Last week’s BVWire reported on a conference during which brand valuators from the world of marketing defended their work. Data analysis shows that the average brand valuation was just as likely to overstate a brand’s value by more than 500% as it was to get within 20% of the actual price paid. Regardless, the valuators on the marketing side feel that they are more qualified to value brands than accredited valuation experts or financial professionals who they say are too conservative.
Updated research: MARKABLES, which maintains a database of trademark valuations, conducted the research that triggered the conference session. It has now updated the research in a paper “Brand Value Rankings - Are They a Blessing or Curse?” The research compares reported (and audited) brand values from PPAs against brand values published on various unsolicited rankings of “the most valuable brands.” The paper’s findings refute the claim that accredited appraisers or financial professionals habitually underestimate brand value.
The paper points to three major reasons why brand valuators from the marketing discipline are off-target: (1) the valuation of brands is about their major subject (brands), and they tend to be positively biased; (2) they underestimate or neglect other valuable intangible assets that form part of a business, such as technology, customer relations, licenses, etc., which is why the deviation is highest in industries such as telecom (504%), airlines (499%), fuel stations (442%), and banks (390%), all of which have substantial intangible assets other than brand; and (3) their methods are not developed to value B2B and other utility-based brands with high profitability.
The paper concludes that “brand rankings are like a chronic disease which requires strict diet and discipline.”
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