EssayClub.com - Free College Essays and Term Papers

Best Advice

Brand Valuation
With the increase in media expenditure, distribution costs, and investments required for extensive and aggressive promotion, Brand Equity and Brand Valuation have attained elephantine focus as compared to few decades earlier. Massive efforts are on to create, build, and maintain the equity of a brand. Upshaw (1995) talks of the brand’s total equity as comprising of two different kinds of equity, viz. Valuation equity which focuses on the financial valuation of the brand, and Identity equity which is similar to Aaker’s (1991) concept of brand equity comprising of five dimensions, viz. Brand loyalty, name awareness, perceived quality, brand association and other proprietary brand assets.
In the wake of recent Mergers and Acquisitions, it has been observed that the stupendous valuation that acquired brands command (e.g. Parle Soft Drink by Coke, Indiaworld by Satyam, Lakme by HLL et al) does not justify their intrinsic value or their current earning capacity. Therefore it becomes important to assess the value of a brand. Valuation of a brand is also desirable from the point of view of providing objectivity to the "value" of the brand, which otherwise tend to become subjective and less useful as a guide for marketing decision making.
Methods of Brand Valuation
The value of a brand stems from the underlying brand equity and Aaker’s definition of brand equity holds great relevance in this context. There are several techniques for brand valuation, the most important of them being the Interbrand approach and Consumer focussed models.
The Interbrand Approach
The pioneer in the field of brand valuation is the Interbrand Group PLC. The Interbrand model seeks to estimate the risk and inflation-adjusted benefits – the current and future earnings or cash flows – flowing from brand ownership.
Under this model the value of a brand is a function of two factors: its earnings and its strength. While the brand’s earnings are a measure of potential profitability,...