The Value of a Brand Name by Aswath Damodaran

The value of a brand name: Thoughts on “luxury” marketing It is not rocket science… Aswath Damodaran http://www.damodaran.com

Is the price difference here for brand name? Dell 15” Laptop $ 800 Apple 15” Mac Book Pro $ 1200

How about in this case? Honda Acura $ 50,000 Ferrari $ 250,000

And this? Rolex Oyster $ 10,000 Fake Rolex Oyster $125

I know you are getting tired… but one final test… CVS Aspirin $1.50/100 Bayer Aspirin $ 6.79/100

The power of a brand name
One of the benefits of having a well-known and respected brand name is that firms can charge higher prices for the same products, leading to higher profit margins. The larger the price premium that a firm can charge, the greater is the value of the brand name.
In practice, people attribute to brand name value what should really be attributed to product quality, styling, service and reliability.
Brand name value is easiest to compute for products and services where the only or primary reason for price differences is brand name (and not quality or service or other product characteristics).

Here is my example… Coca Cola $ 4.00/ 6 pack Generic Cola $ 2.00/ 6 pack

The Value of a Brand Name
Coca Cola With Cott Margins
Current Revenues = $21,962.00 $21,962.00
Operating Margin (after-tax) 15.57% 5.28%
Sales/Capital (Turnover ratio) 1.34 1.34
Return on capital 20.84% 7.06%
Growth rate during period (g) = 10.42% 3.53%
Cost of Capital during period = 7.65% 7.65%
Value of Firm = $79,611.25 $15,371.24
Value of brand name = $79,611 -$15,371 = $64,240 million

Propositions about brand name value
Proposition 1: Brand name value is one of the most sustainable competitive advantages in business.
Proposition 2: Creating a significant brand name is as much a function of luck and serendipity as it is of advertising.
Proposition 3: The value of a brand name rests on illusion. Preserve the illusion.
The Coca Cola Corollary: Taste does not matter
The Tiger Woods Corollary: As a general rule, tying your brand name value to a brand name spokesperson can be a dangerous proposition. While there may synergy involved, damage to the spokesperson can damage the brand name.
Proposition 4: Even valuable brand names can lose value, if they are not nurtured and treated as significant assets.
The Diffusion factor: Brand name value does not always travel well across products and regions.
Measurement factor: Letting accountants put a value for brand name will lead to management by accounting value, a recipe for disaster.

http://mashable.com	8092
http://blog.tagliaerbe.com	237
http://teachthe4ps.com	196
http://news.yahoo.com	77
http://translate.googleusercontent.com	77
http://site14.fourfiveone.com	38
http://www.tendenciasmarketingonline.com	38
http://businessbrandblueprint.com	33
http://www.innovationpath.net	29
http://tumblingideas.tumblr.com	26
http://www.splicedtogether.net	25
http://brandzonellc.com	16
http://expostfacto.posterous.com	12
http://expostfacto.tumblr.com	9
http://tomasztunguz.com	7
http://webcache.googleusercontent.com	7
http://innovationpath.net	5
http://static.slidesharecdn.com	5
http://www.authentikkreative.com	4
http://resensi-blog.blogspot.com	4
http://translate.yandex.net	3
https://mashable.com	3
http://fullsocial.net	2
http://feeds.feedburner.com	2
http://harleysdogdiary.blogspot.com	2
http://www.alltechienews.com	2
http://www.aggregatore.pubblicizzaresito.net	2
http://www.google.co.uk	1
http://207.46.192.232	1
http://sosocial.ie	1
http://www.google.com	1
http://archive.feedblitz.com	1
http://www.google.be	1
http://www.wekreate.it	1
http://www.ghazaliridzwan.com	1
http://email03.secureserver.net	1
http://albiestar.tumblr.com	1
http://www.alexandfred.se	1
http://mailphl.coryngroup.com	1
http://feeds.mashable.com	1
http://feeds.postrank.com	1
http://127.0.0.1:8795	1
http://wildfire.gigya.com	1
http://feedingo.com	1
http://email00.secureserver.net	1
http://localhost	1
http://adeldesignlb.blogspot.com	1
http://74.6.238.254	1

The Value of a Brand Name by Aswath Damodaran

by Erica Swallow on Nov 05, 2010

Accessibility

Categories

Tags

Upload Details

Usage Rights

48 Embeds 8,974

Statistics

The Value of a Brand Name by Aswath Damodaran — Presentation Transcript