Royalty rate 4 percent of sales price Discounting rate applied 10 percent per

Royalty rate 4 percent of sales price discounting

This preview shows page 157 - 161 out of 203 pages.

Royalty rate @ 4 percent of sales price Discounting rate applied 10 percent per annum 157
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BRAND VALUATION Table no: 11.1 The Royalty Relief Approached value will be Rs. 26.42 lacs. 6. Young and Rubican Brand Asset Valuator Model This model evaluates a brand on consumer perceptions on two dimensions which are the brand’s strengths and the brand’s stature . Brand strength is a combination of differentiation (distinctiveness of the brand in the market) and relevance (its appropriateness or meaningfulness to the customer) AND Brand stature is a combination of esteem (the quality perception i.e., popularity and regard for the brand in the minds of the consumers) and knowledge (understanding by the consumer of what the brand stands for) By measuring the brand (on a scale) on these 2 dimensions through consumer surveys one can assess the health of a brand. This model can be used as a diagnostic tool. Year 1 2 3 4 5 6 7 Sales Rs. Lacs 100 110 120 125 135 145 150 Royalty @4 percent 4 4.4 4.8 5 5.4 5.8 6 Discounting Factor 1 1.1 1.21 1.33 1.46 1.61 1.77 NPV 4 4 3.97 3.76 3.70 3.60 3.39 158
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BRAND VALUATION Brand Asset Valuator Model Fig. no.: 11.2 Strength = differentiation + relevance Stature = esteem + knowledge 7. Economic Use Method This method attempts to calculate the value of the brand to its owners in terms of the net present value of the profit streams attributable to the brand. It starts with an analysis of the profitability of the brand to the business. Two brand valuation companies Interbrand Ltd. and Brand Finance Ltd., have their methods based on this approach. Interbrand Group PLC value a brand against 2 factors: earnings and strengths. Earnings reflect the profit potential of a brand and strengths reflect the potential of future earnings. A brand’s strength is a composite value constituted by measuring the following variables: 1. Leadership: how the brand influences the market. 159
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BRAND VALUATION 2. Stability: how enduring the brand has been in the market. 3. Market: how attractive is the market in terms of growth, entry barriers etc. 4. Geographic: how appealing and acceptable the brand is across different markets 5. Trend: how relevant is the brand viz. whether it is contemporary 6. Support: what marketing supports have been made to maintain the brand 7. Protection: how protected is the brand legally One approach is to base on the past few years’ profits, and the other can be to project a few years into the future. The approach is called an Earning multiple method or the other version is called Future earning method. In principle the method is based on the following steps: 1. Fix a period which is to be reckoned to calculate the brand value. Ideally it may range from 5 to 7 years. Shorter than that may be not representative and longer than that may not be relevant. 2. Through a process of due diligence audit get the actual net profit attributable to the brand under valuation, year by year.
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