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Andrew Edgecliffe-Johnson (“Elon Musk and Barbie show just how intangible a brand can be”, Opinion, July 28) rightly highlights the variation in different valuation companies’ estimates of brand value, such as Kantar’s $880bn versus Brand Finance’s $298bn for Apple.

Such variation is inevitable because of the subjective judgments involved in (i) estimating how much of the company’s profit or cash flow is attributable to the brand and (ii) converting this into an asset value. The first involves taking a view on how much lower the company’s profit or cash flow would be if it no longer owned the trade mark. The second involves the usual judgments around projecting future profits or cash flows and the appropriate multiple or risk-adjusted discount rate to estimate the net present value.

As brands become increasingly important, boards need to monitor and actively manage them as strategic assets, using a range of customer and market metrics. They may also find it helpful to have a valuation company audit and evaluate their brands. But when the valuers convert the brand equity measures into single financial numbers, they should regard these as broadly indicative rather than as reliable metrics. And investors should look for a convincing brand strategy, continuing investment in product/service innovation, advertising, etc, and any relevant customer metrics such as churn they can find that reflect management’s ability to maintain and develop the firm’s intangible assets, including brands, over the long term.

If this all sounds familiar, that’s because you can’t separate brand strategy and value from business strategy and value.

Patrick Barwise
Emeritus Professor of Management and Marketing
London Business School
London NW1, UK