Brand Equity

We can divide all definitions available on brand equity in to the following categories:  Cost

based  Price based 

Consumer based

Inter – brand Method The Inter brand Co. UK developed a structured method for arriving at brand equity. This method aims at arriving at a value at which brand can be sold by one company to another. The steps used in this method are described below. The method in its entirety is more complex and is meant only as an appreciation of the same. 

The weighted average of the last three



This figure when multiplied with a number gives the value of brand equity. The number is arrived at by multiplying the P/E of the company or industry in which the company operates and a factor called brand strength.



Brand strength is dependant on certain variables like leadership, stability, internationality, etc of the brand.

Brand equity = (weighted average of brand

Consider a brand X, whose profits are shown below:

Year 1993 1994 1995

Profits ( Rs. Weight age in million) 15 1 20 2 30 3

Average profit = (15x1) + (20x2) + (30x3) 1+2+3 = Rs. 24.2 million

Brand strength depends upon the variables given below. Factors

Implication

Maximum Score

Score for Brand “X”

Leader ship

Is the brand a leader in market share, pricing

25

13

Stability

Is there brand loyalty? Does the brand have stable market share?

15

7

Internationality What is the brand’s acceptance level internationally?

15

1

Support

Is the brand actively promoted and supported by the company?

15

8

Protection

Is it adequately protected be trademark?

5

2

Market

Is the market in which the brand operates stable?

5

2

Trend

What is the long term future for the brand?

20

10

100

43

Total