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Interbrand Methodologies

There are several methods for valuing brands: cost-based (historical and replacement cost), market-based (comparable, equity, and residual approaches), and income-based (royalty relief, differential pricing, price premium, and discounted cash flow). Registering a brand in India involves preparing a trademark application, paying fees, publication for opposition, and acceptance if no opposition occurs. Valuing brands converts them to assets and provides competitive advantages like customer recognition and loyalty.

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Midhun Manohar
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254 views3 pages

Interbrand Methodologies

There are several methods for valuing brands: cost-based (historical and replacement cost), market-based (comparable, equity, and residual approaches), and income-based (royalty relief, differential pricing, price premium, and discounted cash flow). Registering a brand in India involves preparing a trademark application, paying fees, publication for opposition, and acceptance if no opposition occurs. Valuing brands converts them to assets and provides competitive advantages like customer recognition and loyalty.

Uploaded by

Midhun Manohar
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© © All Rights Reserved
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Interbrand Methodologies (Methods of Brand Valuation)

A brand is a valuable and intangible asset for a business. A brand is a covenant with the consumer
creating loyalty, faith, trust and mass-market appeal, based on how the brand is marketed and
promoted. Determination of the brand value involves a combination of direct and indirect processes.
A direct process is one which arrives at a price based on the investment made for the brand. An
indirect measurement will be based on the potential sources, awareness of the brand and elements
of brand image.

We can have the following methods for brand valuation.

• Cost-based approach: It is primarily associated with the cost of creating or replacing the
brand. The following are the classifications in the Cost-based approach:
o Historical cost method: Brand valuation through the historical cost method is used at
the initial stage of brand creation. The historical cost method isolates the direct costs
and contributes to indirect costs. It attempts to recreate the historical development
and creates an assessment value for the future. However, the cost of creating a brand
does not play a major role in the present value.
o Replacement cost method: This method values the brand keeping the investment and
expenditure necessary to replace the brand with a new one which has equivalent
utility to the company.
• Market-based approach: A market-based method of brand valuation deals with the amount
at which a brand is sold and the highest value that a buyer is willing to pay for it. The market-
based approach is classified into:
o Brand scale comparable approach: In this method, the brand is valued by the recent
transactions that involve similar brands in the same industry. It is viewed from a third
party perspective and cannot be applied to all cases for comparing data.
o Brand equity approach: The brand equity approach includes advertising and results
in price premium profits. In this case, the value of brand equity is estimated using the
financial market value.
o Residual method: The residual value is arrived at when the market capitalization is
subtracted from the net asset value. The variables such as risk-free interest rate,
current exercise price, the variance of the asset, time of expiration of the option and
value of the underlying asset are included. It helps to calculate the potential value of
line extensions.
• Income-based approach: In this approach, the potential of the brand is calculated by the
future net earnings that directly contribute to determining the value of the brand. The
following are the classifications in the Income-based approach:
o Royalty relief method: As per this method, the value of the brand is related to
characteristics applied by the company or valuer. The valuer will have to estimate the
base for calculation and determine the appropriate royalty rate, a growth rate,
expected life and a discount rate for the brand. This method is accepted by tax
authorities and has an edge of being industry-specific.
o Deferential price to sales ratio method: This method will calculate the brand value as
a difference between the estimated price to sales ratio for a company with a brand
and the price to sales ratio for an unbranded company. This will be multiplied by the
sales of the branded company.
o Price premium method: The approach of this method is that a branded product
should sell for a premium over an unbranded product. The value is calculated by
comparing the cost involved for production and cost produced after sales. It creates
the impact of assuming that the brand helps to accumulate additional profit.
o Discounted Cash flow method: Cash flow acts as an important component for
determining the value of an asset. It takes into account the increasing working capital
and fixed asset investments. It estimates the amount of future cash flow that the
brand can generate.

Advantages of Brand Valuation for a Business

• Valuation of a brand converts a brand from being an expense to an asset in the financial
statements.
• It helps the brand to be valued with the same criteria as other investments in the firm.
• It helps in customer recognition.
• Brand valuation gives a competitive advantage to the business.
• There is enhanced credibility and customer loyalty.

Validity of Trade Mark


The trademark is valid for a period of 10 years from the date of issuance. After the end of 10 years, it
can be renewed.

Steps to Register a Brand in India

• Step 1: In order to register a brand, a trademark application needs to be prepared. It should


be submitted in Form TM-1 with the below-mentioned documents.
o Proof of business registration such as ID proof of the proprietor, PAN card or Aadhaar
card
o Proof of claim of the proposed mark that can be used in another country.
o Soft copy of the trademark.
o Power of attorney to be signed by the applicant.
o An image of the brand logo
• Step 2: Payment of application fee of Rs.2500.
• Step 3: Fill up the application of the brand name registration through manual filing or e-filing.
For e-filing, the receipt will be provided instantly through the website.
• Step 4: The Registrar will check the documents submitted. There should not be any dispute
amongst the existing products or pending brands for registration.
• Step 5: The brand name will be published in Indian Trade Mark Journals. There should not
be any opposition for 3-4 months from the date of publication and will be proceeded towards
acceptance.
• Step 6: The Registrar will accept the application in case of no opposition is registered within
the stipulated period of 90 or 120 days.

Upon rejection due to non-approval, the applicant has another chance to refill the same form without
any charges. If the application gets rejected the second time, the applicant should file from the
beginning.

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