What is the brand valuation? Models of Brand Valuation | Methods of Brand Valuation

What is the brand valuation? Models of Brand Valuation | Methods of Brand Valuation

What is the brand valuation? It is the process of approximating the monetary value of a brand. It considers multiple factors like devoted customers and if the brand has the necessary capabilities to keep coming up with innovative mechanizations and products that cater to their customer needs. In other words, it refers to the value other companies are willing to remunerate to have possession of the said brand.

Before the estimated summing up if the brand takes place, it is important to ask 2 questions:

  1. To check whether it is the brand, the trademark, or the branded business of the article being assessed. 
  2. The justification of why the valuation process is taking place.

 I hope this answers the question “What is the Brand Valuation?”. Let us dive into the topic now.


  • To create licensing opportunities:

Having brand value details results in profits and returns growth through licensing endeavors. Licensing turns out to be significant income generation from the brand in question. 

An example of a license-generated company has been Toyota and Lexus. Toyota launched Lexus in the US market due to it being a high-value brand.

  • Identifying growth opportunities:

Growth opportunities can be identified when the brand is valued; this is because the estimation makes us realize exactly where the company needs to work on and provides insights on potential research and development schemes that will be productive for the company. 

These allow a company to go through geographical as well as financial growth while still maintaining its stature.

Conditions for brand valuation:

Some requirements have to be fulfilled to reach the actual process of valuation. They are as follows:

  1. The result of the evaluation should be monetary value. This is because the monetary value acts as a medium of communication between the company and its shareholders.
  2. Qualitative marketing and quantitative financial aspects should be well considered. These can also be known as brand power influencing parameters. 

Once these requirements boxes are considered checked, we can go ahead with the different methods of the process of brand valuation:

Models of brand valuation:

  • Conversion Model

The Conversion Model appraises the total price considering the amount of comprehension that ought to incline rise to tug off the current sales. However, in whole theory, power-assisted whole recall is simply one among the doable allocation that characterizes a whole. Within the Young & Rubicam "Brand plus Valuator '', demarcation, connectedness, and approbation square measure the opposite 3 factors that a powerful whole has to be compelled to have in incorporation to information and information. Moreover, Mizik and Jacobson (2008) add energy as a fifth issue to capture the brand's originality and dynamism.

  • Customer Preference Model:

The client Preference's Model calculates the worth of the complete by matching the rise in awareness to the corresponding increase within the market share. Aaker (1991) identified the matter as being “how a lot of the exaggerated market share is thanks to the brand's awareness increase and the way a lot of to alternative factors”. However, a doable pitfall of this read is that there may not be a linear relation between awareness and market share.

Different methods of brand Valuation:

Even though we have multiple brand valuation methods, there are assets and liabilities to each of these. Let's dive into each one:

  • Cost-based valuation method:

It is mostly used in the commencement stage of the brand when understanding benefits and market applications aren’t as prominent. It plays a crucial role in evaluating the investments and expenditures spent while creating the brand. It is less lowering in value due to the usage of the approach stating the total value of a brand= total financing in brand values + total expenditures spent on the brand.

  • Use of conversion model: 

Consumer and brand relationship strength is measured by brand managers using a conversion model, which is commonly known as a psychological consumer behavior model. It has also proven effective in saving one from possible future menacing and giving opportunity insights early.

  • Income-based approach:

The income-based approach is the most popular brand valuation method among financial scrutinizers as it gets to the bottom of many different methods.  

It has different subtypes, some of which are mentioned below:

  • Brand Strength Analysis Method:

Brand Strength Analysis Method (also called the “Reasons-to-Buy” Method or the demand driver) uses Absolute or Relative techniques to estimate the brand’s contribution to profit generation. 

Absolute techniques consider the segments of brand-related factors corresponding to the total number of carefully deliberate factors during the buying process. 

Relative techniques either consider the brand as a quality that influences all the product’s attributes or consider the brand as an independent attribute.

This type of approach can be very useful to understand the demand drivers that create value for the company. However, measuring the interaction between the brand and the other attributes like proper positioning, relevance, and consistency can be difficult.

  • Royalty Relief Method:

The Royalty Relief Method puts a figure on the brand's value by deducting back to the current times the stream of royalty fees or the allowance that the company should defray the cost of if it did not own the brand. 

The brand value that came into possession through this method is related to the specific corporation’s distinctive characteristics and is based on current brand licensing implementations.

  • The differential of Price to Sale ratios Method:

The Differential of Price to Sale ratios Method enumerates brand value as the variability between the approximation of its monetary value to disposal ratio for a renowned branded industry and the monetary value to disposal ratio for an unbranded company. It multiplies it by the sales of the branded company. 

The brand valuation process is not just about the brand and its liabilities; it includes a lot of factors like the valuation of monogram or the hallmark, copyrights, benevolence, etc. 

We have learned just enough about "What is the brand valuation?". This thesis aims to present the different propositions to brand valuation, look over and take into consideration theoretical methods and commercially used models, and then evaluate the most important ones with an empirical study.

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