This document provides a review and comparison of two models for valuing brands: the Interbrand model and the Brand Capability Value (BCV) model. The Interbrand model values brands based on a company's profits after subtracting capital costs and multiplying by a brand role index. The BCV model values brands based on projected cash flows from branding expenses discounted to present value. The authors propose modifications to the BCV model, including changing how the brand's contribution to cash flows is calculated and using the Capital Asset Pricing Model to estimate the discount rate.
Leveraging brand equity in business-to-business mergers and acquisitionsLaurent Muzellec
Every acquisition provokes a branding decision—should the acquirer absorb the acquired business by renaming it
under its ownname to convey to themarket thatownership and theway of doing business has changed, or should
it allow the acquired company to continue trading under its old name so as to avoid damage to its existing
customer franchise? This is a complex management decision but one which apparently receives little attention.
This paper draws on the B2B branding andM&A literatures to create a model of brand equity transfer. The model
assumes that rebranding of an acquired company under the name of the newparent can yield positive benefits if
the new parent has higher brand equity than the acquired company. A case study of an acquisition of a national
construction materials company by a larger international group provides an illustration of the transfer process.
MÖBIUS presentation: Value chain thinking at the heart of your strategyMÖBIUS
Get inspired by how value chain thinking impacts your bottom-line performance. Learn from the views of Arnoldo C. Hax on how to put value chains at the heart of your strategy. Value chains are key in customer bonding. Customer bonding is key in improving your bottom-line performance. Learn from the views of Kaplan & Norton on how to translate strategies into actions. Get a premium from strategy execution. Engage the debate and share your thoughts with your peers. For more information, contact Prof. Dr. Bram Desmet (0497.58.28.60)
Corporate Rebranding and the Implications for Brand Architecture Management: ...Laurent Muzellec
This case reveals the complex problem of protecting corporate heritage while
managing product and corporate brands to keep them aligned with contemporary
market requirements. A dynamic brand building model is presented which
simultaneously addresses the different audiences for the products and the
corporate brand. The paper concludes that a new concept of ‘business branding’,
distinct from ‘consumer/product branding’, may allow corporations to reconcile
the need for both corporate accountability and risk limitation while maintaining
an effective brand management programme.
Leveraging brand equity in business-to-business mergers and acquisitionsLaurent Muzellec
Every acquisition provokes a branding decision—should the acquirer absorb the acquired business by renaming it
under its ownname to convey to themarket thatownership and theway of doing business has changed, or should
it allow the acquired company to continue trading under its old name so as to avoid damage to its existing
customer franchise? This is a complex management decision but one which apparently receives little attention.
This paper draws on the B2B branding andM&A literatures to create a model of brand equity transfer. The model
assumes that rebranding of an acquired company under the name of the newparent can yield positive benefits if
the new parent has higher brand equity than the acquired company. A case study of an acquisition of a national
construction materials company by a larger international group provides an illustration of the transfer process.
MÖBIUS presentation: Value chain thinking at the heart of your strategyMÖBIUS
Get inspired by how value chain thinking impacts your bottom-line performance. Learn from the views of Arnoldo C. Hax on how to put value chains at the heart of your strategy. Value chains are key in customer bonding. Customer bonding is key in improving your bottom-line performance. Learn from the views of Kaplan & Norton on how to translate strategies into actions. Get a premium from strategy execution. Engage the debate and share your thoughts with your peers. For more information, contact Prof. Dr. Bram Desmet (0497.58.28.60)
Corporate Rebranding and the Implications for Brand Architecture Management: ...Laurent Muzellec
This case reveals the complex problem of protecting corporate heritage while
managing product and corporate brands to keep them aligned with contemporary
market requirements. A dynamic brand building model is presented which
simultaneously addresses the different audiences for the products and the
corporate brand. The paper concludes that a new concept of ‘business branding’,
distinct from ‘consumer/product branding’, may allow corporations to reconcile
the need for both corporate accountability and risk limitation while maintaining
an effective brand management programme.
corporate rebranding and its effect on consumer attitudesLaurent Muzellec
Watering down Guinness? The Diageo effect
Guinness is a strong drink. It is a strong brand. It Guiness
belong to everyone, and is part of the narrative of the social
history of the twentieth century.
With Guinness the product name was interchangeable with
that of the company. Guinness sold Guinness and the world
new what they stood for. It was and is a venerable brand.
Except that Guinness no longer make and sell Guinness.
That privilege belongs to Diageo. Who? Diageo, an untried,
untested commodity. Diageo is the corporate identity for the
people who make Guinness – among other things. Diageo, a
name that would seem to have breadth, enabling the company
to move beyond its core products. But will the introduction of
the new name risk, well watering down one of the world’s
best-loved beers?
Câu trả lời là Google, tiếp theo sau là tập đoàn Microsoft. Trong khi đó, Apple đã có một bước tiến dài khi nhảy từ vị trí 20 trong năm 2010, lên thành vị trí thứ 8 trong năm 2011.
Theo các chuyên gia phân tích, nhờ vào cỗ máy tìm kiếm đứng đầu thế giới hiện nay mà Google đã chiếm vị trí dẫn đầu về chất lượng thương hiệu. Hiện thương hiệu của hãng này được định giá 44,3 tỉ USD. Vị trí số hai thuộc về Microsoft với giá trị thương hiệu khoảng 42,8 tỉ USD.
Đặc biệt Apple đã xuất sắc tiến thêm 12 bậc, từ vị trí thứ 20 thành vị trí thứ 8 trong năm 2011. Có thể nói năm 2010 là một năm rất thành công của hãng này. Hiện, giá trị thương hiệu của Apple được định giá là 29,5 tỉ USD.
Mạng xã hội nổi tiếng Facebook cũng lần đầu tiên lọt vào top 500 của Brand Finance, với vị trí 285 và giá trị thương hiệu được định giá 3,7 tỉ USD.
Đáng buồn nhất là Nokia khi hãng này trở thành thương hiệu rớt hạng thê thảm nhất, từ vị trí thứ 21 của năm 2010 xuống vị trí 94 trong năm 2011. Giá trị thương hiệu vì thế cũng giảm theo, từ 19,6 tỉ USD xuống còn 9,7 tỉ USD.
Companies changing their brand names are frequently reported in the business press but this phenomenon has as yet received little academic attention. This paper sets out to understand the
drivers of the corporate rebranding phenomenon and to analyse the impact of such strategies on
corporate brand equity.
A decision to rebrand is most often provoked by structural changes,
particularly mergers and acquisitions, which have a fundamental effect on the corporation’s identity
and core strategy. A change in marketing aesthetics affects brand equity less
than other factors such as employees’ behaviour.
This paper is of value to anybody seeking to understand the rebranding
phenomenon, including academics and business managers.
corporate rebranding and its effect on consumer attitudesLaurent Muzellec
Watering down Guinness? The Diageo effect
Guinness is a strong drink. It is a strong brand. It Guiness
belong to everyone, and is part of the narrative of the social
history of the twentieth century.
With Guinness the product name was interchangeable with
that of the company. Guinness sold Guinness and the world
new what they stood for. It was and is a venerable brand.
Except that Guinness no longer make and sell Guinness.
That privilege belongs to Diageo. Who? Diageo, an untried,
untested commodity. Diageo is the corporate identity for the
people who make Guinness – among other things. Diageo, a
name that would seem to have breadth, enabling the company
to move beyond its core products. But will the introduction of
the new name risk, well watering down one of the world’s
best-loved beers?
Câu trả lời là Google, tiếp theo sau là tập đoàn Microsoft. Trong khi đó, Apple đã có một bước tiến dài khi nhảy từ vị trí 20 trong năm 2010, lên thành vị trí thứ 8 trong năm 2011.
Theo các chuyên gia phân tích, nhờ vào cỗ máy tìm kiếm đứng đầu thế giới hiện nay mà Google đã chiếm vị trí dẫn đầu về chất lượng thương hiệu. Hiện thương hiệu của hãng này được định giá 44,3 tỉ USD. Vị trí số hai thuộc về Microsoft với giá trị thương hiệu khoảng 42,8 tỉ USD.
Đặc biệt Apple đã xuất sắc tiến thêm 12 bậc, từ vị trí thứ 20 thành vị trí thứ 8 trong năm 2011. Có thể nói năm 2010 là một năm rất thành công của hãng này. Hiện, giá trị thương hiệu của Apple được định giá là 29,5 tỉ USD.
Mạng xã hội nổi tiếng Facebook cũng lần đầu tiên lọt vào top 500 của Brand Finance, với vị trí 285 và giá trị thương hiệu được định giá 3,7 tỉ USD.
Đáng buồn nhất là Nokia khi hãng này trở thành thương hiệu rớt hạng thê thảm nhất, từ vị trí thứ 21 của năm 2010 xuống vị trí 94 trong năm 2011. Giá trị thương hiệu vì thế cũng giảm theo, từ 19,6 tỉ USD xuống còn 9,7 tỉ USD.
Companies changing their brand names are frequently reported in the business press but this phenomenon has as yet received little academic attention. This paper sets out to understand the
drivers of the corporate rebranding phenomenon and to analyse the impact of such strategies on
corporate brand equity.
A decision to rebrand is most often provoked by structural changes,
particularly mergers and acquisitions, which have a fundamental effect on the corporation’s identity
and core strategy. A change in marketing aesthetics affects brand equity less
than other factors such as employees’ behaviour.
This paper is of value to anybody seeking to understand the rebranding
phenomenon, including academics and business managers.
Lacking a set standard, the finance function tends to avoid assigning value to its brands, and companies tend to focus instead on qualitative assessments, such as brand awareness, customer engagement and perception of quality. While these metrics can inform growth expectations, they do not assess the true value that the company might have created by growing its brands. This article, sponsored by Oracle, explores the brand valuation conundrum.
Lacking a set standard, the finance function tends to avoid assigning value to its brands, and companies tend to focus instead on qualitative assessments, such as brand awareness, customer engagement and perception of quality. While these metrics can inform growth expectations, they do not assess the true value that the company might have created by growing its brands.
B2B payments are rapidly changing. Find out the 5 key questions you need to be asking yourself to be sure you are mastering B2B payments today. Learn more at www.BlueSnap.com.
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Vat Registration is a legal obligation for businesses meeting the threshold requirement, helping companies avoid fines and ramifications. Contact now!
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Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
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LA HUG - Video Testimonials with Chynna Morgan - June 2024Lital Barkan
Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.🤯
We will dig deeper into:
1. How to capture video testimonials that convert from your audience 🎥
2. How to leverage your testimonials to boost your sales 💲
3. How you can capture more CRM data to understand your audience better through video testimonials. 📊
Recruiting in the Digital Age: A Social Media MasterclassLuanWise
In this masterclass, presented at the Global HR Summit on 5th June 2024, Luan Wise explored the essential features of social media platforms that support talent acquisition, including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok.
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Understanding User Needs and Satisfying ThemAggregage
https://www.productmanagementtoday.com/frs/26903918/understanding-user-needs-and-satisfying-them
We know we want to create products which our customers find to be valuable. Whether we label it as customer-centric or product-led depends on how long we've been doing product management. There are three challenges we face when doing this. The obvious challenge is figuring out what our users need; the non-obvious challenges are in creating a shared understanding of those needs and in sensing if what we're doing is meeting those needs.
In this webinar, we won't focus on the research methods for discovering user-needs. We will focus on synthesis of the needs we discover, communication and alignment tools, and how we operationalize addressing those needs.
Industry expert Scott Sehlhorst will:
• Introduce a taxonomy for user goals with real world examples
• Present the Onion Diagram, a tool for contextualizing task-level goals
• Illustrate how customer journey maps capture activity-level and task-level goals
• Demonstrate the best approach to selection and prioritization of user-goals to address
• Highlight the crucial benchmarks, observable changes, in ensuring fulfillment of customer needs
3. Int. J. Mgmt Res. & Bus. Strat. 2013 Washington Macías Rendón and Katia Rodríguez Morales, 2013
since it estimates the future impact of branding A Review of InterbrandTM Model
decisions over the brand value. The brand valuation model of the Interbrand Group
The BCV model was based on previous is a famous model that is very well accepted in
the marketing community. However, it cannot be
papers, where was argued that companies need
used by any practitioner since some of its
to focus on knowing how to combine all of its
parameters, as the Brand Role Index and the
assets to produce its ability to increase its
Brand Strength Score, are estimated upon
economic value (Ratnatunga Gray and
formulas protected by the consultant, which is
Balachandran, 2004). The BVC model uses the
the one that markets the valuation services.
so called Expenses Leveraged Value Indices
(ELVIs), in order to estimate the economic value Summing up, the Inter brand model has its
of company’s tangible and intangible assets, upon starting point in the company´s operating profits
after taxes (or business unit´s), subtracting a
its expense budget allocated to different type of
charge for the invested capital, obtained from the
assets (Ratnatunga et al., 2004; and Ratnatunga
result between the amount of capital invested
and Ewing, 2005). In other words, it is based on
intangible assets and the cost of capital, in order
the premise that the expenses budget goes to
to reach what they call in tangible profit. Then,
activities that create value and ELVIs reflect the
the previous result is multiplied by the Role of
expenses multiplier effect on the value of tangible
Brand Index (RBI). The RBI is mainly determined
and intangible assets. through primary sources from market resear-
In this paper, there are made some ches, where the goal is finding in what percentage
modifications to the BCV approach. For instance, the purchasing decision is generated by the brand
it is considered in a different way the contribution instead of other determinants such as price or
brand factor in generating cash flows, in order to product attributes (Rocha, 2012).
reflect that like the contribution of the brand in Finally, these projected earnings in the next
generating sales increases, the value of the brand five years are translated to present value with a
also increases. Besides, we suggest using, as discount rate that considers the Brand Strength
an input of the valuation model, a discount rate Score (Brand Strength Discount Rate), resulting
from models like the Capital Assets Pricing Model into the brand value (Figure 1). Interbrand currently
(CAPM), a widely used model in the financial field uses 10 components to obtain the Brand Strength
(Graham and Harvey, 2001). A correction to one Score (Rocha, 2012):
of the BCV model formulas is also made, which 1. Internal commitment (within the organization)
has to do with the forecasted incremental value with the brand, in terms of time, influence and
derived from the branding budget and ELVIs. investment.
The next section summarizes the most 2. Brand protection which includes: legal
important issues of the BCV and Interbrand protection, proprietorship ingredients or
models and explains the additions suggested by design, scale or geographical jurisdiction.
the authors in order to improve the measuring of 3. Clarity of values, positioning and brand
brand value. The final part is a conclusion about proposal within the organization, targeting the
the contribution of the proposed methodology. audience.
This article can be downloaded from http://www.ijmrbs.com/currentissue.php
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4. Int. J. Mgmt Res. & Bus. Strat. 2013 Washington Macías Rendón and Katia Rodríguez Morales, 2013
Figure 1: Interbrand Valuation Approach
Source: Rocha (2012)
4. Brand Responsiveness (adaptability) to 10. Differentiation from competition, based on
changes in the environment. customers’ perception.
5. Brand’s authenticity regarding to its distinctive Ratnatunga and Ewing model is based on an
values earlier version of Interbrand model, which used 7
6. Relevance for customers’ needs desires and components for Brand Strength Score.
decision criteria.
7. Customers’ understanding (not only
THE BCVTM MODEL
knowledge) of brand’s distinctive qualities and The BCV model is based on projected cash flows
characteristics. attributable to the brand, which are brought to a
8. Consistency while experimenting with the present value. In this sense, the BCV model is
brand, with regard to their expectations. aligned with the Interbrand Model. However, a
9. Positive presence in traditional media and difference and main strength of BCV is the fact
social networks. that the model can be used to optimize the
This article can be downloaded from http://www.ijmrbs.com/currentissue.php
123
5. Int. J. Mgmt Res. & Bus. Strat. 2013 Washington Macías Rendón and Katia Rodríguez Morales, 2013
branding budget, with the aim of increasing the consensual analysis conduced together the
expected value of the brand; due to this, the company executives.
authors call this model an ex-ante model.
Moreover, the model is participative, in the sense Review and Extension of BCV Model
that many of its parameters are obtained from a Table 1 shows the main elements of the BCV
Table 1: Changes on BCV Model
BCV (Ratnatunga and Ewing, 2009) This Proposal
To determine: To determine operating cash flow instead of sales, because of the
• Current company sales (recent historical average) costs associated to the products or services sold. We call:
• Maximum possible company sales (average of two • Cash flow Statu Quo, CFSQ
subsequent years) • Cash flow Maximum , CFMAX
To determine the brand contribution to the sales: The same
• To separate the activities of the sales process and weigh their
importance, ai
• To determine the role of brand recognition in achieving each
activity listed previously, bi
• To estimate the total contribution of brand recognition, c:
c = ai * bi
To determine the maximun capability, M, and the current capability To determine:
of the value of the brand, S:
• Cash flows attributable to the brand, BCF, as a direct relationship
Current Sales to the brand’s contribution factor:
S • Maximun capability, M, and the current capability value of
c the brand, S, applying a discount rate, k, to the cash flows:
SQ
Maximum Sales BCF
M S
0
c k
MAX
BCF
M
0
k
• The discount rate can be estimated with the CAPM, where
the risk factor is inversely related to the brand strength
score. Include an illiquidity premium.
• The brand strength score could be an overall score based on a
consumer market research evaluating the 10 Interbrand
components, or a subjective evaluation by firm executives.
To list variables (marketing activities) that contribute to brand To extend from 7 to 10 actual Interbrand components and their
recognition, based on 7 Interbrand Brand Strength components weights, wi
(previous version) and weigh their importance, wi (Equation 2,
Ratnatunga and Ewing, 2009)
dS N M i Si
ri Ei i Si
dS N M i Si dt i 1
Mi
ri Ei pi i Si
i 1
dt Mi
To apply the model of change in the value of brand capability, optimizing To exclude the pi term, since it is already implicit in Ei , meaning Ei
the branding budget: the total budget multiplied by the proportion spent on component
where, i. N can include up to 10 components.
N total number of components or brand strength variables. BCV
model uses 7 components, following the previous Interbrand
approach. To add dS/dt (corrected) to S0 in order to obtain the expected value
ri: is the value-increasing ELVI multiplier of the ith component (value of the brand.
generated per dollar spent).
Ei:is the expense incurred in carrying out the activities of ith component.
pi : proportionof the total budget supportaimed to the brand strength
ith component.
Mi: is the maximum capability value of brand, dueto ith component.
Si : is the current capability value of brand, dueto ith component.
i : is the value-reduction ELVI of the ith component.
This article can be downloaded from http://www.ijmrbs.com/currentissue.php
124
6. Int. J. Mgmt Res. & Bus. Strat. 2013 Washington Macías Rendón and Katia Rodríguez Morales, 2013
model and the improvement proposal as well as SQ
BCF
the addition that are hold throughout this paper, S0 ...(2)
k
which are explained below.
where, k is the discount rate for the cash flow
Brand Contribution and Cash Flow attributable to the brand. Among the models to
Attributable to the Brand estimate discount rates, according to a study by
Considering the weaknesses of the BCV model, Graham and Harvey (2001), the most widely used
it has been considered the proposal of a variation model is the CAPM. The risk reflected in the rate
thereof. In first place, instead of assessing the should consider brand strength variables.
brand from sales, it is suggested to use operating Interbrand uses an algorithm in which a higher
cash flow due to the costs involved in the goods score of brand strength means a lower discount
or services of the brand. We define: rate, reflecting lower risk. This approach is
BCFSQ (Brand Cash Flow, Statu Quo): Cash supported by studies demonstrating that with
Flow attributable to the brand estimated without higher branding efforts and increased customer
considering future marketing efforts to increase satisfaction, it is reduced the variability of cash
brand equity (Statu Quo). flows and company´s returns (Gruca and Rego,
BCFSQ = CFSQ * c ...(1) 2005; and Krasnikov et al., 2009).
In practice, this cash flow would be obtained An option proposed to relate the brand strength
from the average cash flow of the company or with the discount rate is similar to the approach
business unit, CFSQ, of recent years (e.g., 2 or 3 of Interbrand. In view of the fact that the discount
years) multiplying by a factor that reflects the brand rate should consider the characteristics of the
contribution to achieve cash flow, c, analogous industry of the brand being evaluated, its
to the Role of Brand Index of Interbrand. determination may obtain the information from
As suggested by Ratnatunga and Ewing companies in the same industry that operate in
(2009), the factor can be obtained from listing the the stock market.
activities of the sales process of the assessed Suppose that the brand strength score is
company, establishing a weight for each activity assigned from a market survey of its ten evaluated
in the total process, determining the percentage ithcomponents on a scale from 1 to 10. A score of
by which the brand recognition influences in the 1 should have to be associated to the highest
development of each activity, and then multiplying risk and 10 to the lowest. These risk levels depend
the weights by the percentage of brand influence. on observed betas in the industry.In order to
The activities, their weights, and the percentages illustrate this, Figure 2 shows thestatistical
of brand influence are derived upon consensus
information of unlevered betas of the restaurant
among company executives.
industry in the United States, and upon it can be
Brand Strength, Discount Rate and set an interval at 95% confidence with minimum
Current Value of the Brand values of –0.42 and maximum of 2.14.
Afterwards, we propose that the current value of The beta of 2.14 reflecting high risk levels of
the brand, S0, should be obtained through the industry would have to be associated with lowest
following expression: brand strength score 1, while the beta of –0.42
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125
7. Int. J. Mgmt Res. & Bus. Strat. 2013 Washington Macías Rendón and Katia Rodríguez Morales, 2013
Figure 2: Histogram of Betas, Restaurants Industry, USA
Statistics
Unlevered Beta
N Valid 51
Lost 0
Mean 0.859946
Std. Dev. 0.6520581
Skewness 0.845
SE in Skewness 0.333
Kurtosis 0.794
SE in Kutosis 0.656
Minimum –0.4393
Maximum 2.6100
Elaboration: Authors
would have to be associated with the highest a way to apply this is with a premium in the
brand strength score, 10, corresponding to this discount rate (Damodaran, 2005). If we add a 1%
specific case, a discount rate even lower than illiquidity premium, the discount rate would be
2.32%.
the risk-free rate, according to the CAPM1.
Making the same exercise for a brand in the
For example, for a brand of restaurants with a
same industry, with brand strength score set to
brand strength score equal to 8, the unlevered 4, the equity discount rate including 1% of illiquidity
beta would be 0.51. Obtaining the information from premium would be 6.98%.
the stock market on October 2012, the risk-free
The BVC model used to treat the contributing
rate would be 0.71%2. With an estimated risk factor of the brand in a way opposed to the
premium of 4.10%3, the resulting discount rate is proposal of this article. The cash flow of the
1.32%. In addition, you can include an illiquidity company was divided by the factor, obtaining the
premium in the discount rate, because brands estimated brand value in the current situation.
are less tradable than other kind of assets like However, with this treatment, a greater role of the
stocks. There is evidence that investors spenalize brand would turn into a lower brand value, which
asset prices based on the perceived illiquidity and has no theoretical basis.
1
Because of the negative beta of –0.42, the discount rate associated is lower than the risk-free rate.
2
Source: Yahoo Finance. 5 years yield, average of the last month, October 16, 2012.
3
Source: Damodaran Online. Historic estimated risk premium (1928-2011) over US treasury bonds.
This article can be downloaded from http://www.ijmrbs.com/currentissue.php
126
8. Int. J. Mgmt Res. & Bus. Strat. 2013 Washington Macías Rendón and Katia Rodríguez Morales, 2013
Maximum Capability Value of the Brand Ratnatunga and Ewing (2009) are proxies of the
The BCV model makes an estimation of the Interbrand brand strength components.
maximum capability value of the brand, M0, with We propose the following equation for the
the same in consistencies described above. In change in the BCV in time, ds/dt, which corrects
this case, the maximum cash flow that could be the Equation (2) of Ratnatunga and Ewing (2009)
achieved in future periods is divided by the brand excluding the pi term, which is implicit in the Ei
contributing factor. One more time, a greater term:
brand contribution used to result into a lower value
N
ds Mi Si
brand capability.
dt
r E
i 1
i i
Mi
i Si
...(5)
This proposal consists in using the maximum
estimated cash flow, multiplied by the factor of where,
brand contribution, obtaining the maximum cash N Total number of components and brand
flow attributable to the brand, and then dividing it strength
by the appropriate discount rate:
ri is the value-increasing ELVI multiplier of the
MAX
BCF ith component (value generated per dollar
M0 ...(3)
k spent).
BCFMAX = CFMAX * c ...(4) Ei is the expense incurred in carrying out the
where activities of the ith component. It is obtained
by multiplying the total budget that supports
M0 Maximum capability value of the brand
the brand strength, by the proportion
BCFMAX (Brand Cash Flow, Maximum
assigned to the ith component.
Capability): Maximum cash flows
attributable to the brand. Mi is the maximum capability value of brand
due to ith component.
The BCFMAX is calculated upon the maximum
cash flow that the company could reach in the Si is the current capability value of the brand
projection period, optimizing its branding budget, due to the i component.
CFMAX, multiplied by the brand contribution factor.
i is thevalue-decay ELVI multiplier of the ith
Change in Brand Capability Value component, this implies that there must be
The contributionof the BCV model, which mainly a minimum expenditure to maintain the
differentiates it from the Interbrand’s approach, value of brand capability.
is that it permits estimating the change in the Both ELVIs, the one that increases value and
economic value of the brand based on the the one that reduces it, are obtained from
assigned budget for N components (or activities) consensus among executives of the company
oriented to the construction of brand strength, and or business unit evaluated. This feature of the
the multipliers of value of those expenses, which approach has the advantage of being participative,
are named ELVIs. The N components used by allowing the company abetter understanding of
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127
9. Int. J. Mgmt Res. & Bus. Strat. 2013 Washington Macías Rendón and Katia Rodríguez Morales, 2013
the determinants of its brand value, which is kept the efforts to improve the available methodologies
in our proposal. for professionals in marketing and finance areas.
Projected Brand Capability Value
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