BRANDS – THEIR WEIGHT IN GOLD

10 June 2008
Christopher Scholz, Chair, and Holger Mühlbauer, Secretary, ISO/PC 231, Brand valuation
Christopher Scholz, Chair, and Holger Mühlbauer, Secretary, ISO/PC 231, Brand valuation


ISO Focus, May 2008



Information about non-tangible values, including brands, can be of great importance for companies. But how can the value of a brand be measured? Although brands can be ranked on other scales, monetary value is a particularly important assessment. Agreed methods and measurement tools are, however, a challenge for companies as well as for valuation agencies. An ISO project committee, ISO/PC 231, has therefore been set up with the ambitious aim of developing a standard covering the basic requirements for measuring monetary brand valuation.

The new project committee reflects the significant and growing role that brands play as value drivers and intangible assets, not just for individual companies but also for entire economies. In fact, it is fair to say that economies today are brand-driven. While the market-to-book value ratio of companies traded on the New York Stock Exchange in the 1980s was approximately 50-50, by the 1990s that number was up to 20-80, reflecting the value of goodwill and intangible assets associated with the companies.

A recent study conducted among German branded goods manufacturers shows that CEOs assign an average of 67 % of their companies’ value to their brands. The price tag is the result of internal emphasis on controlling, shareholder value concepts as part of corporate cultures, and financial reporting activities. Monetary brand valuation is today increasingly important to many operational functions, among them controlling, marketing, legal, strategic planning and others.

“Although brands can be ranked on other scales,

monetary value is a particularly important assessment.”



Brand value
Monetary brand valuation is furthermore an opportunity for brands and their owners. Price is a value-defining parameter, and making a case for the protection of brands depends on the ability to show that value is threatened, diminished or infringed.

Monetary brand valuation can contribute to the interests and needs of the financial, marketing and legal communities in numerous ways. At the same time, the number of companies which have actually had the monetary value of their brands evaluated is limited. There are a number of reasons for this, the most prominent being the popular misconception that a meaningful monetary value cannot be assigned to something as challenging to isolate and define as an intangible asset.

A prerequisite to successful monetary brand valuation is therefore not only that the exercise is undertaken with due diligence, but also that the results are broadly accepted. A standard on monetary brand valuation can ensure that both conditions will be met.

No quick consensus
However, the project committee must address a number of requirements. The definition of basic requirements for methods of monetary brand valuation must be results-oriented. Further, methodologies for logical approaches to monetary brand valuations must include all relevant valuation or devaluation factors, reflecting the importance of transparency and consistency of effort. The methodologies must show that monetary brand valuations keep in mind the underlying constituents of valuation.

Existing brand measurement models have little in common and there is currently little chance of reaching a quick consensus. It therefore seems appropriate to take steps to develop a “metastandard”, which would set out the most important basic provisions from the point of view of market research, auditing and industry itself. An additional motivation is the introduction of the “international accounting standards” which, under certain circumstances, allow the inclusion of brand values in financial statements.

Although the work on a standard that can ensure all of the above will require significant effort on the part of the project committee, we are already witnessing the emergence of a common understanding, certain structural elements and essential requirements. It must be recognized that the development of one standard procedure for monetary brand valuation that can be easily applied to any brand on any occasion is a tempting but unlikely ideal. Nonetheless, there is a real chance that the standardization of basic requirements for methods of monetary brand valuation will successfully meet the expectations of those who wish to assign a dependable monetary value to what is already, in many cases, the most precious equity.

"It is fair to say that economies today

are in fact brand-driven.”



Invitation to participate

Participants in ISO/PC 231 include financial and other service providers, as well as representatives from research organizations and high-profile companies, whose active participation reveals the importance of the topic.

The businesses and other stakeholders supporting this project realized early on that standardizing these subjects at the national or regional level would be less meaningful, and that only international standardization would have an impact on the sector. Although ISO/PC 231 involves a large number of experts representing different viewpoints and approaches, it has proven itself to be constructive and goal-oriented. With already 11 participating and three observer countries, represented by some 33 experts in the field, the project committee invites other interested countries to participate. It is expected that the standard will be ready for publication in 2010.



About the author
Christopher Scholz is Chair of ISO/PC 231, Brand valuation and to the German mirror committee at DIN. He is Deputy Director General of the German Brands Association MARKENVERBAND, where he is responsible for all legal, industry-trade and brand valuation issues. Christopher Scholz has a legal background and is accredited to the German bar as attorney-at-law.