The World’s Most Misunderstood Consumer Brands

Re-Post

The process of brand valuation is more an art than a science, or at least that is the conclusion of research done by 24/7 Wall St. The most well-regarded “brand evaluators” rarely come up with similar figures–except for among the very largest brands. Some of their opinions diverge dramatically.

24/7 Wall St. looked at the brand valuations and methodologies of BrandZ, Interbrand, and Brandirectory. The first two list 100 brands each in their public studies. Brandirectory lists 500. Each would defend its valuations which use different “black box” systems for calculating value. That is probably because all three charge hefty fees for their services.

The explanations for their methodologies are even more convoluted.

Here is what BrandZ says:  “The brand value published is based on the intrinsic value of the brand – derived from its ability to generate demand. The dollar value of each brand in the ranking is the sum of all future earnings that brand is forecast to generate, discounted to a present-day value. Given the high volatility of financial markets over the past 12 months, the brand value is in some cases high relative to current market capitalization, reflecting true value rather than current market swings.” Where is the heart of that exercise? It is impossible to say.

Interbrands has three criteria: “1) Financial performance measures an organization’s raw financial return to the investors, 2) Role of brand measures the portion of the decision to purchase that is attributable to brand – this is exclusive of other aspects of the offer like price or feature, and 3) Brand strength measures the ability of the brand to secure the delivery of expected future earnings.” Without the exact data that Interband uses and details of how it is arranged to derive a value, it is impossible say how its process works.

Brandirectory describes its methodology this way: “The methodology employed in the BrandFinance Global 500 uses a discounted cash flow (DCF) technique to discount estimated future royalties, at an appropriate discount rate, to arrive at a net present value (NPV) of the trademark and associated intellectual property: the brand value.”

Read more: The World’s Most Misunderstood Consumer Brands – 24/7 Wall St. http://247wallst.com/2011/03/23/the-world%e2%80%99s-most-misunderstood-consumer-brands/#ixzz1HYeAaBm4