The Value of a Brand


13 February 2009 Ilya Kazi


A brand holds more worth than many small business realise, and in a recession, it's value becomes even more crucial. Patent attorney Ilya Kazi explains how to unlock and maximise a brand's potential.


As businesses continue to feel the effect of the economic downturn, maintaining their competitive advantage and building market share is more important than ever, but many companies neglect what could be one of their most valuable assets: their brand identity.

Many smaller businesses fail to recognise the worth of their own brand, even though the directors must be aware that the world’s biggest organisations have huge amounts of value in their brands. Coca Cola is valued at up to $66bn (£46bn), Nokia at $35bn (£25bn), Intel at $31bn (£22bn) and eBay at $8bn (£6bn), according to leading brand consultancy, Interbrand.

In a downturn, maximising the potential of your brand can be the difference between success and collapse. Innovative companies that use their IP commercially and creatively will do much better than those that neglect it.

"Many of today’s business successes stand testament to the importance of getting their IP in order at the birth of a company."

Take, for example, Woolworths and MFI.  Both were established and well-loved British companies, but they failed to make the most of their reputations and extract maximum value from their brands and this may have been a contributing factor in their demise. Interestingly, the Woolworths brand has recently been acquired and will assist in launching an online version of its former self. This clearly indicates that it retains a reputation and value. In addition, the Wedgwood family are reported to be in discussion with potential investors hoping to acquire the Wedgwood brand and business.

Part of the reason that brand assets are so often overlooked is that working out their value is far from straightforward, requiring the creation of something definite from something intangible. If a number cannot be written down next to an asset on a balance sheet, people can forget it exists.  This often applies to IP assets, whether patents, know-how or trade marks.  There are no hard and fast rules when it comes to brand evaluation. Yardsticks such as profitability, customer satisfaction, quality, perception, corporate image and expectation are all relevant factors in determining the ultimate value.

At a time when distressed companies are highly likely to be seeking potential acquirers, establishing the value of all assets, including any brand(s) is essential.  If a business is struggling, it may be that its main, or only, selling point is its reputation in its industry and among its customers or clients.  

For example, when Little Chef went into administration in 2007, its position as a British institution may have saved it by attracting its eventual private equity investors, RCapital.  Elsewhere, Nestlé acquired Rowntree for £2.5bn in 1988, even though Rowntree's tangible assets were only valued at £500,000.  Most of the balance was attributed to the value of the Rowntree brands including Smarties, Polo and Kit-Kat.

Using your intellect

It is not only established companies that need to make the most of the value inherent in their brand.  Many of today’s business successes stand testament to the importance of getting their IP in order at the birth of a company. Registering IP rights not only provides effective protection in the event of a dispute, but also protects the reputation of the brand; crucial to businesses that rely on an image or perception to sell the product or service.

"At a time when distressed companies are highly likely to be seeking potential acquirers, establishing the value of all assets, including any brand(s) is essential."

The value of companies such as Microsoft, Vodafone and Google can largely be attributed to the strength of their intellectual property rights – namely patents, copyright, designs and trademarks – and how well these have been protected.

An important consideration is that IP protection typically leads to significantly higher margins for products. Even in a climate when all are getting squeezed on price, those with IP protection will at the very least have more headroom.

For brands, there is limited common law protection available in some countries.  However, registering intellectual property rights can make it significantly easier to establish ownership should disputes or issues arise, particularly internationally, and to attach a value to the brand.

Although a few technical inventions are of the nature that keeping them secret is feasible, the majority can routinely be reverse-engineered nowadays. Protecting the brand will help retain an advantage over competition once the first-mover advantage has gone. Where available, obtaining a patent (which must be filed before any disclosure), even for a minor but commercially valuable aspect of a new product, is a much more effective way of protecting market share.

However difficult to quantify, or even to understand, it is vitally important that trademarks and other intellectual properties are considered seriously as assets of a business.  Companies may not know the precise value of their customer contacts, but they would not hand their distribution lists to competitors simply because of this.

Those companies willing to invest resources to maintain or grow their business, and in doing so to protect its IP assets, will be in a better position, not only for the short-term challenging trading conditions, but also for the long-term health of the organisation.  In a recession, all companies, whether large or small, should consider their brand as an asset worth investing in.