Week 10: Brand Valuation

I like all of these Brands as they satisfy one or my other need!

1.     What makes a brand valuable?

Perception of the value that a brand offers is what makes a brand valuable. The benefits, real or perceived, a brand offers or claims to offer, to its stakeholders is what makes a brand popular. A valuable brand is one that can influence the choices of customers, employees, investors and government authorities.  In a world of choices that we live in, such influence is crucial for commercial success and creation of shareholder value.

2.     What do brands do?  How do they create value?

Brands create value, real and/or perceived in the minds of its key stakeholders i.e. consumers. Brands create value by understanding the consumer needs and consistently fulfilling those needs. How the needs are full-filled is where creative marketing comes into play. Brands do create value, but whether it is real value or perceived value can have different meaning for different consumers.

3.     What are some of your most favorite brands?  Why?

I have several favorite brands depending on the particular need the brand fulfills. In apparels, I enjoy shopping at Ann Taylor/Loft (part of Ann Inc.). I like their design of clothes, the uniqueness that is season specific, durability and the price point. In home-items, I like Crate & Barrel, Bed Bath & Beyond, Target and IKEA. Each of these stores offers different items that I like to buy in different price ranges while balancing my key requisites, durability, maintainability, style, uniqueness and cost. For electronics, I like to shop at Apple & Amazon. I have transformed from an ignorant user to an ardent fan of Apple products given their evergreen ability to pleasantly surprise the customer with unique and useful feature sets. Amazon offers useful products at amazing price points (Cell phone covers @ $1.99!). In shoes, I like Aldo as comfort, durability and style are all beautifully synchronized. In cosmetics, Estee Lauder, wins my vote. Last but probably the most important category is grocery/food purchases. If cost, reliability and bulk purchase is the driving factor, Walmart/Sams club stands on top. For specific items (dried mango and sesame crackers), Trader Joes wins hands-down.

Outside the product usefulness, I also care about the social value of brands. If I learn that a particular company is misusing its workforce or exploiting cheap labor to increase its bottom line, then it would make me reconsider my brand loyalty.

4.     Should Brands be on the balance sheet?  Why?  Why not?

In my opinion, Brands should be included on the balance sheet. Not including brand value on the balance sheet appears to me like ignoring a significant asset. Following are key reasons why I vote for including Brands on balance sheet.

Ø To attach financial value to respective brand.

Ø To accurately evaluate effect of brand during a merger / acquisition deal.

Ø To determine transfer pricing & licensing agreements during brand transfers.

Ø To avoid monopolistic dominance by few companies.

Ø To institute transparency and ethical behavior in brand formation & maintenance.

The moot point is how to quantify Brand Value. Brand evaluation models outlined in the course pack article offer some good suggestions, but I am not sure if the evaluation will be straight-forward. We shall find out during the brand valuation project when evaluating Mr. Woods brand value decline after the 2009 episode.