Microsoft PowerPoint - 2b Brand Valuation · Web view(Aaker 1996) Price premium...
Transcript of Microsoft PowerPoint - 2b Brand Valuation · Web view(Aaker 1996) Price premium...
Overview
Prof. Dr. Sven Reinecke Marketing Management Control
I. Relevance of Brand Strength and Brand Equity
II. Methods of Brand Valuation: An Overview
III. Drivers of Brand Strength and Brand Value
IV. Conclusions
Strong Brands Provide Customer Value
Prof. Dr. Sven Reinecke Marketing Management Control
100%Risk reduction
100%Informatio
n efficiency
100%Intangible
value(e.g. emotional)
Strong Brands Provide Customer Value
Prof. Dr. Sven Reinecke Marketing Management Control
Source: in reference to MCM/McKinsey/GfK.
Brand Valuation: Purposes
Prof. Dr. Sven Reinecke Marketing Management Control
Internal/ managementpurposes
Brand management
Evaluation of brand strategy Planning and control Budget allocation
External purposes
Transfer of trademark rights
Mergers & acquisitions, bankrupcy
Licencing, franchising Loan security purposes
Violation of trademark rights
Compensation for damages
Documentation of trademark rights
Financial accounting Ratio for financial analysts
Source: in reference to Sattler 1995.
Overview
II. Methods of Brand Valuation: An Overview
Prof. Dr. Sven Reinecke Marketing Management Control
I. Relevance of Brand Strength and Brand Equity
III. Drivers of Brand Strength and Brand Value
IV. Conclusions
Brand Value of VW: Huge Valuation Differences (2012)
9.25Bio.
$
27.3Bio.$
Prof. Dr. Sven Reinecke Marketing Management Control
Interbrand Semion
Brand Valuation: Major Challenges
Prof. Dr. Sven Reinecke Marketing Management Control
Terminology (definition of "brand")
Separation problem (separation of brand and product)
Interdependence problem (possibility to isolate different brands in order to allocate costs and revenues "correctly")
Monetary transformation from (non-financial) brand strength to (financial) brand equity (forecast, selection of value drivers, determination of interest rate …)
Consideration of brand extension and transfer
Context-specific relatedness of brand valuation
Brand Valuation: Major Challenges
Prof. Dr. Sven Reinecke Marketing Management Control
Source: in reference to Tomczak/Reinecke/Kaetzke 2004
Comprehensive Methods of Brand Valuation
Source: Tomczak/Reinecke/Kaetzke 2004 in reference to Aaeker 1991, Srivastava/Shocker 1991;
Simons/Sullivan 1993; Keller 1998; Sattler 1998;Cravens Guilding 1999; Baumgarth 2001.
Prof. Dr. Sven Reinecke Marketing Management Control
Cost-based methodsEvaluation of total brand investments or estimation of replication costs
Related to past performance Cost allocation? Brand replication often impossible
Capital-based methodsEvaluation of possible market price of a brand
Existence of a “market for brands" questionable Brand values fluctuate heavily
(indication for inefficient markets)Income-based methods
Evaluation of preferences that cannot be attributed to product differences (e.g. price premium, discounted license fees)
Price premium: feasible & under- standable, but not always possible
Static approach (no consideration of brand extensions)
Time horizon? interest rate? forecasts?
Indicator-Based Methods of Brand Valuation (1/3)
Source: in reference to Tomczak/Reinecke/Kaetzke.
Prof. Dr. Sven Reinecke Marketing Management Control
Brand knowledge(Keller 2003)
Brand awareness:a) depth: recall, recognition;b) breadth: purchase, consumption
Brand associationsa) strong: relevance, consistency;b) favorable: desirable, deliverablec) unique: points-of-parity, points-of-difference
Icon Added Value(Icon Brand Navigation)
Brand iconography:vividness, advertising pressure, advertising memorability, uniqueness, appeal
Brand assets:brand likeability, brand confidence, brand loyalty
Icon Added Value: The Brand Iceberg
Prof. Dr. Sven Reinecke Marketing Management Control
Brand iconographyVividness, advertising pressure, advertising memorability, uniqueness, appeal
Brand likeability,brand confidence, brand loyalty
Brand assets
Source: in reference to Icon Added Value.
Indicator-Based Methods of Brand Valuation (2/3)
Source: Tomczak/Reinecke/Kaetzke. Prof. Dr. Sven Reinecke Marketing Management Control
Brand Equity Ten(Aaker 1996)
Price premium Satisfaction/loyalty Perceived quality Leadership/popularity Perceived value
Brand personality Organizational associations Brand awareness Market share Market price &
distribution coverage
Brand Asset Valuator(Young & Rubicam)
Hierarchic four-criteria model:Brand strength (growth potential) Differentiation (basis) RelevanceBrand stature (image) Esteem (perceived quality, popularity) Knowledge (true understanding of a
brand's personality)
Brand Asset Valuator
Prof. Dr. Sven Reinecke Marketing Management Control
GrowthLeadingbrands
Young brands Branderosion
high
Brand strength
(differentiation & relevance)
low
lowBrand stature
(esteem &
kno
wledge)
Brand Asset Valuator
Prof. Dr. Sven Reinecke Marketing Management Control
high
Source:Young & Rubicam
Indicator-Based Methods of Brand Valuation (3/3)
Source: Tomczak/Reinecke/Kaetzke. Prof. Dr. Sven Reinecke Marketing Management Control
GfK Brand Potential Index (BPI)(Högl/Twardawa/ Hupp 2001)
Purchase intention Uniqueness Brand loyalty Brand sympathy
Price premium Brand confidence acceptance Brand identification
Perceived quality Willingness to Brand awareness recommend
Interbrand- Modell (Interbrand)
Multiplicator-based model (operating profit * industry specific multiplier)
Indicators used to evaluate brand strength (in order to determine risk-adequate interest rate for discounting purposes): market, brand stability, brand leadership, brand trend, brand support, brand diversification, brand protection
Interbrand Brand Equity Ranking 2016
Prof. Dr. Sven Reinecke Marketing Management Control
Source: Interbrand 2016.
200.0
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
178.12
133.25
73.10 72.80
Brand Equity in Billions US$
53.58 52.50 51.81 50.34 43.49 43.13 41.54 39.38
Change.in % +5 +11 -7 +8 +9 -19 +14 +33 +18 +2 +12 -1
App
le
Goo
gle
Coc
a-C
ola
Mic
roso
ft
Toyo
ta
IBM
Sam
sung
Am
azon
Mer
cede
s
GE
BM
W
McD
onal
ds
Interbrand Brand Valuation: Overview
Prof. Dr. Sven Reinecke Marketing Management Control
Source: Interbrand 2012.
Brand segmentation 0
1 Financial analysis 2 Demand analysis 3 Strength analysis
4
Present value of future brand (segment) revenues
Brand risk (discount
Branded
Interbrand Brand Valuation: Financial and Demand Analysis
Prof. Dr. Sven Reinecke Marketing Management Control
Source: Interbrand 2012.
Phase 1: Financial analysisFuture revenues of brand./. necessary costs to achieve brand revenues./. taxes and capital costs for working and invested capital (weighted
average cost of capital, WACC) EVA (Economic Value Added)
Phase 2: Demand analysis − role of brand in industry• Determination and weighting of drivers of customer demand (e.g.
price, quality, distribution coverage)• Evaluation of role of brand for each of these drivers• Aggregation of total role of brand„Role of brand index“in %
• Multiplication of EVA with role of brand index= Branded Earnings (= future brand revenues)
Interbrand Brand Valuation: Brand Strength Score
Prof. Dr. Sven Reinecke Marketing Management Control
Source: Interbrand 2012.
r
i
Bra
r nan
dd
Interbrand Brand Valuation: Brand Risk
Marketing Management Control
Riskless interestrate
Discount rate
Industry WACC
D credit- worthiness
Source: Interbrand Zinzmeyer & Lux. Brand strength score
Prof. Dr. Sven Reinecke
Interbrand Brand Valuation: Brand Calculation
Marketing Management Control
YearRevenue Operating costs
Operating capital
Interest rate (15 %) Discount factor Discounted brand revenues
Cash value until 2008 Continuing value (growth rate = 2 %)Net present value of brand segment
Source: Interbrand Zinzmeyer & Lux.
Interbrand Brand Valuation: Evaluation
Prof. Dr. Sven Reinecke Marketing Management Control
+ feasible model using "financial logic"+ well-known, high number of practiced evaluations+ differentiation of brand segments
– typical problems of scoring models:– subjectivity: selection and weighting of indicators?
(e.g. brand support is an input factor, not an outcome)
– independence of indicators (correlations?)
– arbitrary fixing of S-curve (interest rates)– interconnection of brand value and tax system
Stock Market Reactions on Brand Value Announcements
it is stronger in periods with higher investor riskaversion.
Source: Dutordoir et al., IJRM 2015.
Prof. Dr. Sven Reinecke Marketing Management Control
Significant and abnormal stock price reactions on brand value announcement days
Shareholders put more weight on brand value information for companies with lower cash levels, lower industry concentration, higher market to book ration and
Evaluation of Indicator-Based Methods of Brand Valuation
High feasibility, suitable for portfolio models
Basic assumptions are very simplistic, seldom empirically based, unsatisfying operationalization
Partly missing consistency, subjective selection of indicators and weighting
Seldom financial calculation of brand equity(exception: e.g. Interbrand)
Brand Equity-Rankings
„Science is somewhat fascinating.Such a small investment of facts yields to impressive predictions.”
Mark Twain
Brand Valuation: Limitations
Challenges of financial calculations:• strong systematic measurement error
- reliablity?- validity?
Challenges of behavioristic brand valuation:• operationalization• missing objectivity
Solution:• multi-method-approach
• expert opinions
Overview
III. Drivers of Brand Strength and Brand Value
I. Relevance of Brand Strength and Brand Equity
II. Methods of Brand Valuation: An Overview
IV. Conclusions
Determinants of Brand Equity & Brand Value
Brand knowledgeAwareness
Degree of
Image• perceived quality• other associations
X
Size of
Size and quality of customer
base
Brand strength/
Uniqueness competence field equity
Loyality
-Brand protection
Source: Tomczak.
Markenwissen
Brand knowledge
Brand awarenessBrand imageTypes, intensity, degree, number, relevance, uniqueness ofassociations
Soruce: Keller 1993; Esch 1993
Overview
IV. Conclusions
I. Relevance of Brand Strength and Brand Equity
II. Methods of Brand Valuation: An Overview
III. Drivers of Brand Strength and Brand Value
Brand Valuation: Conclusions
The financial brand value (= brand equity) is helpful in specific situations (e.g. mergers & acquisitions, licensing, legal cases). Otherwise it should be interpreted in the long run only (trend analysis) due to severe systematic measurement errors.
For brand management, the multi-dimensional brand strength (awareness, brand associations, competence field) is much more important that the financial brand equity.
For a sound brand valuation a multi-method-approach is recommended.