Brand valuation: an innovative approach based on the risk difference

Authors

DOI:

https://doi.org/10.24136/oc.2021.007

Keywords:

brand valuation, valuation methods, risk difference, Net Present Value, NPV, IRR

Abstract

Research background: Among academicians, a growing interest in brand valuation methods can be observed since the 1980s, when it became obvious that firms have off-balance sheet assets which have a significant effect on their value. Moreover, in a number of cases, the need to value the brand arises due to the reporting requirements or transactional and other intrafirm reasons. The existing methods used so far have commonly focused on changes in variables such as sale prices, changes in customer behaviour, or sales volumes and very often lead to different results, even when valuing the same brand. We believe that the risk factor has been neglected in these methods, although having a significant impact on the brand valuation.

Purpose of the article: The aim of this paper is to formulate an alternative brand valuation approach based on the risk difference. This is defined as the difference between the risk to which a producer with a certain brand is exposed and the risk of the producer without a brand.

Methods: Firstly, a set of assumptions was defined concerning the issue what conditions are required to be applied to use the proposed methodological approach. Next, the concept itself is formulated and tested while using the case study approach. Hence, in conditions of a model company, the method was verified with specific data. The results were also compared with the reproduction cost approach.

Findings & value added: This paper presents a novel brand valuation method based on the risk difference. Building on a thought experiment, we compare an incumbent with a brand rather than with an average producer, which is a commonly used approach, with a new entrant to the market. We argue that in comparison to existing methods, our methodological approach reduces the number of unobservable inputs in the brand valuation process, and thus increases the accuracy and reliability of its results. Our method supports both researchers and practitioners to establish a better understanding between the well-established financial theories and new directions in brand valuation research.

Downloads

Download data is not yet available.

References

Aaker, D. (1995). Building strong brands. New York: Free Press.
View in Google Scholar

Aaker, D., & Keller, K. (1990). Consumer evaluations of brand extensions. Journal of Marketing, 54(1), 27?41. doi: 10.2307/1252171.

DOI: https://doi.org/10.1177/002224299005400102
View in Google Scholar

Aaker, D . (2009). Managing brand equity: capitalizing on the value of a brand name. New York: Free Press.
View in Google Scholar

Abratt, R., & Bick, G. (2003). Valuing brands and brand equity: methods and processes. Journal of Applied Management and Entrepreneurship, 8(1), 21?39.
View in Google Scholar

AMA (American Marketing Association) (2019). Brand. Dictionary. Retrieved from https://www.ama.org/resources/pages/dictionary.aspx?dLetter=B/
View in Google Scholar

(15.10.2020).
View in Google Scholar

Avery, J., & Keinan, A. (2015). Consuming brands. In M. I. Norton, D. D. Rucker, & C. Lamberton (Eds.). The Cambridge handbook of consumer psychology. Cambridge University Press. 209?232. doi: 10.1017/CBO9781107706552.008.

DOI: https://doi.org/10.1017/CBO9781107706552.008
View in Google Scholar

Bilan, Y., Lyeonov, S., Lyulyov, O., & Pimonenko, T. (2019). Brand management and macroeconomic stability of the country. Polish Journal of Management Studies, 19(2), 61?74. doi: 10.17512/pjms.2019.19.2.05.

DOI: https://doi.org/10.17512/pjms.2019.19.2.05
View in Google Scholar

Bratu, S. (2019). Can social media influencers shape corporate brand reputation? Online followers? trust, value creation, and purchase intentions. Review of Contemporary Philosophy, 18. 157?163. doi: 10.22381/RCP18201910.

DOI: https://doi.org/10.22381/RCP18201910
View in Google Scholar

Calder, B. J., & Frigo, M. L. (2019). The financial value of brand: finance and marketing teams can work together on both brand evaluation and valuation to account for the worth of brand in financial terms. Strategic Finance, 101(4).
View in Google Scholar

Crimmins, J. C. (1992). Better measurement and management of brand value. Journal of Advertising Research, 32(4), 11?19.
View in Google Scholar

Damodaran, A. (2006). Damodaran on valuation: security analysis for investment and corporate finance. Hoboken, New Jersey: John Wiley.
View in Google Scholar

Davcik, N. S., Vinhas Da Silva, R., & Hair, J. F. (2015). Towards a unified theory of brand equity: conceptualizations, taxonomy and avenues for future research. Journal of Product & Brand Management, 24(1), 3?17. doi: 10.1108/JP BM-06-2014-0639.

DOI: https://doi.org/10.1108/JPBM-06-2014-0639
View in Google Scholar

Ferencakova, L., Gajdka, K., Netek, V., & Kapoun, P. (2020). Engaging customers on Facebook coffee shops' brand-fan pages. International Journal of Entrepreneurial Knowledge, 8(1), 65?75. doi: 10.37335/ijek.v8i1.110.

DOI: https://doi.org/10.37335/ijek.v8i1.110
View in Google Scholar

Fernández, P. (2002). Valuation of brands and intellectual capital. IESE Research Papers, D/456.

DOI: https://doi.org/10.2139/ssrn.270688
View in Google Scholar

Fournier, S. (1998). Consumers and their brands: developing relationship theory in consumer research. Journal of Consumer Research, 24(4), 343?353. doi: 10.10 86/209515.

DOI: https://doi.org/10.1086/209515
View in Google Scholar

Gajanova, L., Majerova, J., & Nadanyiova, M. (2020). The impact of influencers on the decision-making process regarding the purchase of the brand product. Business, Management and Economics Engineering, 18(2), 282?293. doi: 10.3846/bme.2020.12608.

DOI: https://doi.org/10.3846/bme.2020.12608
View in Google Scholar

Haigh, D. (1997). Accounting and forecasting for brands. In R. Perrier (Ed.). Brand valuation. London: Premier Books, 25?34.
View in Google Scholar

Haskel, J., & Westlake, S. (2018). Capitalism without capital. The rise of the intangible economy. Princeton & Oxford: Princeton University Press.

DOI: https://doi.org/10.1515/9781400888320
View in Google Scholar

He, J., & Calder, B. J. (2020). The experimental evaluation of brand strength and brand value. Journal of Business Research, 115, 194?202. doi: 10.1016/j.jbusre s.2020.04.035.

DOI: https://doi.org/10.1016/j.jbusres.2020.04.035
View in Google Scholar

Herremans, I. M., Ryans, J. K., & Aggarwal, R. (2000). Linking advertising and brand value. Business Horizons, 43(3), 19?26. doi: 10.1016/S0007-6813(00)89 197-1.

DOI: https://doi.org/10.1016/S0007-6813(00)89197-1
View in Google Scholar

Holt, D. B. (2002). Why do brands cause trouble? A dialectical theory of consumer culture and branding. Journal of Consumer Research, 29(1), 70?90. doi: 10.108 6/339922.

DOI: https://doi.org/10.1086/339922
View in Google Scholar

Holt, D. B. (2004). How brands become icons: the principles of cultural branding. Boston, Mass.: Harvard Business Press.
View in Google Scholar

Holt, D. B., & Cameron, D. (2012). Cultural strategy: using innovative ideologies to build breakthrough brands. Oxford: Oxford University Press.
View in Google Scholar

Hollowell, J. C., Rowland, Z., Kliestik, T., Kliestikova, J., & Dengov, V. V. (2019). Customer loyalty in the sharing economy platforms: how digital personal reputation and feedback systems facilitate interaction and trust between strangers. Journal of Self-Governance and Management Economics, 7(1), 13?18. doi: 10.22 381/JSME7120192.

DOI: https://doi.org/10.22381/JSME7120192
View in Google Scholar

Hupp, O., & Powaga, K. (2004). Using consumer attitudes to value brands: evaluation of the financial value of brands. Journal of Advertising Research, 44(3), 225?231. doi: 10.1017/S0021849904040267.

DOI: https://doi.org/10.1017/S0021849904040267
View in Google Scholar

Hussain, S., Ahmed, R. R. (2020). Smartphone buying behaviors in a framework of brand experience and brand equity. Transformations in Business & Economics, 19, 2 (50), 220?242.
View in Google Scholar

IVS (International Valuation Committee) (2020). International valuation standards. Retrieved from: https://www.rics.org/globalassets/rics-website/media/uphold ing-professional-standards/sector-standards/valuation/international-valuation-st andards-rics2.pdf (15.10.2020).
View in Google Scholar

Janoskova, K., & Kliestikova, J. (2018). Analysis of the impact of selected determinants on brand value. Journal of International Studies, 11(1), 152?162. doi: 10.14254/2071-8330.2018/11-1/11.

DOI: https://doi.org/10.14254/2071-8330.2018/11-1/11
View in Google Scholar

Janoskova, K., & Krizanova, A. (2017). Comparison of selected internationally recognized brand valuation methods. Oeconomia Copernicana, 8(1), 99?110. doi: 10.24136/oc.v8i1.7.

DOI: https://doi.org/10.24136/oc.v8i1.7
View in Google Scholar

Keller, K., L. (1999). Managing brands for the long run: brand reinforcement and revitalization strategies. California Management Review, 41(33), 102?124. doi: 10.2307/41165999.

DOI: https://doi.org/10.2307/41165999
View in Google Scholar

Keller, K., L., Apéria, T., & Georgson, M. (2008). Strategic brand management. A European perspective. Edinburgh: Pearson Education Limited.
View in Google Scholar

Kitchenham, B. (2004). Procedures for performing systematic reviews. NICTA technical report 0400011T.1. Eversleigh, Australia: Empirical Software Engineering, National ICT Australia Ltd. Retrieved from: http://www.inf.ufsc.br/~aldo.vw/kitchenham.pdf (02.10.2020).
View in Google Scholar

Krabec, T. (2009). Valuation and sale of a dental practice. Prague: Grada.
View in Google Scholar

Lagrost, C., Martin, D., Dubois, C., & Quazzotti, S. (2010). Intellectual property valuation: how to approach the selection of an appropriate valuation method. Journal of Intellectual Capital, 11(4), 481?503. doi: 10.1108/14691931011085 641.

DOI: https://doi.org/10.1108/14691931011085641
View in Google Scholar

Larkin, Y. (2013). Brand perception, cash flow stability, and financial policy. Journal of Financial Economics, 110(1), 232?253. doi: 10.1016/j.jfineco.20 13.05.002.

DOI: https://doi.org/10.1016/j.jfineco.2013.05.002
View in Google Scholar

Lev, B., & Gu, F. (2016). The end of accounting and the path forward for investors and managers. New York: Wiley.

DOI: https://doi.org/10.1002/9781119270041
View in Google Scholar

Lev, B. (2019). Ending the accounting-for-intangibles status quo. European Accounting Review, 28(4), 713?736. doi: 10.1080/09638180.2018.1521614.

DOI: https://doi.org/10.1080/09638180.2018.1521614
View in Google Scholar

Meilhan, D. (2019). Customer value co-creation behavior in the online platform economy. Journal of Self-Governance and Management Economics, 7(1), 19?24. doi: 10.22381/JSME7120193.

DOI: https://doi.org/10.22381/JSME7120193
View in Google Scholar

Mick, D. G., & Buhl, C. (1992). A meaning-based model of advertising experiences. Journal of Consumer Research, 19(3), 317?338. doi: 10.1086/209305.

DOI: https://doi.org/10.1086/209305
View in Google Scholar

Mičík, M., & Mičudová, K. (2018). Employer brand building: using social media and career websites to attract generation Y. Economics and Sociology, 11(3), 171?189. doi: 10.14254/2071-789X.2018/11-3/11.

DOI: https://doi.org/10.14254/2071-789X.2018/11-3/11
View in Google Scholar

Paugam, L., André, P., Philippe, H., & Harfouche, R. (2016). Brand valuation. New York: Routledge. doi: 10.4324/9781315677347.

DOI: https://doi.org/10.4324/9781315677347
View in Google Scholar

Pepall, L., Richards, D. J., & Norman, G. (2010). Contemporary industrial organization: a quantitative approach. Hoboken: Wiley.
View in Google Scholar

Pinto, J. E., Henry, E., Robinsons, T. R., & Stowe, J. D. (2015). Equity asset valuation. Hoboken: Wiley.
View in Google Scholar

Reyneke, J., Abratt, R., & Bick, G. (2014). What is your corporate brand worth? A guide to brand valuation approaches. South African Journal of Business Management, 45(4), 1?10. doi: 10.4102/sajbm.v45i4.136.

DOI: https://doi.org/10.4102/sajbm.v45i4.136
View in Google Scholar

Salinas, G. (2013). The international brand valuation manual. Chichester, United Kingdom: John Wiley & Sons.

DOI: https://doi.org/10.1002/9781119206408
View in Google Scholar

Salinas, G., & Ambler, T. (2009). A taxonomy of brand valuation practice: methodologies and purposes. Journal of Brand Management, 17(1), 39?61. doi: 10.1 057/bm.2009.14

DOI: https://doi.org/10.1057/bm.2009.14
View in Google Scholar

Sander, M. (1994). Der Wert internationaler Marken: Ein Ansatz zu seiner Bestimmung auf Basis der hedonischen Theorie. Tübingen: University of Tübingen, School of Business and Economics.
View in Google Scholar

Schauten, M., Stegink, R., & de Graaff, G. (2010). The discount rate for discounted cash flow valuations of intangible assets. Managerial Finance, 36(9), 799?811. doi: 10.1108/03074351011064663.

DOI: https://doi.org/10.1108/03074351011064663
View in Google Scholar

Servera-Francés, D., & Piqueras-Tomás, L. (2019). The effects of corporate social responsibility on consumer loyalty through consumer perceived value. Economic Research-Ekonomska Istraživanja, 32(1), 66?84. doi: 10.1080/1331677X.20 18.1547202

DOI: https://doi.org/10.1080/1331677X.2018.1547202
View in Google Scholar

Sicard, M. (2013). Brand revolution: rethinking brand identity Basingstoke. Hampshire, United Kingdom: Macmillan.

DOI: https://doi.org/10.1057/9781137019493
View in Google Scholar

Simon, C., J, & Sullivan, M., W. (1993). The measurement and determinants of brand equity: a financial approach. Marketing Science, 12(1), 28?52. doi: 10.1287/mksc.12.1.28.

DOI: https://doi.org/10.1287/mksc.12.1.28
View in Google Scholar

Sinclair, R., N., & Keller, K., L. (2014). A case for brands as assets: acquired and internally developed. Journal of Brand Management, 21(4), 286?302. doi: 10.1057/bm.2014.8.

DOI: https://doi.org/10.1057/bm.2014.8
View in Google Scholar

Smith, G., V., & Richey, S., M. (2013). Trademark valuation. A tool for brand management. Hoboken, New Jersey: John Wiley & Sons.
View in Google Scholar

Sudolska, A., & Łapińska, J. (2020). Exploring determinants of innovation capability in manufacturing companies operating in Poland. Sustainability, 12(7101), 1?20. doi: 10.3390/su12177101.

DOI: https://doi.org/10.3390/su12177101
View in Google Scholar

Uskokovic, L. (2020). Creating a city brand as a tourist destination in the selected countries of Adriatic region. Transformations in Business & Economics, 19, 1 (49), 155?165.
View in Google Scholar

Worimegbe , P. M., Worimegbe, T. M., Abiola-Oke, E. (2020). Gamification and customers experience in the hospitality industry. Journal of Tourism and Services, 21(11), 71?87. doi: 10.29036/jots.v11i21.165.

DOI: https://doi.org/10.29036/jots.v11i21.165
View in Google Scholar

Yasin, M., Porcu, L., Abusharbeh, M.T. & Liébana-Cabanillas, F. (2020). The impact of customer personality and online brand community engagement on intention to forward company and users generated content: palestinian banking industry a case. Economic Research-Ekonomska Istraživanja, 33(1), 1985?2006. doi: 10.1080/1331677X.2020.1752277.

DOI: https://doi.org/10.1080/1331677X.2020.1752277
View in Google Scholar

Yuan, D., & Shaw, R. (2014). The concept of brand insecurity & its measurement for ISO 10668 valuations. Journal of Financial Risk Management, 3(4), 177?184. doi: 10.4236/jfrm.2014.34015.

DOI: https://doi.org/10.4236/jfrm.2014.34015
View in Google Scholar

Downloads

Published

2021-04-13

How to Cite

Skalický , R., Meluzín, T., & Zinecker, M. (2021). Brand valuation: an innovative approach based on the risk difference. Oeconomia Copernicana, 12(1), 159–191. https://doi.org/10.24136/oc.2021.007

Issue

Section

Articles

Similar Articles

1 2 3 4 5 6 7 8 9 10 > >> 

You may also start an advanced similarity search for this article.