The Strength of the Invisible

Using InterBrand's Brand Strength model to evaluate a brand

The concept of brand valuation was developed to recognise brand value on a balance sheet. However, not every brand meets with the criteria that allow clear valuation: should be separately identifiable, able to be protected legally, should be transferable and enduring in nature.

The relationship between the brand strength and brand value follows a normal distribution represented by the “S” curve. As the brand evolves from a weak brand to a strong one, the curve shifts to the right. The multiple on the y-axis is determined by making use of all brands in that particular segment/industry. The brand strength variables are then correlated to a multiple such as price ratio to gauge the level of confidence of the brand in the future. The brand multiple must then be added to brand profit to derive the true value of brand equity.

Interbrand is a pioneer in brand valuation. Their Brand Strength Model is used to determine the value of a brand based on the assumption that a strong brand is more reliable for future earnings with lesser risk. Under this approach, a brand’s strength comprises of seven variables:

Leadership: A brand that dominates the market in its category using economies of scale.
Stability: It is etched in the consumer’s mind since its inception.
Market: Brands in markets such as convenience food items, soft drinks and consumer durables score high over brands in technology-driven (computers) or highly fashionable (apparel) categories, since these markets are more vulnerable to technological or taste changes. A brand in a stable but growing market with strong entry barriers will score high in brand strength. Colgate-Palmolive, for instance, has got a strong foothold in the toothpaste market making it difficult for competitors to enter.
Geographic: The value of a brand is measured in terms of its attractiveness and acceptance in multiple markets. Making a mark internationally adds to brand strength.
Trend: The over-all long-term trend (of the brand) is a measure of its ability to remain contemporary and retain consumers by being relevant to their needs and wants.
Support: The assessment of qualitative and quantitative support provided by the company to the brand.
Protection: The extent of legal support a brand possesses is very crucial in its assessment.

The location of the Brand

Strength	Maximum Value
Leadership	25
Stability	15
Market	10
Geographic Spread	25
Trend	10
Support	10
Protection	05
Total:	100

In this approach there is a weak link from the marketer’s perspective. There is an inadequate measure of the consumer’s perception of the brand, which is critical for decision-making. The Interbrand approach is amongst the first of its kind and refinements to the model will follow.

Successful organisations of the future will be marked by mastery of their intangible assets: clarifying, evaluating, managing and communicating their value.

Related Readings:
1. “Do you know how Flexible your Brand is?” ; Chevron, Jacques; Brandweek; July 2000
2. “Building Strong Brands”; David A. Aaker; 1996