Driving and creating brand value through brand equity valuation

Abstract

Business decision-makers must effectively allocate scarce resources in order to survive and thrive in today's competitive business environment. The dramatic advances in technology over the last decade, fueled in part by the rapidly expanding use of social media, have created an extremely complex and fast-moving global marketplace. The traditional tools and methods used to measure brand equity and returns from brand investments have become less effective in providing decision makers guidance in gauging returns, and in determining where and what to invest to maximize brand value. The traditional tools are therefore no longer able to provide significant impactful or actionable information to assist executives making resource allocation decisions. This paper examines traditional brand equity valuation approaches, identifying their strengths and limitations. It then introduces a proactive brand equity valuation methodology - the Brand Equity Valuation Methodology (BEVM). This new approach applies the Black-Sholes Option Pricing Model (BSOPM) statistical and mathematic logic to brand equity valuation. The BEVM reconfigures the BSOPM variables enabling the BSOPM to generate a measure of the brand's equity value for publicly held companies (in this paper) as well as for privately owned business. It is anticipated that future applications of this methodology will enable quantification of the likely returns on brand-building investment initiatives. The BEVM model will offer decision-makers a robust and effective tool to enable improved resource allocation decisions that maximize overall brand value.

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