In the modern business environment intangible assets constantly gain more value and importance. With the existing high level of the competition the products' natural benefits do not suffice for their successful promotion any more. That is why the branding and everything related to it becomes so significant. Thus, the business management faced with a new and complicated task: to measure up the intangible assets. Such an intangible asset as a brand equity has to find its financial equivalent.
The financial valuation is crucial not only for companies' records, but it also allows to make some constructive conclusions for the future business decisions. The process of the financial valuation joints two separate company functions: a financial and a marketing one. It can be very important for the future company strategic planning.
Basically, the financial valuation of a brand assigns some figures to the brand equity, gained through the brand name promotion and brand image. Some brands' values come up to ninety percent of their total market value. This kind of companies, such as Nike, Coca-Cola or the others, would not be able to retain their market shares and sales rate without their brand names. It means that their brands are their most valuable possessions. For instance, shoes and clothes without the Nike brand name and logo would be only another product of this product line in the market.
There are several methods to do a financial valuation of the brands. In the practice of the brand valuation there have to be used not only objective factors, but subjective ones as well. For instance, there is a method of the cost based brand valuation. It uses precise information on the expenditures of the brand tends creation. However, this data has little similarity with the current brand financial value. Another brand financial valuation method is a market comparison. However, this method can hardly be considered a precise one, since every brand is unique and the data on the subject is not sufficient. A royalty relief method has gained more popularity as a brand financial valuation tool. It includes the estimation of the brand's future sales and is technically sound. Nevertheless, this method does not provide the information on how and when the brand value is being created. The most useful brand valuation method to marketers is an economic use method. It includes a consumer research, competitive analysis and brand forecast earnings. Such methods of the brand financial valuation results may be very important for the brand management strategic decisions and planning.
All those valuation methods require a constant application for getting more adjusted results. The financial brand valuation has many benefits to provide. It evokes more interaction between different brand departments and significantly improves the inner company communication. Moreover, it provides all the managers with the common point of reference. It helps the company management to focus on long term goals and increases the future planning and strategy development efficiency.
The intangible assets require no less attention from the companies' management than the tangible ones and overlooking them may have some negative consequences.
practice in brand valuation