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Interbrand Brand Valuation Method


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Brands are an important asset that generates value either for customers or for shareholders. That value generates inflows of cash flow> There are different methods and this is a compact and efficient method>

Published in: Business, Technology

Interbrand Brand Valuation Method

  1. 1. Interbrand Brand Valuation Method<br />Freddy Guevara<br /><br /><br />
  2. 2. Brand is an important asset that add value to the company and therefore it needs to be evaluated.<br />Actually the infinite number of choices in the e-market make the companies build strong brands to keep them in the mind of customers.<br />The trend is to incorporate metrics to evaluate brand performance and show that value in financial statements.<br />Brand Valuation:<br />
  3. 3. The value stages of a brand are:<br />Brand Value Chain<br />Marketing program investment<br />Customer mind-set<br />Brand Performance<br />Shareholders and employees value<br />
  4. 4. The interbrand brand valuation method consists of:<br />Brand Value Method<br />Target markets<br />Financial Analysis<br />Demand Drivers<br />Competitive Benchmarking<br />Brand earnings<br />Brand discount rate<br />Brand Value<br />(Net present value of future brand earnings)<br />
  5. 5. After we have segmented our markets and analyzed our markets, we need to analyze our financial statements in terms of revenues, sales, costs and forecasts.<br />Then, determine the drivers of the demand for our particular brand, such as elasticity of the price, the level of need, the amount of competitors and substitutes, etc.<br />Brand NPV - I<br />
  6. 6. A competitive benchmarking analysis is necessary to establish the gap between our branding processes and strategies with our competitors.<br />We will determine the brand earnings in one specific period, and the brand discount rate once we have gathered our financial, demand analysis, and competitive information.<br />Brand NPV II<br />
  7. 7. Now, it is time to determine our brand value through the application of the NPV formula:<br />To calculate the NPV, we find the present value of the individual cash flows and find the sum of those discounted cash flows. <br />This value represents the value the project add to shareholder wealth. r = 10% Project S<br />Time period: 0 1 2 3 4<br />Cash flow:(1,000) 500 400 300 100 <br />Disc. cash flow: (1,000) 455 331 225 68<br />NPV(S) = $78.82<br />Brand NPV III<br />
  8. 8. The previous formula gets the net present value of a project, and that is the same basic operation to calculate the future value of a brand, and it is simple, a brand generates value for shareholders, and that value is cash, and your brand has to generate the cash flow necessary to keep it in the market and even to be the source of future brands or brands with financial problems in our portfolio.<br />Brand NPV IV<br />
  9. 9. At the end of the day, that is the important relationship: Brand-cash flow.<br />I know that we have feelings and maybe that brand is our most loved one, but work better on your brand strategy so it can generate the cash flow that shareholders are expecting. You have the tool and you have more methods in the market, but justify your marketing investment producing a winner brand that generates the Value-Cash.<br />Brand and Cash Flow<br />
  10. 10. This is the beginning of a trend that supports the fact of incorporating the financial value of a brand into the balance sheet.<br />We have already countries trying: UK, Hong-Kong, Australia.<br />Understanding we manage markets whose needs are represented by the creation of brands and when that process matches, those brands generate the value expected and the final result is more inflow of cash flow for your company. <br />The Beginning<br />