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| The RSVX is our stock portfolio. We started the portfolio on January 2010 and we will measure the performance against the S & P 500. Click here to read more about the RSVX and the underlying stocks. |
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| | Strong Brand
Creating a strong brand is one of the main focuses of many marketing campaigns. The brand strength can be measured as percentage of the population who know the brand, brand image (the perceived value proposition related to the brand) and brand loyalty (will consumers choose the same brand again during their next purchase).
A brand is an immaterial fixed asset and its value is difficult to measure. One way to value the brand value on a balance sheet is by activating marketing costs spent to build a brand. If a new entrant tries to enter the market the company theoretically should spend at least the same amount of marketing costs to achieve a similar market share.
However the real brand value can be much higher. For example the brand Google is one of the most well known and strongest global brands, but Google did not spend any money on consumer advertising.
A strong brand could provide a sustainable competitive advantage, like Coco Cola, McDonalds, Harley Davidson, Nike, Porsche, Adidas, Ray-ban, Coach, Starbucks, Rolex. Customers are willing to pay premiums for these brands.
Other strong brands can be found in consulting companies, where brand image related to trust and quality is important and a reason that clients are willing to pay premiums. Examples are Accenture, Gartner, Pricewaterhouse Cooopers, Moody's, S & P, Morningstar,
The challenge when valuing companies is to determine the brand value. There are two ways. One is looking at the financials. A company that has high profit margins, high returns on equity and assets are indications that a company has a competitive advantage. The next step is to determine whether it is because of a strong brand or because of other reasons like
low cost structure or other competitive advantage. The next step is to try to determine how much revenues the company will loose without the brand and then use a net present value calculation to determine the future value.
Another way (less numerical) is to try to determine the strength of the brand by doing market analysis. Which percentage of a market know the brand. How many of them are buying the brand, are they only buying the brand or switching between oth |
