Brands and Consumer Needs and Values
The brand concept developed in parallel with the Industrial Revolution and the emergence of national distribution systems. But until the mid-1980s there was nothing like a body of knowledge about the function of brands in the society. This chapter discusses the different approaches to brand valuation and then returns to its complexities. Experts in the field of brand valuation distinguish seven approaches: market value, historic cost, replacement cost, royalty relief, price premium, economic value added, and economic use. The discounted future cash flow (DCF) approach uses projected cash flows after making a fair charge for the tangible assets employed for producing and financing the brand. Brand valuation procedure using the DCF methodology typically includes five steps: market segmentation, brand financial analysis, brand driver analysis, brand risk analysis and brand value calculation. The execution of a brand valuation following the discounted future cash flow methodology includes a number of complexities that increase the difficulty of the procedure.