INTHEBLACK March 2025 - Magazine - Page 23
to identify how much the brand is
contributing to the revenue of the business.
Among other things, company brands
can be heavily influenced by reputational
issues that can arise for a range of reasons.
Social media channels can have a major
positive or negative impact on the sales
of company products, easily enhancing
or devaluing brands. Meanwhile,
environmental, social and governance issues
— some of which can lead to regulatory
actions and litigation — can also have
significant ramifications for the external
reputation of company brands (not to
mention major financial consequences).
“Brand strength is essentially
a composition of brand awareness and
reputation. To identify monetary value,
brand strength is combined with the
business’s financial size, in the form of
revenue forecasts and the impact of the
brand within the category,” Crowe says.
“This converts a per-purchase brand impact
to a total brand impact for the business.
This can then be forecasted, and the forecasts
valued to create a present value. Our analysis
demonstrates there’s strong correlation
between the strength of a brand and the
market share it enjoys.”
One valuation methodology applied
by Brand Finance is known as “royalty
relief ”, which calculates what a company
would hypothetically have to pay to use
its own brand under a royalty or licensing
arrangement with a third party.
“We look at actual royalty rate agreements
that operate in the relevant sector. A stronger
brand is always going to attract a higher fee
in terms of licensing it or paying a royalty
for it,” Crowe notes.
“In sectors where you have highly
branded goods, such as retail luxury
goods, you tend to attract a higher royalty
because the impact of the brand is much
higher in those sectors as opposed to, say,
mining, where that’s obviously a very highly
commoditised industry.”
Crowe says brand valuations change
on an ongoing basis and can be impacted
positively or negatively for a range of reasons,
including market and economic factors.
“The rigour and the analysis that goes into
those valuations today is very much grounded
in commercial reality, is evidence based and
very defensible.” ■
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