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Brand Valuation: Progress But Lots More Needed

Brand valuation is a challenging subject. There isn’t a single formula I can give but it is an extremely important topic for marketers to understand. Hence it gets its own popular marketing metrics page.

Brand Matters

Brands clearly matter in marketing. There are any number of marketing sites that will explain this. Indeed, that is part of the problem that I will identify. Lots of people have a definition and ‘brand’ often means slight different things to different people. (Which makes getting a single brand value number challenging).

That said, there are some commonalities amongst definitions and good places to start in understanding brand. Below is Kevin Keller defining brand on the MASB YouTube channel, an excellent source.

Kevin Keller defines brand

What Is A Brand’s Value?

We know brand has value but it is harder to say what that value is.

There is plenty of advice that says how you can point to the value created by a brand. A lot of this is great advice. If your brand is valuable this is likely to raise what people are willing to pay for products with your brand on them.

That said, showing the positive impact of brand is not the same as getting to a specific brand valuation, i.e. a dollar value for the brand. If some people pay $1 more because the shirt has a brand on it this is clearly valuable to the brand. (I buy a lot of Columbia shirts — and provide a lot of free advertising for them. To be fair perhaps they, reasonably, think they can get better looking people than me for their paid advertising).

Advertising for Columbia but they don’t value it

Still, when we talk brand valuation we mean the overall value of the brand to the firm, e.g., “The brand is worth $400m”. This is the sort of number a CFO is going to want and ultimately it is the number that will be most valuable in budget discussions. How, then, does an increase in willingness to pay (WTP) relate to the overall contribution of brand to the firm’s value?

On a side note brand evaluation is a wider term. This considers how the brand is doing without having to give a single dollar term, e.g., “The brand is getting stronger, especially in terms of awareness”. See the MASB common language dictionary for more.


Brand evaluation refers to the measurement of the value of a brand using relevant indicators that assess the impact of the brand on customers/users. Brand evaluation includes both non-monetary and monetary considerations.


Brand valuation refers to the estimation of the monetary value of a brand in a transaction whether it is internal or a purchase, sale or licensing agreement. It is the financial equity the company has in the brand as a transferrable asset.

MASB Common Language Dictionary, &

I Argue Brand Valuation Has Value

In some ways I am more positive about brand valuation than some marketing professors. (That might surprise those who have read my rants about various marketing metrics). There are clearly significant problems which help explain why brand valuation hasn’t taken off in the way we might like it to have in an idea world. That said, the problems aren’t insuperable and there are a couple of things that are helpful to remember.

Why Is Not Having A Brand Valuation A Problem?

The challenge is that brands matter in business. Everyone sensible knows that many brands are extremely valuable but not everyone agrees what, if anything, to do about it.

As we generally don’t add brand values to firm balance sheets we get massive discrepancies between book value, what the financial accountants record, and market value, what you have to pay to buy the firm. Book value isn’t designed to track market value but if it has no obvious connection to the value of the firm this creates concerns that accounts are not that useful for investors. As the value of intangible assets is simply not well tracked by financial accounting, see more here, this can give the impression that firms need their machinery more than their brands. This typically isn’t the case in modern businesses.

The current way of treating brand values in financial accounting also gives weird impacts on balance sheets, such as the moribund effect. This effect is when brand values sometimes appear on the accounts — basically when a brand is initially acquired — but this number is never updated so becomes increasingly divorced from reality.

The Moribund Effect results from an established accounting practice by which the value of a brand that is acquired, measured and added to the balance sheet by a company cannot be increased no matter how well the brand might perform after its acquisition.

MASB Common Language Dictionary
Valuing Brands

Methods Used To Value Brands

We can look at a variety of methods to value brands.

For more on this section see Marc Fischer, 2016, Brand Valuation in Accordance with GAAP and Legal Requirements, In Accountable Marketing: Linking Marketing Actions to Financial Performance, Edited by David W. Stewart and Craig T. Gugel, Routledge, MASB

Cost-Based Valuation

A cost-based approach determines the value of a brand according to its inputs. Such valuations are easy to create which is great. In some ways one might expect financial accountants to be most receptive to this approach given this it mirrors their typical way of capitalizing spending. (Creating assets based upon spending made on them). However, there is no strong reason to think that what it cost to create a brand is a good proxy of brand value. This approach is the triumph of practicality over theory.

Market Based Valuation

A market based approach is theoretically strong. Any brand’s value can be described as what someone would pay to purchase the brand as an entity. (By purchase the brand as an entity I mean buy the rights to control the brand, not buy a single product with the brand’s name on it). A market based valuation is theoretically better than a cost based approach but it is very hard to deploy. We don’t really have many market values of brands to use for comparison. Basically, we don’t know what someone would pay to buy a similar brand so it is often impossible to use this figure to value the brand.

Income Flow/Royalty Valuation

An income-based approach values a brand based upon a projected stream of cashflows, suitably discounted, that will arise because of the use of the brand. Again this is great in theory but even if you can accurately project the future cashflows of a firm how do you decide what percentage of the cashflows will arise only because of the brand? Such income-based approaches can leave considerable disagreement around the assumptions used. This leaves the valuation vulnerable to criticism.

Another approach is to predict the value arising from a brand by estimating what it would costs to pay to use (lease) the brand if you did not own in. You estimate the value of the rights and use this to extrapolate up to a value for the entire brand.

None of these are the clear winner in the market currently. One can argue for each approach but none are ideal. By this I mean that no approach is simple, replicable, theoretically strong, non-proprietary etc…. I believe it is fair to say that the argument about the approach to use hasn’t been won yet by anyone.

What Are The Problems With Brand Valuations?

Let me start by putting in the reasons why there are problems with brand valuation. This is important — as an academic I don’t want anyone to think I’ve missed the problems. They exist and those expressing concerns about the use of brand valuations have valid points.

How Do You Measure A Brand Without Agreeing Exactly What A Brand Is?

There would be a universally accepted brand valuation methodology in an ideal world. This method would reliably track changing value of any brand, as well as being to understand, and easy to calculate. At the risk of disappointing anyone who believes in the Easter Bunny we don’t have that.

I’m not sure how we could have that as there are lots of different views of what exactly a brand. If you are measuring slightly different things you will get different numbers.

I can see no way of having a universally agreed brand value without a universally agreed definition of brand. While I would be happy to put professors who study branding in a room and not let them out till they perfectly agreed I don’t see that being allowed anytime soon.

Proprietary Methods Discourage Adoption

There are a number of providers of brand valuations. Typically these have proprietary methods. They all have their own secret sauce.

Differing secret sauces can be great in cooking

Secret sauces can be great when people are making food. Each company can have their own version of the product that appeals to different people. Theoretically, this applies somewhat to brand valuations. One consultancy’s approach might work better for your firm than the others and each firm gets to choose. Yet, if we are to have widely agreed values we need consistency between measures with secret sauces aren’t conducive to.

To have widely accepted values we also need transparency. Business people, with good reason, want to know how the valuation was put together. This creates a challenge in brand valuation. Accountants seem (understandably) not willing to even consider putting values into the financial accounts when these values are derived from proprietary methods that cannot be fully audited.

Lack of Agreement Between Providers

When reviewing the popular brand valuations methods — e.g., Brand Finance, Interbrand, Brand Z — it is reasonable to get frustrated that they seem to disagree so much. They don’t have similar valuations. The valuations don’t’ agree on the same ranking of brands. Probably more challenging is that the valuation providers don’t necessarily agree on the direction of change. A brand may go up in one valuation and down in another during the same year. As such it could have been a good or a bad year for the brand depending upon who you ask. (Have a look at Natalie Mizik’s excellent slides for MASB here. They are a bit old now but the argument still holds).

In many ways the differences are unsurprising. Different providers visualize brand differently. Still it is hard to imagine how one can convince financial accountants to recognize the value of a brand when there are highly divergent estimates out there. If marketers can’t really agree on what a brand is, financial accountants are going to be dubious of our measures of brand.

Using The Number

Events beyond the control of a marketing impact the value of any brand. This means it can often be hard to know what caused any change. When a marketer is not sure what caused a change in the valuation of any brand they will find it hard to know what to do to ensure the value will be better going forward.

Financial Accountants Worry About Overstating Values

Financial accounting tends to base values upon arms length transactions. Yet, firms probably build most brands internally. Marketers have brand building budgets they spend each year. Yet, this does not produce a neatly defined asset like it would have done if the firm had bought a new machine. Brands, rather than the much more limited physical representations of brands such as logos, are hard to point to. Brands are intangible assets. Financial accountants are generally much more comfortable dealing with tangible assets, those they can point to, rather than intangible assets, which they can’t.

Of course, brands are purchased sometimes. Yet, even here the brands still have to be supported by on-going marketing spend and so are tp a certain extent built, or should I say extended, internally. Overall, it is fair to say that even when a lot of money is spent on branding it is hard to point to exactly what was the result of this spending.

As such there isn’t a readily available number to plug into the accounts. In the UK, Rank Hovis MacDougall did add the value of their brands to the balance sheet, and Suffice it to say that adding brand valuations to the balance sheet was not popular with everyone. (Here is an exciting digression. Hovis bread, the brand that Rank Hovis MacDougall was so proud of the value of and added to the balance sheet, was helped by an ‘iconic’ advertising campaign directed by Ridley Scott, of Alien fame. It is a shame he couldn’t get the Alien to eat bread instead of people).

To summarize, financial accountants don’t want to put a number onto the balance sheet that they are not sure of. They have reasonable fears about the validity of some numbers mentioned by marketers.

Progress Is Being Made

Change is necessarily slow in this area but one can look at rays of hope.

Classic Hovis Bread advert directed by a young Ridley Scott

MASB has been working hard on brand valuation. Their recent move towards arguing that notes to the accounts might give us more detail on valuation is a positive and pragmatic one. It was always brave to hope that financial accountants would bring in brand valuations directly onto the balance sheet. Adding notes to the accounts is a more realistic ask in the foreseeable future.

ISO, the international organization for standardization, have also been working on the problem over the years. in the past this resulted is an ISO brand valuation standard, ISO 10668:2010: Brand valuation — Requirements for monetary brand valuation,

More recently we have seen great progress with a new brand evaluation standard, ISO 20671:2019 — The technical committee, 289, is being led by Bobby Calder and has more to come. Keep your eyes on this space.

Why Might Valuation Be Useful Even If Financial Accounting Rules Never Allow It To Hit A Balance Sheet?

Resistance May Fade With Use

If brand valuations are not used that much they are not likely to be used as much going forward. Put another way, I expect a virtuous circle in the use of brand valuations. The more they are used, the more credibility they will have. As such, the adoption of brand valuations is a bit of a classic marketing problem.

Although attitudes to brand valuation matter I believe adoption is not just a matter of perception. Consider that when brand valuations are used internally the measures will be improved further through usage. We can expect more usage of brand valuations to improve valuations. Even if brand valuations are currently far from perfect further usage should make them better. Ideally, greater usage will lead to the develop of more non-proprietary measures as firms experiment with what works for them.

Valuation Has Value Beyond The Number

The discipline brought from the act of valuation can be useful by itself, ( Putting a number on the value of a brand can focus marketers on the importance of brand.

This is also true for those outside marketing. I have met many marketers who are frustrated by non-marketers who don’t necessarily see marketing’s value. If, however, the marketer can point to an X million dollar brand they have built and manage this is helpful for marketing’s credibility. Showing that there is a strong brand can also help justify on-going investments in the brand.

Not-For-Profits Can Value Brands

Interesting the logic for valuing brands to show the worth of the brand can even extend to not for profits. The idea being that the value of brand helps show the importance of marketing for not-for-profits and helps build more professionalism in the organizations. (See a HBR article on this here).


It would be wrong to hope for too much progress too soon. Certainly brand valuations have challenges currently. Yet, a path forward is there. Hopefully marketers can help drive their organizations towards this.

See Also

It is important to measure the value of brands
It is important to create discussions between accountants and marketers

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