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Apart from standing for certain values in the consumer mind such as trust, functionality and status, brands also have a financial value, said Mr Harish Bhat, Chief Operating Officer (Watches), Titan Industries.
Addressing students at the Institute for Financial Management and Research, as part of the BL Club lecture series, presented by Central Bank of India, Mr Bhat said valuation of brands has today become a science, given its importance in a host of applications – ranging from enabling M&A decisions and ensuring brand strength in share value to securitised borrowing and setting licensing and franchising rates.
How is a brand's financial value calculated? “The drivers of brand value include the brand's ability to generate consumer demand, attract consumers, the relationship with consumers and its future growth potential and barriers to growth,” explained Mr Bhat.
Brands with a broad-based consumer appeal tend to have a greater value. “For instance, like Toyota has greater brand value than a niche brand such as Rolls Royce. Facebook has greater value than a LinkedIn,” Mr Bhat said.
Brand value
Brands brought or used often create far more value. Examples are Google and McDonalds. Addictive brands (such as Facebook) and products where people discover newer uses (such as the mobile phone) score high on the brand value count.
Some countries permit brands to be featured on the company's balance sheet as intangible assets. In India, brand value can be included in the balance sheet only it the brand has been purchased and is not self-generated. But this does not undermine the importance of calculating the financial value of the brand, given its widespread applications.
The most valuable brands today are those with a global footprint – those that have “conquered the world”. Apple, the most valuable brand in the world in 2011, was valued at $153 billion. “This is more than the GDP of certain countries,” said Mr Bhat.
Interestingly, the US – an economy that is being written off by most people, has the most number of brands in list of “valuable” brands across the world. Google, IBM, McDonalds, Microsoft and Coca-Cola are the other brands in that coveted list. ICICI Bank is the only Indian brand in the top 100 list.
“Brand value is a key responsibility of the CEO of the company; not just the marketing team,” said Mr Bhat.
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