Behavioural-qualitative value drivers in variable interdependent model for valuing brands

This paper analyses the relationship between behavioral-qualitative and financial brand value drivers. The first group of factors is identified through marketing research of sales success and customer satisfaction. These factors are then reflected in the aggregate measure, defined as “brand impact adjustor” by using a newly developed scoring model. The size of the brand impact adjustor is essentially a projection of the success of the brand by using a marketing point of view. A brand impact adjustor allows us to quantify the risk of a brand in comparison with the level of risk of the enterprise and to quantify the level of free cash flow, which is attributable to the brand and therefore creates its value.

Financial brand value drivers encompass the individual sub-elements of the operating profit margin (e.g. price, volume of production or cost items). These factors are – depending on the detail of internal financial reporting – obtainable from the corporate management accounting. Brand value is directly determined by the difference between operating profit margin usual in the industry and operating profit margin of the business that sells branded production. In our concept, the industry profit margin is known as the margin of a benchmark enterprise. This is a hypothetical company that achieves results at the level of sector specific percentile values. Specific percentile is yet determined depending on the structure and share of the branded production in the industry in which the company operates.

The purpose of this analysis is therefore to evaluate past data which can provide a platform for the management of the company for the evaluation of decisions made and correct them in the future, which will result in higher brand value. Therefore the paper highlights the unique tool for managing brand values that the Verifiable Interdependent Model (VIM) provides.

Defining a brand from economic and marketing perspective and analyzing how the brand (hence all of the intangible assets) contribute to the formation of the company´s value, allowed us to identify key behavioral-qualitative factors that determine the amount of cash flows that is attributable to the brand. The above mentioned theoretical and methodological framework is followed by a case study where we show its practical application.