The experimental evaluation of brand strength and brand value

Abstract

Investments in intangibles, as opposed to things such as plant and equipment, have become more and more critical to the financial performance and growth of organizations. Brands represent an important source of intangible investment. Unfortunately, expenditures for branding are still commonly treated in financial accounting as expenses rather than as investments. There is a movement, however, to treat brands as financial assets. This can be approached directly by evaluating the financial value of a brand based on how strong the brand is in determining consumer choice versus a comparatively weakly branded product. We present a practical approach to evaluating brand strength using discrete choice experiments and estimation techniques that allow for the calculation of the value of brands as financial assets. Treating brands as assets and not expenses can allow companies to align marketing and finance around internal investments and provide outside investors with much needed financial information.