 30. They all pursue different objectives; they have
different understanding of brand value and thus different results.
7
However,
according to the research study of PwC, the standardization of the methods
is not as important for firms as the fact that they should be accredited.
8
Furthermore, many marketing research institutes, the biggest advertising
agencies and the most significant management consultancies offer their own
attempts to value the brand as shown in the example of Figure 1.
BBDO
Consulting's results for the brand value of Siemens in 2003 was 15bn
Euros, whereas one year later Interbrand company's result were only 6bn
Euros for the same brand, the difference accounts for 156%.
Comparing the
brand values obtained by the different companies and their corresponding
methods, huge differences can be recognized which reach values up to
252%.
9
5
cf. Maul, K-H./Kasperzak, R. (2004). Der Wert der Marke. In: Hanser, P.: Markenbewertung. Die Tank AG: Wie
neuen Bewertungsexperten eine fiktive Marke bewerten. Düsseldorf. Verlagsgruppe Handelsblatt GmbH. p. 11
6
cf. Maul, K-H./Kasperzak, R. (2004). Der Wert der Marke. p. 11
7
cf. Schimansky, A. (2005). Der Wert der Marke vielfältige Ansätze zu seiner Messung. Retrieved on 19th March
2007 online in the Internet: http://www.markenlexikon.com/d_texte/stern_schimansky_markenwert.pdf. p. 2
8
cf. PWC Studie (2006). Praxis von Markenbewertung und Markenmanagement in deutschen Unternehmen. loc. cit.
Retrieved online in Internet. pp. 19-20
9
cf. Esch, F.R/Geus P. (2005). Ansätze zur Messung des Markenwerts. In: Esch, FR.: Moderne Markenführung.
Grundlagen Innovative Ansätze, Praktische Umsetzungen. (4. Auflage). Wiesbaden. GWV Fachverlage GmbH. p.
1265
1
Introduction
3
Figure 1: Varied brand value results for Siemens, Deutsche Bank and Merck
15370
6001
15719
5652
7079
2013
0
2000
4000
6000
8000
10000
12000
14000
16000
BBDO
(2003)
Interbrand
(2004)
Semion
(2004)
BBDO
(2003)
Interbrand
(2004)
Semion
(2004)
Mi
o
. E
u
ro
Source: from Esch, F.R/Geus (2005). Ansätze zur Messung des Markenwerts. p. 1266
In this context, the existing and newly developed methods should be able to
provide reliable brand value results for companies. Therefore, the necessary
requirements that the brand valuation methods should fulfil in order to be
accredited must be researched. Moreover, their ability to value the brand in
different situations (e.g. the sale and purchase of brands, mergers and
acquisitions, licensing and franchising) must be analysed.
1.2 Purpose and Structure of the Thesis
The main purpose of this thesis is the critical comparison between two
well-known brand valuation methods in order to choose the one that reflects
the monetary value of a brand best possible. For this purpose, the methods
are first analysed in relation to their compliance with the requirements for
brand valuation methods. Secondly, the extent to which the methods can be
applied for the different valuation purposes is also analysed. The two
selected methods are the Interbrand model (from Interbrand Zintzmeyer &
Lux) and the Brand Equity Evaluator model (from BBDO Consulting).
In order to achieve this purpose, the following sub-objectives are pursued:
·
To gain a clear understanding of the definition of brand value. In order
to achieve this objective, the brad definition must be clear as well as the
concept of the brand as an asset that is able to generate value.
Siemens
Merck
Deutsche Bank
Difference
156%
Difference
178%
Difference
252%
1
Introduction
4
·
To identify the requirements that new and existing brand value methods
should fulfil in order to be accredited as a brand valuation method.
·
To clearly understand the different purposes for which brand valuation
methods are used.
·
To understand the categorization, under which the two selected
methods are placed, in order to have a better understanding of their
theoretical background.
This thesis is structured as follows:
After having described the actual situation of brand value and brand
valuation methods and having established the purpose and sub-objectives
of this thesis, chapter two will introduce the first theoretical concepts of
brand from the firms' and consumers' perspectives and, most importantly,
the perspective of brand as an intangible asset will be emphasized. Finally,
the concept of brand value will be defined and explained using the different
existing perspectives.
In chapter three a list of requirements that new and existing brand valuation
methods should satisfy in order to be accredited as such will be presented.
Furthermore, the scopes of application of brand valuation will be discussed
taking into consideration both the external scope of application (e.g. financial
accounting, brands' and firm's acquisitions, brand licensing, compensation
for brand damages, loan security) and the internal scope of application (e.g.
budget allocation, brand steering and controlling, incentive system for
managers and transfer potential). Moreover, the basic requirements for
these purposes are identified; this will facilitate the determination of the
suitability of the methods for the specific valuation purpose.
In chapter four a classification of brand valuation methods is presented and
their theoretical background is described. The main objective is to recognize
the category in which the two selected methods are placed, in order to
understand their theoretical and methodological fundaments. Afterwards, an
in-depth theoretical and methodological description of the Interbrand model
and the Brand Equity Evaluator model is carried out.
1
Introduction
5
In chapter five both models are contrasted in order to identify the main
differences and similarities of their methodologically procedures.
Furthermore, a critical comparison of each model in relation to their
compliance with the requirements of brand valuation methods is conducted.
In addition, an analysis of their adequacy for the different brand valuation
situations is determined. Finally, both methods are evaluated and a
summary of their weaknesses and strengths will be presented, in order to
select the method which can reflect best the brand value and can be best
adequate to the valuation purposes.
In chapter six the most important findings in this thesis will be resumed and
corresponding recommendations will be given.
Figure 2: Structure of the thesis
Chapter 1: Introduction
Chapter 2: Foundation of brand valuation
Chapter 3: Selection of the
comparison criteria for brand
valuation methods
3.1 Requirements for brand valuation
methods
3.2 Scope of application of brand
valuation
Chapter 4: Methods for
assessing the brand value
4.1 Classifications of the methods
4.2 Theoretical and methodological
description of the methods
· Interbrand Brand Value Approach
· Brand Equity Evaluator Approach
Chapter 5: Critical comparison of the Interbrand model and the
Brand Equity Evaluator model
5.1 Contrast of the
theory and
methodology
5.2 Compliance with
the requirements for
brand valuation
methods
5.3 Practical
application of the
valuation models
5.4 Evaluation and
conclusion of the
methods'
comparison
Chapter 6: Resume and recommendations
2
Foundation of Brand Valuation
6
2 Foundation of Brand Valuation
2.1 Importance and Definition of Brand
2.1.1 Importance of Brand
In recent years, brands have become one of the main topics of practitioners
and scholars of marketing.
10
The concept of the brand stems from America.
Branding was and still is the process by which owners of cattle mark their
animals in order to identify them. In the same way products are marked by
manufacturers in order to be recognised.
11
The nature of brands has changed and developed over the years. Now a
brand is more than a pure marking, it represents association and shared
values. The importance of brands is continuously increasing. Now, brands
are the visiting card for companies, the label of their products and
services.
12
Companies can protect their brands through registered
trademarks, their manufacturing processes through patents, and their
packaging through copyrights and designs. For this reasons, firms can
safely invest in their brands, and receive the benefits of this valuable asset.
13
These investments in brands can provide a product with unique associations
and give them an advantage over other products and, at the same time, they
make it difficult for competitors to enter the market. Therefore, brands bring
many competitive advantages to firms.
14
Furthermore, brands are important for consumers because they reduce
the risk of buying products with low quality. In this respect, brands can be
considered as indicators of quality. Consumers are unsure whether a
product can generally hold its quality promise and they must first try it out in
order to evaluate it. Hence, when consumers shop, they place complete and
full trust on brands. Products can be identified through brands and also their
10
cf. Esch, F-R. et al. (2005). Herausforderung und Aufgaben des Markenmanagements. In: Esch, FR.Moderne
Markenführung. Grundlagen Innovative Ansätze, Praktische Umsetzungen. (4.Auflage). Wiesbaden: GWV
Fachverlage GmbH. p. 5
11
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brand: Markenwert als zentraler Treiber des Unternehmenswertes.
Stuttgart. Schäffer-Poeschel Verlag. p. 3
12
cf. Klein-Bölting, Udo/ Maskus, Michel (2003). Value Brands. p.3
13
cf. Keller, K.L. (1998). Strategic Brand Management: Building, Measuring, and Managing Brand Equity. New Jersey:
Prentice-Hall. p. 9
14
cf. Keller, K. L. (1998). Strategic Brand Management. p. 9
2
Foundation of Brand Valuation
7
linked attributes. This reduces the effort in making choices. If consumers are
disappointed by a product, they will not buy it anymore.
15
Consumers learn about brands because of their past experience with them;
they can identify brands that satisfy their needs and the ones which do not.
16
Brands develop preferences for consumers. Consumers experience these
preferences when they not only hear a brand name or see a logo, but when
they really "experience" the brand. In this case, the brand will be considered
a powerful brand.
17
In this context, one of the most famous comparison tests between Coca-
Cola and Pepsi-cola is presented. During the blind test 51% of the
interviewees preferred the brand Pepsi and only 44% chose Coca-Cola. This
situation changed when the brand names were shown. In this test only 23%
of the interviewees chose Pepsi, whereas 65% preferred Coca-Cola (see
Figure 3).
18
This is the so-called Halo-Effect. The Halo-Effect means that
when consumers evaluate a product as good (or bad) in certain attributes,
they are likely to make a similar evaluation in other attributes because they
are influenced by the former evaluation.
19
To summarise, brands play a very important role not only for firms, but also
for consumers. The creation of perceived differences through branding and
the development of loyal consumers create value, which means financial
profits for the firm.
20
The most valuable assets that firms have may not be
tangible assets, but intangibles, such as management skills, marketing,
financial and operation expertise and most importantly: "brands".
21
15
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. loc. cit. p. 11. cf. also De Chernatony, L./ McDonald, M.
(2003). Creating Powerful Brands in Consumer, Service and Industrial Markets. p. 450
16
cf. Keller, K.L. (2003). Strategic Brand Management. loc. cit. p. 7
17
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. loc. cit. P. 3
18
cf. Esch F-R. et al. (2005). Herausforderung und Aufgaben des Markenmanagements. loc. cit. p. 7
19
cf. Kroeber-Riel/ Weinberg, P. (2003). Konsumverhalten. 8.Auflage. München: Vahlen. p. 310
20
cf. Keller, K.L. (1998). Strategic Brand Management. p. 5
21
cf. Keller, K. L. (1998). Strategic Brand Management. p. 5
2
Foundation of Brand Valuation
8
Figure 3: Results of a blind test and open test between Pepsi and Coke
Blind test Test w ith brand nam e
51%
4 4 %
5%
2 3 %
6 5%
12 %
0%
10%
20%
30%
40%
50%
60%
70%
Pref er Pepsi
Pref er Coke
No pref erence
(equal good)
Pref er Pepsi
Pref er Coke
No pref erence
(equal good)
Source:
from Esch, F-R. et al. (2005). Herausforderung und Aufgaben des Markenmanagements.
p. 7.
2.1.2 Brand Definition
The majority of people have an idea of what brands are because they are
confronted each day with them. However, a uniform understanding of this
concept is missing in literature.
22
A brand can be defined from different
points of view; some approaches are:
23
·
Attribute- based approach
·
The legal brand definition approach
·
Effect- based approach
·
Perceived versus real product performance
The Attribute- based approach is represented by the classical appreciation
of brand definition.
24
A brand is characterised by the physical labelling of
products, so that consumers are able to identify which firm produces which
goods or services. From this point of view, the function of brand is to give
consumers information which signalises the quality of products.
25
In this
respect, the branded finished good will be characterised by attributes such
as larger sales area, intense consumer promotion and a great
22
cf. Kriegbaum, C. (2001). Markencontrolling: Bewertung und Steuerung von Marken als immaterielle
Vermögenswerte im Rahmen eines unternehmenswertorientierten Controllings. München: Vahlen. Verlag Franz
Vahlen GmbH. P. 27
23
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. loc. cit. p. 4.
24
cf. Esch, F-R et al. (2005). Herausforderung und Aufgaben des Markenmanagements. loc. cit. p. 8
25
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. p. 4
2
Foundation of Brand Valuation
9
acknowledgement of the good.
26
However, this definition is not used
anymore because nowadays not only finished goods from companies, but
also services and preliminary products have a brand status.
27
From a legal point of view brands are defined as protected trademarks
that are adequate to differentiate legally goods and services of one company
from those of its competitors. These trademarks must be graphically
represented. These graphical representations are words, good figures,
letters, numbers, audible signals, three-dimensional designs and include
good design, good packaging, as well as other formats, including colours
and combination of colours.
28
Furthermore, product designs of particular
brands (e.g. the Coca-Cola bottle), some combinations of colours (e.g. the
yellow and red of the Maggi logo) and also advertising slogans are
trademarked.
29
The number of signs registered as trademarks has
considerably increased. In 1991 the amount of registered signs in Germany
was 316,000,
30
whereas in 2004 this number increased to 716,123 and in
2005 ascended to 731,039; an increase of 2, 1%.
31
Kotler has a similar concept of brands and states that a brand can be
created by means of a name, logo, symbol, package or other attributes that
distinguish a product or service from others.
32
The function of brands in this
context is to identify and differentiate products.
33
This definition, however,
ignores the impact of the brand from a consumer's perspective.
In this manner, the effect-based approach outlines the impact of brands
over consumers; this means consumers' subjective perception of brands.
34
Branded goods are all perceived by consumers as such, if they can fulfil
26
cf. Mellerowicz (1963). Markenartikel: Die ökonomische gesetze ihrer Preisbildung und Preisbindung. 2. Aufl.
München, Berlin: Beck. p. 40. as cited by: Klein-Bölting, Udo/ Maskus, Michel (2003). Value Brands. loc.cit. p. 4
27
cf. Esch, F-R. et al. (2005). Herausforderung und Aufgaben des Markenmanagements. loc. cit. p. 8
28
cf. Markengesetz . § 3 Abs. MarkenG
29
cf. Esch, F-R. et al. (2005). Herausforderung und Aufgaben des Markenmanagements. p. 10
30
cf. Dichtl, E. (1992) Grundidee, Varianten und Funktionen der Markierung von Waren und Diensleistungen. In: Marke
und Markenartikel. Dichtl, E./Eggers, W. München. p. 7. As cited by: Bekmeier-Feuerhahn, S. (1998).
Marktorientierte Markenbewertung : eine konsumenten- und unternehmensbezogene Betrachtung. Wiesbaden.
Gabler. p. 14
31
cf. Dpma (Deutsches patent- und Markenamt). Jahresbericht 2005. Retrieved on 24th March 2007 online in the
Internet: http://www.dpma.de/veroeffentlichungen/jahresbericht05/dpma_jb_2005.pdf p. 8
32
cf. Kotler, P. (1991). Marketing-Management: Analysis, Planning, Implementation and Control. (7th Edition).
Englewood Cliffs/NJ: Prentice Hall. p. 442
33
cf. Esch, F-R. et al. (2005). Herausforderung und Aufgaben des Markenmanagements. p. 10
34
cf. Kriegbaum, C. (2001). Markencontrolling. loc. cit. p. 36
2
Foundation of Brand Valuation
10
functions that are essential for them.
35
Under this approach a brand can be
defined as fixed, distinctive, perceptions of a product or service in the mind
of consumers that take over the functions of identification and differentiation
and influence consumer's choices.
36
Nevertheless, this approach states
how consumers are influenced by brands, but not where brands are
originated.
37
The perceived versus real product performance approach infers that not
only the product attributes have an influence on consumers, but also
experiences and feelings linked to brands play an important role.
38
The
quality of products is perceived subjectively, and the consumers associate
certain properties with the brand scheme, which generate positive
recognition associated to the product. Thus, the signal sent by the brand are
perceived by consumers, who associate them with personal past
experiences. Therefore, brands are not only originated in the mind of
consumers. Brands must be born so that they can live in their minds.
39
By building and managing brands it is, therefore, important to consider the
product itself, the competitors' products, and the consumers' perspective for
the success of the brand.
40
For the purpose of this thesis, the following
definition, which encloses a consumers' and firms' view, will be considered:
"Brands serve to identify and differentiate products and services. They stand
for tradition and innovation, authenticity and quality. For the consumer, they
are signs, which arouse specific associations and influence buying decision.
For the firms, they guarantee the building of strong brand and their
acceptance in the market. "
41
35
cf. Berekoven, L. (1961). Die Werbung für Investition- und Produktionsgüter, ihre Möglichkeiten und Grenzen. In:
Gfk-Schriftenreihe. ,,Marktwitschaft und Verbrauch". Band 16. München. As cited by: Kriegbaum, Catharina (2001).
Markencontrolling. loc. cit. p. 36
36
cf. Meffert, H. et al. (2002). Stellenwert und Gegenstand des Markenmanagement. In: Meffert, H et al. (Hrsg.).:
Markenmanagement: Grundlagen der identitätsorientierten Markenführung. Mit Best Practice-Fallstudien.
Wiesbaden: Verlag Dr.Th. Gabler GmbH. p. 6
37
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. loc. cit. p. 5
38
cf. Esch, F-R. et. al. (2005). Herausforderung und Aufgaben des Markenmanagements. loc. cit. p. 11
39
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. pp. 5-6
40
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. p. 5
41
Dpma (Deutsches patent- und Markenamt). Jahresbericht 2005. loc. cit. Retrieved online in Internet. p. 8
2
Foundation of Brand Valuation
11
2.1.3 Brands as Intangible Assets and Generators of Value
For the purpose of this thesis, brands should also be understood from
another perspective. Brands are not only trademarks, or consumers'
perceptions, or signs to distinguish one company's products or services from
its competitors, but they are also the most important intangible asset for
many business. The reason is the economic impact that brands have.
42
According to Aaker, the most important assets of a firm are the intangibles,
these are not capitalized and do not appear on the balance sheet.
Therefore, their maintenance comes directly out of cash flow and short-term
profits. Nevertheless, as they are not depreciated, their maintenance is
invisible and thus sometimes neglected by managers.
43
For this reason, tangibles were regarded for a long time as the main sources
of business, as their value was shown on the balance sheet of the firms. The
market was aware of intangibles, but their value was unclear and
unquantifiable. The increase of importance of intangibles is the result of the
continuous increase of the gap between companies' book value and their
stock market valuations, as well as the new wage of mergers and
acquisitions in the 1980s.
44
According to a study conducted by PricewaterhouseCoopers, the most
important intangible asset is the human capital (68%), followed by the
customer-relationship (67%) and property rights (43%). The brand is in the
fourth place with 42%. Furthermore, 83% of the firms agreed that the brand
is the determining factor for the business' success (see Figure 4).
45
Firms
such as Ford Motor Company now prefer to invest in intangibles assets and
in the past years it spent $12bn to acquire prestigious brand names such as
Jaguar, Aston Martin, Volvo and Land Rover.
46
42
cf. Interbrand (2004). Brand Valuation. A chapter from Brands and Branding an Economist Book. Retrieved on 31st
January 2007 online in the Internet: www.brandchannel.com/-images/papers/financial_value.pdf. p. 1
43
cf. Aaker A. D.(1991). Managing Brand Equity: Capitalizing on the Value of a Brand Name. New York: The Free
Press. A Division of Simon & Schuster Inc. p. 14
44
cf. Interbrand (2004). Brand Valuation. p. 2
45
cf. PWC Study (2006). Praxis von Markenbewertung und Markenmanagement in deutschen Unternehmen. loc. cit.
Retrieved online in Internet. p. 11
46
cf. Interbrand (2004). Brand Valuation. p. 1
2
Foundation of Brand Valuation
12
Figure 4: Importance of intangible assets
68%
67%
43%
42%
40%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Human capital
Customer-
relationship
Property rights
Brands
Know ledge
capital
Source: from PwC Study (2006). Praxis von Markenbewertung und Markenmanagement in
deutschen Unternehmen.p.11
Rankings of the best known brands are carried out yearly and show that
brands usually represent the comparatively biggest value in the firm.
47
The
marketing consulting firm BBDO conducts a yearly ranking of the firms that
are registered in the stock-market index DAX 30
48
(the new ranking 2005-
2006 is available in Appendix 1). Here can be seen that Deutsche Telekom,
Allianz and DaimlerChrysler are at the top of the ranking.
According to the observations of Klein-Bölting & Maskus on the BBDO's
ranking 2000-2002, the brand value is independent from the economic
environment and external factors and has therefore, a stable development.
If in the future the brand value were to be included in the balance sheet in
Germany, a strong brand could protect a company from a fall in value both
in the financial statement and in the stock-market.
49
Brand value represents more than half of the total value of the company.
50
A
study made by Interbrand in association with JP Morgan infers that brands
account for more than one-third of shareholder value.
51
Table 1 shows the
contribution of brands to shareholder value.
47
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. loc. cit. p. 6
48
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. p. 6
49
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. pp. 7-8
50
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. p. 9
51
cf. Interbrand (2004). Brand Valuation. loc. cit. Retrieved online in Internet. p. 1
2
Foundation of Brand Valuation
13
Table 1: The contribution of brands to shareholder value
Company
2006 Best
global brands
value ($bn)
2002 brand
value($bn)
Brand
contribution
to market
capitalization of
parent company
(%)
2001 brand
value
($bn)
Coca-Cola
67.0
69.6
51
69.0
Microsoft 56.9 64.1
21 65.1
IBM 56.2
51.2
39
52.8
GE 48.9
41.3
14
42.4
Intel 32.3
30.9
22
34.7
Nokia 30.1
30.0 51
35.0
Disney 27.8
29.3 68
32.6
McDonald's 27.5
26.4
71
25.3
Marlboro 21.3 24.2
20 22.1
Mercedes-Benz 21.7
21.0
47
21.7
Source: adapted from Interbrand (2004). Brand valuation. p. 2 and Interbrand (2006). Best
Global Brands. p. 11
It is noticeable that there are several brands which contribute a great extent
to the shareholder value. For example, McDonald's brand contributes 71%
to the shareholder value, followed by Disney with 68%. It should be also
mentioned that the brand value for most of the companies has increased
between 2001 and 2002. The present Interbrand ranking of "the Best Global
Brands" 2006 (see Appendix 2) shows the 25 most valuable brands. Coca-
Cola occupies the first place with a brand value of $67bn, followed by
Microsoft, $ 57bn, and at the third place IBM, $56bn. Comparing the
rankings of 2002 and of 2006, the top ten brands stay in the same place,
except for Marlboro, which has been replaced by Mercedes on place 10.
It is important to mention that the proper management of brands, which
means their maintenance and nurturing over the years, results in a constant
brand value.
52
However, it is important to clearly understand the concept of
brand value in order to understand what brand valuation means and how it is
conducted.
52
cf. Klein-Bölting, U./ Maskus, M. (2003). Value Brands. loc. cit. p. 9
2
Foundation of Brand Valuation
14
2.2 Definition of Brand Value
The definition of brand value is not standardised.
53
The concept of brand
value emerged in the 1980s and carried the increasing importance of brands
in marketing strategy with it, on one hand. However, on the other hand,
different definitions appeared according to different purposes.
54
Many
authors, who deal with this topic, establish their own definitions.
55
Even in
the professional area this concept is not uniform. Lawyers talk about strong,
well-known or even famous brands, whereas marketers and brand
managers talk about brand goods or brand articles and financers talk about
brand equity.
56
The translation from English literature to German literature also brings
different terminologies of brand value. Terminologies such as "Markenwert",
"Markenstärke" or "Markenkraft" arise in the German language, whereas in
Anglo-American literature there are definitions such as "brand equity",
"brand strength" or "brand assets".
57
The common feature of these different terminologies is that when talking
about brand or brand value, not only brand mark is implied, but also the
brand as a generator of added value.
58
Furthermore, the common concept,
which encloses the different terminologies, is the brand valuation
59
as shown
in Figure 5.
53
cf. Kranz, M. (2002). Markenbewertung- Bestandsaufnahme und kritische Würdigung. In: Meffert, H. et al. (Hrsg.):
Markenmanagement: Grundlagen der identitätsorientierten Markenführung. Mit Best Practice-Fallstudien.
Wiesbaden: Verlag Dr.Th. Gabler GmbH. p. 434
54
cf. Keller, K. L. (1998). Strategic Brand Management. loc. cit. p. 42
55
cf. Kranz, M. (2002). Markenbewertung- Bestandsaufnahme und kritische Würdigung. p. 434
56
cf. Schneider, M. et al. (2003). Integrale Markenführung: 14 Grundsätze, wie Markenwert geschaffen, geschützt,
berechnet und vermehrt wird. Switzerland: Haupt Verlag Berne. p. 89
57
cf. Kranz, M. (2002). Markenbewertung- Bestandsaufnahme und kritische Würdigung. p. 434
58
cf. Schneider, M. et al. (2003). Integrale Markenführung. p. 90
59
cf. Kranz, M. (2002). Markenbewertung- Bestandsaufnahme und kritische Würdigung. p. 434
2
Foundation of Brand Valuation
15
Figure 5: Understanding of brand valuation
Source: adapted from Kranz, M. (2002). Markenbewertung- Bestandsaufnahme und
kritische Würdigung. p. 435
Brand valuation is the process to assess brand value, which is represented
by the different brand valuation methods (in German: Verfahren zur
Markenbewertung)
60
. These different perspectives to define brand value are
categorised in financial, behavioural and combined financial/behavioural
approaches
61
and will be explained in detail in the following sections.
2.2.1 Financial Approach
The financial or classic approach defines brand from a monetary
perspective.
62
Financers were the first to talk about the monetary value of a
firm's brands. These were employed by companies which intend to take over
another company.
63
Besides, the financial approach focuses on the firm's
60
cf. Gerpott, T. J./ Thomas, S.E. (2004). Markenbewertungsverfahren: Einsatzfelder und Verfahrensüberblick. In:
Wirtschaftswissenschaftliches Studium. Zeitschrift für Ausbildung und Hochschulkontakt. 33. Heft 7. p. 394
61
cf. Wirtz, B.W./ Roth K.P. (2004). Grundlagen der Markenbewertung. In: Wirtz, B.W./Göttgens O. (Hrsg.):
Integriertes Marken- und Kundenwertmanagement: Strategien, Konzepte und Best Practices. (1. Auflage).
Wiesbaden: Dr. THh Gabler Fachverlag GmbH. pp. 274-282.
62
cf. Kranz, M. (2002). Markenbewertung- Bestandsaufnahme und kritische Würdigung. loc. cit. p. 435
63
cf. Kapferer, J-N. (1992). Strategic Brand Management. loc.cit. p. 264
Brand valuation
Financial Approach
"Brand value"
(classic, narrow sense)
(Markenwert)
Perspective:
Firm
Dimension:
monetary unit
Scale:
ratio-scale
Behavioural approach
,,Brand strength"
(Markenstärke, Markenkraft)
Perspective:
Consumer
Dimension:
no monetary unit
Scale:
ordinal- scale
Combined financial/behavioural approach
"Brand value"
(broader sense)
(Markenwert, Brand equity)
Perspective:
integrated
(firm, consumer)
Dimension:
monetary unit
Scale:
ratio-scale
2
Foundation of Brand Valuation
16
perspective. Brand value is considered here as "a firm's capital asset".
64
Others authors talk about brand value as the "latest asset value".
65
The argument on brand value started in Germany in the capital investment
area.
66
In 1962, Kern provided the following definition "...'.the value of trade
mark as the sum of its present discounted added profits'".
67
Simon and
Sullivan defined brand value as the incremental cash flow resulting from the
association of branded products over unbranded ones.
68
These definitions
are focused on the cash flow concept and found favour with business
management.
69
For Sander, the consumer is the starting point of the brand value definition.
He states that when consumers purchase products, revenues are generated
for the company which excess the current value of physical product
attributes. Thus, this excess of revenues is the brand value.
70
Sattler also holds a financial perspective and mentions that brand value is
composed of inpayments and outpayments which are specific to the brand.
In this context, brand value is defined as the sum of the discounted future
surpluses specific to the brand's inpayments over the brand's outpayments
in form of net present value. The surplus of brand's inpayments is also
called Brand Specific Earnings (BSE).
71
Although all these definitions have different focuses, the main idea is the
same: revenues or at least the expectation of profits.
72
Revenues are a
result of quantities, price and costs, and specially quantity and prices are
influenced by consumers. Therefore, the problem is to isolate the revenues
64
Kapferer, J-N. (1992). Strategic Brand Management. loc. cit. p. 263
65
Arnold, D. (1992). Modernes Markenmanagement: Geheimnisse erfolgreicher Marken, Internationale Fallstudien.
Wien: Ueberreuter Verlag. p. 13
66
cf. Bekmeier-Feuerhahn, S. (1998). Marktorientierte Markenbewertung. loc. cit. p. 30
67
Kern,W. (1962). Bewertung von Warenzeichen. In: Betriebswirtschaftliche Forschung und Praxis. H. 1. p. 26 as cited
by Bekmeier-Feuerhahn, S. (1998). Marktorientierte Markenbewertung. loc. cit. P. 30
68
cf. Simon.C.J./Sullivan, M.W.(1993). The measurement and determinats of brand equity: a Financial approach. In:
Marketing Science. Vol.12. p. 29 as cited by Bekmeier-Feuerhahn, S. (1998). Marktorientierte Markenbewertung. loc.
cit. p. 30
69
cf. Bekmeier-Feuerhahn, S. (1998). Marktorientierte Markenbewertung. p. 30
70
cf.Sander, M. (1994). Die Bestimmung und Steuerung des Wertes von Marken : eine Analyse aus Sicht des
Markeninhabers. Heidelberg: Physica-Verlag. p. 48
71
cf. Satller, H. (2001). Markenpolitik: Wertorientierte Markenführung. Stuttgart. p. 145
72
cf. Bekmeier-Feuerhahn, S. (1998). Marktorientierte Markenbewertung. p. 31
Details
- Seiten
- Erscheinungsform
- Originalausgabe
- Jahr
- 2007
- ISBN (eBook)
- 9783836608725
- DOI
- 10.3239/9783836608725
- Dateigröße
- 907 KB
- Sprache
- Englisch
- Institution / Hochschule
- Katholische Fachhochschule Norddeutschland Osnabrück – Wirtschafts- und Sozialwissenschaften, Studiengang International Business and MGT
- Erscheinungsdatum
- 2008 (Januar)
- Note
- 1,3
- Schlagworte
- markenwert wertanalyse brand value markenbewertung bewertungsverfahren marke
