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Caution:	
  A	
  Trademark	
  Can’t	
  Be	
  Valued	
  as	
  a	
  Brand	
  

	
  
	
  

	
  
	
  

Gelb Consulting Group, Inc.
1011 Highway 6 South
Suite 120
Houston, Texas 77077

	
  

P + 281.759.3600
F + 281.759.3607
www.gelbconsulting.com

An Endeavor Management Company

	
  
Caution:	
  A	
  Trademark	
  Can’t	
  Be	
  Valued	
  As	
  A	
  Brand	
  
	
  
	
  
One	
  of	
  the	
  most	
  vexing	
  issues	
  facing	
  intellectual	
  property	
  attorneys	
  is	
  establishing	
  a	
  value	
  
after	
  a	
  trademark	
  has	
  been	
  infringed	
  or	
  diluted	
  or	
  sold,	
  or	
  when	
  an	
  organization	
  wishes	
  to	
  
arrange	
  a	
  licensing	
  fee.	
  Yes,	
  a	
  brand	
  may	
  be	
  the	
  most	
  valuable	
  asset	
  of	
  a	
  company.	
  But	
  what	
  
is	
  the	
  trademark	
  worth?	
  
	
  
The	
  central	
  point	
  to	
  be	
  made	
  is	
  that,	
  contrary	
  to	
  widespread	
  use	
  of	
  both	
  terms	
  as	
  
synonyms,	
  a	
  trademark	
  is	
  an	
  identifier	
  or	
  “face”	
  of	
  the	
  brand,	
  not	
  the	
  brand	
  itself.	
  	
  The	
  
American	
  Heritage	
  Dictionary,	
  Second	
  College	
  Edition,	
  made	
  this	
  mistake	
  when	
  it	
  gave	
  as	
  
the	
  first	
  definition	
  of	
  the	
  term	
  brand,	
  the	
  following:	
  “A	
  trademark	
  or	
  distinctive	
  name	
  
identifying	
  a	
  product	
  or	
  a	
  manufacturer.”	
  
	
  
Many	
  use	
  the	
  terms	
  brand	
  and	
  trademark	
  interchangeably.	
  	
  As	
  a	
  writer	
  on	
  trademark	
  
valuation	
  notes	
  in	
  an	
  e-­‐mail	
  to	
  me,	
  “I	
  find	
  both	
  businesspeople	
  and	
  attorneys	
  conflate	
  the	
  
terms	
  brand	
  and	
  trademarks”	
  (Michael	
  J.	
  Freno,	
  Kenyon	
  and	
  Kenyon	
  LLP,	
  author	
  of	
  
“Trademark	
  Valuation:	
  Preserving	
  Brand	
  Equity,”	
  The	
  Trademark	
  Reporter,	
  September-­‐
October	
  2007.	
  	
  However,	
  they	
  should	
  not	
  make	
  that	
  mistake.	
  The	
  value	
  of	
  a	
  trademark	
  is	
  a	
  
fraction	
  of	
  the	
  value	
  of	
  a	
  brand,	
  and	
  both	
  the	
  total	
  brand	
  value	
  and	
  the	
  trademark’s	
  
proportional	
  value	
  must	
  be	
  estimated	
  when	
  legal	
  issues	
  arise.	
  
	
  
Skeptics	
  may	
  ask,	
  what	
  is	
  the	
  brand	
  if	
  not	
  its	
  trademark?	
  The	
  answer	
  is,	
  the	
  product	
  itself	
  
and	
  its	
  entire	
  range	
  of	
  attendant	
  attributes.	
  Without	
  the	
  product,	
  there	
  is	
  no	
  brand	
  -­‐-­‐	
  and	
  
no	
  enterprise,	
  one	
  might	
  add.	
  
	
  
In	
  today’s	
  world	
  almost	
  everything	
  is	
  branded,	
  starting	
  from	
  the	
  original	
  use	
  as	
  a	
  simple	
  
branding	
  iron	
  to	
  much	
  more	
  expansive	
  applications,	
  such	
  as	
  the	
  following:	
  “The	
  Olympics	
  
are	
  branding	
  Canada	
  to	
  the	
  world,	
  but	
  they	
  are	
  also	
  branding	
  Canada	
  to	
  the	
  Canadians,”	
  
said	
  Michael	
  Ignatieff,	
  leader	
  of	
  the	
  Liberal	
  Party	
  of	
  Canada,	
  quoted	
  in	
  The	
  New	
  York	
  Times.	
  
What	
  might	
  a	
  brand	
  be	
  worth?	
  The	
  president	
  of	
  Coca-­‐Cola,	
  the	
  most	
  valuable	
  brand	
  in	
  the	
  
world	
  (valued	
  at	
  $68.7	
  billion)	
  once	
  famously	
  said	
  that	
  that	
  if	
  all	
  their	
  buildings	
  and	
  
equipment	
  burned	
  down,	
  he	
  could	
  get	
  a	
  loan	
  to	
  rebuild	
  based	
  on	
  the	
  value	
  on	
  the	
  brand	
  
alone.	
  But	
  if	
  the	
  brand	
  was	
  taken	
  away,	
  the	
  company	
  couldn’t	
  recover.	
  	
  On	
  the	
  negative	
  side	
  
of	
  brand	
  value,	
  the	
  estimated	
  value	
  of	
  Citi’s	
  brand	
  went	
  from	
  $20.1	
  billion	
  in	
  2008	
  to	
  $10.2	
  
billion,	
  according	
  to	
  an	
  article	
  in	
  Business	
  Week,	
  “100	
  Best	
  Global	
  Brands.”	
  
	
  
But	
  how	
  much	
  is	
  the	
  trademark	
  of	
  Coca-­‐Cola	
  or	
  Citi	
  worth?	
  	
  Certainly	
  not	
  as	
  much	
  as	
  the	
  
brand	
  because	
  the	
  trademark	
  can	
  be	
  changed	
  without	
  necessarily	
  diminishing	
  the	
  value	
  of	
  
the	
  brand.	
  	
  It	
  is	
  not	
  rare	
  for	
  marketers	
  to	
  tweak	
  the	
  product	
  name	
  and	
  even	
  more	
  common	
  
for	
  them	
  to	
  change	
  some	
  facet	
  of	
  their	
  trade	
  dress,	
  a	
  brand	
  signal	
  that	
  can	
  be	
  a	
  logo,	
  color,	
  
sound,	
  or	
  “look	
  and	
  feel”	
  of	
  a	
  tangible	
  product.	
  	
  
	
  
Perhaps	
  here	
  it	
  is	
  worthwhile	
  to	
  define	
  the	
  meaning	
  of	
  these	
  two	
  intangibles,	
  recognizing	
  
because	
  they	
  are	
  intangible,	
  honest	
  folks	
  may	
  differ.	
  But	
  it	
  is	
  important	
  to	
  offer	
  a	
  starting	
  
point	
  because	
  of	
  a	
  nascent	
  movement	
  to	
  require	
  companies	
  to	
  value	
  their	
  brands	
  on	
  their	
  
balance	
  sheets.	
  Today	
  relatively	
  new	
  accounting	
  standards	
  require	
  brand	
  evaluation	
  only	
  
2
Caution:	
  A	
  Trademark	
  Can’t	
  Be	
  Valued	
  As	
  A	
  Brand	
  
	
  
when	
  a	
  company	
  is	
  merged,	
  bought,	
  or	
  sold	
  (Financial	
  Accounting	
  Standards	
  Board	
  rules	
  
157	
  and	
  159.)	
  	
  	
  However,	
  given	
  this	
  precedent,	
  new	
  rules	
  may	
  be	
  promulgated	
  to	
  value	
  a	
  
company’s	
  brands	
  routinely.	
  	
  
	
  
Basically,	
  a	
  brand	
  can	
  be	
  defined	
  as	
  the	
  sum	
  of	
  its	
  product’s	
  or	
  service’s	
  attributes,	
  its	
  
history,	
  reputation	
  and	
  all	
  the	
  ways	
  it’s	
  been	
  experienced	
  by	
  whatever	
  buyers	
  it	
  targets.	
  	
  So	
  
of	
  course	
  that	
  includes	
  its	
  trademark,	
  whether	
  expressed	
  as	
  a	
  corporate	
  or	
  product	
  name	
  
or	
  logo,	
  as	
  a	
  component	
  of	
  the	
  brand.	
  Whether	
  it	
  is	
  15%	
  component	
  or	
  a	
  50%	
  component	
  
or	
  something	
  in	
  between	
  depends	
  on	
  its	
  specific	
  situation.	
  
The	
  balance	
  of	
  this	
  article	
  points	
  to	
  ways	
  the	
  trademark	
  itself	
  can	
  comprise	
  a	
  smaller	
  or	
  
larger	
  component	
  of	
  the	
  value	
  of	
  the	
  brand.	
  
	
  For	
  example,	
  consider	
  the	
  longevity	
  of	
  the	
  Coca-­‐Cola	
  brand	
  and	
  its	
  worldwide	
  distribution.	
  	
  
But	
  distinguish	
  that	
  coverage	
  from	
  a	
  3-­‐year-­‐old	
  restaurant	
  famous	
  for	
  its	
  menu	
  in	
  a	
  certain	
  
part	
  of	
  a	
  city.	
  In	
  addition	
  to	
  geographic	
  reach,	
  the	
  value	
  of	
  a	
  brand	
  is	
  modified	
  by	
  its	
  
uniqueness	
  and/or	
  distinctiveness	
  vis	
  a	
  vis	
  its	
  competition,	
  its	
  trade	
  dress,	
  how	
  it	
  is	
  
promoted,	
  whether	
  its	
  business	
  model	
  is	
  business-­‐to-­‐consumer	
  or	
  business-­‐to-­‐business,	
  
and	
  many	
  other	
  factors.	
  For	
  example,	
  for	
  an	
  industrial	
  product,	
  the	
  quality	
  of	
  its	
  sales	
  force	
  
is	
  consequential;	
  for	
  a	
  consumer	
  product,	
  the	
  quantity	
  and	
  quality	
  of	
  its	
  advertising	
  matters	
  
greatly,	
  and	
  for	
  a	
  service,	
  a	
  major	
  issue	
  is	
  the	
  quality	
  of	
  personnel.
Following	
  are	
  three	
  broad	
  factors	
  to	
  consider	
  in	
  valuing	
  a	
  trademark.	
  
1. Valuing	
  the	
  trademark
If,	
  in	
  valuing	
  a	
  brand,	
  one	
  removes	
  the	
  concept	
  of	
  its	
  trademark,	
  what	
  is	
  left?	
  As	
  stated	
  
above,	
  what	
  remains	
  is	
  the	
  product,	
  which	
  may	
  be	
  distinctive	
  in	
  and	
  of	
  itself—the	
  
McDonald	
  French	
  fries	
  come	
  to	
  mind—or	
  it	
  may	
  not	
  be	
  distinctive	
  vis	
  a	
  vis	
  its	
  competitors	
  
–milk	
  in	
  a	
  carton	
  comes	
  to	
  mind.
	
  
So	
  if	
  one	
  is	
  valuing	
  the	
  trademark	
  of	
  a	
  brand	
  of	
  milk,	
  and	
  if	
  the	
  milk	
  itself	
  has	
  no	
  perceived	
  
distinctiveness	
  compared	
  to	
  competing	
  brands	
  of	
  milk,	
  then	
  the	
  value	
  of	
  the	
  trademark	
  and	
  
the	
  value	
  of	
  the	
  brand	
  are	
  equal.	
  	
  However,	
  if	
  one	
  is	
  valuing	
  the	
  first	
  toothpaste	
  brand	
  that	
  
contains	
  a	
  whitening	
  agent,	
  then	
  that	
  distinctive	
  brand	
  attribute	
  justifies	
  a	
  higher	
  price	
  
point	
  against	
  its	
  competitors.	
  	
  Once	
  that	
  difference	
  based	
  on	
  a	
  product	
  characteristic	
  is	
  
calculated,	
  it	
  can	
  be	
  subtracted	
  from	
  the	
  total	
  brand	
  value,	
  with	
  the	
  remainder	
  the	
  value	
  
attributed	
  to	
  the	
  trademark.	
  
	
  
In	
  short,	
  trademark	
  value	
  can	
  be	
  calculated	
  by	
  measuring	
  the	
  value	
  of	
  the	
  product	
  itself	
  
against	
  like	
  competing	
  products	
  and	
  subtracting	
  its	
  incremental	
  value	
  from	
  the	
  total	
  value	
  
of	
  the	
  brand,	
  leaving	
  the	
  remainder	
  for	
  the	
  trademark.	
  
	
  
	
  
	
  

3
Caution:	
  A	
  Trademark	
  Can’t	
  Be	
  Valued	
  As	
  A	
  Brand	
  
	
  
2. Consumer	
  or	
  business	
  product	
  or	
  service
As	
  a	
  general	
  rule,	
  a	
  trademark	
  of	
  a	
  consumer	
  product	
  comprises	
  a	
  higher	
  proportion	
  of	
  a	
  
brand’s	
  value	
  than	
  does	
  the	
  trademark	
  of	
  an	
  industrial	
  product.	
  The	
  major	
  reason	
  for	
  this	
  is	
  
that	
  consumers	
  are	
  likely	
  to	
  be	
  introduced	
  to	
  a	
  branded	
  product	
  by	
  advertising,	
  which	
  is	
  
not	
  the	
  case	
  with	
  a	
  business-­‐to-­‐business	
  product.	
  In	
  the	
  latter	
  case,	
  the	
  price	
  points	
  are	
  
higher	
  and	
  the	
  introduction	
  is	
  accomplished	
  through	
  a	
  sales	
  force.	
  Thus,	
  name	
  recognition	
  
is	
  most	
  important	
  as	
  a	
  consumer	
  breezes	
  by	
  supermarket	
  shelves.	
  
In	
  the	
  much	
  higher	
  ticket	
  price	
  of	
  a	
  business-­‐to-­‐business	
  product,	
  the	
  buyer	
  is	
  heavily	
  
influenced	
  by	
  previous	
  experience	
  with	
  the	
  brand	
  and	
  possibly	
  with	
  other	
  brands	
  from	
  the	
  
same	
  company.	
  	
  Obviously,	
  the	
  decision	
  in	
  a	
  business-­‐purchasing	
  situation	
  may	
  involve	
  a	
  
committee	
  on	
  the	
  customer	
  side	
  and	
  the	
  depth	
  of	
  technical	
  expertise	
  on	
  the	
  seller’s	
  side.	
  
Here,	
  advertising	
  is	
  less	
  consequential.	
  
	
  
3. A	
  simple	
  trademark	
  valuation	
  research	
  design
Given	
  the	
  increasing	
  attention	
  to	
  placing	
  intangibles	
  on	
  a	
  company’s	
  balance	
  sheet,	
  a	
  
number	
  of	
  consulting	
  firms	
  are	
  available,	
  many	
  of	
  which	
  offer	
  their	
  own	
  approach—often	
  
somewhat	
  complicated—to	
  valuing	
  a	
  brand,	
  thereby	
  providing	
  a	
  ceiling	
  for	
  the	
  value	
  of	
  its	
  
trademark.	
  For	
  those	
  not	
  in	
  a	
  Coca-­‐Cola	
  or	
  Intel	
  financial	
  realm,	
  one	
  relatively	
  inexpensive	
  
way	
  to	
  measure	
  the	
  value	
  of	
  a	
  trademark	
  is	
  by	
  placing	
  your	
  product	
  in	
  a	
  lineup	
  with	
  
competing	
  products	
  and	
  asking	
  consumers	
  how	
  much	
  they	
  would	
  reasonable	
  pay	
  to	
  buy	
  
your	
  product	
  if	
  a	
  standard	
  product	
  sold	
  for	
  X.	
  
This	
  is	
  known	
  as	
  a	
  price	
  premium	
  approach	
  to	
  valuing	
  a	
  brand,	
  as	
  compared	
  to	
  more	
  highly	
  
technical	
  accounting	
  methods,	
  or	
  those	
  that	
  value	
  brand	
  as	
  a	
  proportion	
  of	
  market	
  
capitalization.
An	
  actual,	
  although	
  somewhat	
  disguised,	
  	
  assignment	
  by	
  the	
  author	
  was	
  to	
  calculate	
  the	
  
trademark	
  value	
  of	
  an	
  automobile	
  tire.	
  The	
  design	
  called	
  for	
  showing	
  a	
  lineup	
  of	
  four	
  tires	
  
where	
  the	
  Goodyear	
  tire	
  was	
  priced	
  as	
  the	
  price	
  anchor	
  at	
  $125	
  and	
  the	
  consumer	
  was	
  
asked	
  what	
  he	
  or	
  she	
  might	
  pay	
  for	
  the	
  test	
  tire	
  and	
  the	
  two	
  others	
  included	
  as	
  controls.	
  
One	
  interesting	
  finding	
  was	
  that	
  the	
  test	
  tire’s	
  perceived	
  value	
  was	
  different	
  depending	
  on	
  
geographic	
  location:	
  it	
  was	
  higher	
  where	
  it	
  maintained	
  a	
  higher	
  market	
  share.	
  In	
  the	
  New	
  
York	
  metropolitan	
  area,	
  where	
  the	
  test	
  tire	
  had	
  a	
  9%	
  market	
  share,	
  its	
  expected	
  retail	
  price	
  
averaged	
  $109,	
  as	
  was	
  the	
  case	
  in	
  other	
  geographic	
  areas	
  with	
  similar	
  market	
  shares.	
  By	
  
contrast,	
  in	
  most	
  Western	
  states,	
  where	
  the	
  test	
  tire’s	
  market	
  share	
  was	
  only	
  5%,	
  the	
  price	
  
consumers	
  expected	
  to	
  pay	
  was	
  $94.	
  Presumably,	
  then	
  the	
  value	
  of	
  the	
  trademark	
  would	
  
vary	
  as	
  the	
  brand	
  value	
  varied.
The	
  same	
  test	
  could	
  be	
  employed	
  for	
  toothpaste,	
  packaged	
  bread,	
  branded	
  clothing	
  or	
  any	
  
other	
  widely	
  available	
  standardized	
  consumer	
  products.	
  Because	
  many	
  industrial	
  products	
  
may	
  not	
  be	
  standardized,	
  it	
  is	
  not	
  clear	
  if	
  such	
  a	
  test	
  would	
  be	
  worthwhile.	
  However,	
  it	
  
might	
  be	
  employed	
  for	
  services	
  such	
  as	
  hospital	
  stays,	
  eye	
  examinations,	
  oil	
  changes,	
  or	
  
package	
  delivery.	
  	
  
	
  
	
  
	
  
4
Caution:	
  A	
  Trademark	
  Can’t	
  Be	
  Valued	
  As	
  A	
  Brand	
  
	
  
	
  
About	
  Endeavor	
  
	
  
Endeavor	
  Management,	
  is	
  an	
  international	
  management	
  consulting	
  firm	
  that	
  
collaboratively	
  works	
  with	
  their	
  clients	
  to	
  achieve	
  greater	
  value	
  from	
  their	
  
transformational	
  business	
  initiatives.	
  Endeavor	
  serves	
  as	
  a	
  catalyst	
  by	
  providing	
  pragmatic	
  
methodologies	
  and	
  industry	
  expertise	
  in	
  Transformational	
  Strategies,	
  Operational	
  
Excellence,	
  Organizational	
  Effectiveness,	
  and	
  Transformational	
  Leadership.	
  
	
  
Our	
  clients	
  include	
  those	
  responsible	
  for:	
  
•	
  
Business	
  Strategy	
  
•	
  
Marketing	
  and	
  Brand	
  Strategy	
  
•	
  
Operations	
  
•	
  
Technology	
  Deployment	
  
•	
  
Strategic	
  Human	
  Capital	
  
•	
  
Corporate	
  Finance	
  
	
  
The	
  firm’s	
  40	
  year	
  heritage	
  has	
  produced	
  a	
  substantial	
  portfolio	
  of	
  proven	
  methodologies,	
  
deep	
  operational	
  insight	
  and	
  broad	
  industry	
  experience.	
  	
  This	
  experience	
  enables	
  our	
  team	
  
to	
  quickly	
  understand	
  the	
  dynamics	
  of	
  client	
  companies	
  and	
  markets.	
  	
  Endeavor’s	
  clients	
  
span	
  the	
  globe	
  and	
  are	
  typically	
  leaders	
  in	
  their	
  industry.	
  	
  
	
  
Gelb	
  Consulting	
  Group,	
  a	
  wholly	
  owned	
  subsidiary,	
  monitors	
  organizational	
  performance	
  
and	
  designs	
  winning	
  marketing	
  strategies.	
  	
  Gelb	
  helps	
  organizations	
  focus	
  their	
  marketing	
  
initiatives	
  by	
  fully	
  understanding	
  customer	
  needs	
  through	
  proven	
  strategic	
  frameworks	
  to	
  
guide	
  marketing	
  strategies,	
  build	
  trusted	
  brands,	
  deliver	
  exceptional	
  experiences	
  and	
  
launch	
  new	
  products.	
  
	
  
Our	
  websites:	
  
www.endeavormgmt.com	
  
www.gelbconsulting.com	
  
www.gulfresearch.com	
  

	
  
5

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A Trademark Can't Be Valued As A Brand

  • 1. Caution:  A  Trademark  Can’t  Be  Valued  as  a  Brand           Gelb Consulting Group, Inc. 1011 Highway 6 South Suite 120 Houston, Texas 77077   P + 281.759.3600 F + 281.759.3607 www.gelbconsulting.com An Endeavor Management Company  
  • 2. Caution:  A  Trademark  Can’t  Be  Valued  As  A  Brand       One  of  the  most  vexing  issues  facing  intellectual  property  attorneys  is  establishing  a  value   after  a  trademark  has  been  infringed  or  diluted  or  sold,  or  when  an  organization  wishes  to   arrange  a  licensing  fee.  Yes,  a  brand  may  be  the  most  valuable  asset  of  a  company.  But  what   is  the  trademark  worth?     The  central  point  to  be  made  is  that,  contrary  to  widespread  use  of  both  terms  as   synonyms,  a  trademark  is  an  identifier  or  “face”  of  the  brand,  not  the  brand  itself.    The   American  Heritage  Dictionary,  Second  College  Edition,  made  this  mistake  when  it  gave  as   the  first  definition  of  the  term  brand,  the  following:  “A  trademark  or  distinctive  name   identifying  a  product  or  a  manufacturer.”     Many  use  the  terms  brand  and  trademark  interchangeably.    As  a  writer  on  trademark   valuation  notes  in  an  e-­‐mail  to  me,  “I  find  both  businesspeople  and  attorneys  conflate  the   terms  brand  and  trademarks”  (Michael  J.  Freno,  Kenyon  and  Kenyon  LLP,  author  of   “Trademark  Valuation:  Preserving  Brand  Equity,”  The  Trademark  Reporter,  September-­‐ October  2007.    However,  they  should  not  make  that  mistake.  The  value  of  a  trademark  is  a   fraction  of  the  value  of  a  brand,  and  both  the  total  brand  value  and  the  trademark’s   proportional  value  must  be  estimated  when  legal  issues  arise.     Skeptics  may  ask,  what  is  the  brand  if  not  its  trademark?  The  answer  is,  the  product  itself   and  its  entire  range  of  attendant  attributes.  Without  the  product,  there  is  no  brand  -­‐-­‐  and   no  enterprise,  one  might  add.     In  today’s  world  almost  everything  is  branded,  starting  from  the  original  use  as  a  simple   branding  iron  to  much  more  expansive  applications,  such  as  the  following:  “The  Olympics   are  branding  Canada  to  the  world,  but  they  are  also  branding  Canada  to  the  Canadians,”   said  Michael  Ignatieff,  leader  of  the  Liberal  Party  of  Canada,  quoted  in  The  New  York  Times.   What  might  a  brand  be  worth?  The  president  of  Coca-­‐Cola,  the  most  valuable  brand  in  the   world  (valued  at  $68.7  billion)  once  famously  said  that  that  if  all  their  buildings  and   equipment  burned  down,  he  could  get  a  loan  to  rebuild  based  on  the  value  on  the  brand   alone.  But  if  the  brand  was  taken  away,  the  company  couldn’t  recover.    On  the  negative  side   of  brand  value,  the  estimated  value  of  Citi’s  brand  went  from  $20.1  billion  in  2008  to  $10.2   billion,  according  to  an  article  in  Business  Week,  “100  Best  Global  Brands.”     But  how  much  is  the  trademark  of  Coca-­‐Cola  or  Citi  worth?    Certainly  not  as  much  as  the   brand  because  the  trademark  can  be  changed  without  necessarily  diminishing  the  value  of   the  brand.    It  is  not  rare  for  marketers  to  tweak  the  product  name  and  even  more  common   for  them  to  change  some  facet  of  their  trade  dress,  a  brand  signal  that  can  be  a  logo,  color,   sound,  or  “look  and  feel”  of  a  tangible  product.       Perhaps  here  it  is  worthwhile  to  define  the  meaning  of  these  two  intangibles,  recognizing   because  they  are  intangible,  honest  folks  may  differ.  But  it  is  important  to  offer  a  starting   point  because  of  a  nascent  movement  to  require  companies  to  value  their  brands  on  their   balance  sheets.  Today  relatively  new  accounting  standards  require  brand  evaluation  only   2
  • 3. Caution:  A  Trademark  Can’t  Be  Valued  As  A  Brand     when  a  company  is  merged,  bought,  or  sold  (Financial  Accounting  Standards  Board  rules   157  and  159.)      However,  given  this  precedent,  new  rules  may  be  promulgated  to  value  a   company’s  brands  routinely.       Basically,  a  brand  can  be  defined  as  the  sum  of  its  product’s  or  service’s  attributes,  its   history,  reputation  and  all  the  ways  it’s  been  experienced  by  whatever  buyers  it  targets.    So   of  course  that  includes  its  trademark,  whether  expressed  as  a  corporate  or  product  name   or  logo,  as  a  component  of  the  brand.  Whether  it  is  15%  component  or  a  50%  component   or  something  in  between  depends  on  its  specific  situation.   The  balance  of  this  article  points  to  ways  the  trademark  itself  can  comprise  a  smaller  or   larger  component  of  the  value  of  the  brand.    For  example,  consider  the  longevity  of  the  Coca-­‐Cola  brand  and  its  worldwide  distribution.     But  distinguish  that  coverage  from  a  3-­‐year-­‐old  restaurant  famous  for  its  menu  in  a  certain   part  of  a  city.  In  addition  to  geographic  reach,  the  value  of  a  brand  is  modified  by  its   uniqueness  and/or  distinctiveness  vis  a  vis  its  competition,  its  trade  dress,  how  it  is   promoted,  whether  its  business  model  is  business-­‐to-­‐consumer  or  business-­‐to-­‐business,   and  many  other  factors.  For  example,  for  an  industrial  product,  the  quality  of  its  sales  force   is  consequential;  for  a  consumer  product,  the  quantity  and  quality  of  its  advertising  matters   greatly,  and  for  a  service,  a  major  issue  is  the  quality  of  personnel. Following  are  three  broad  factors  to  consider  in  valuing  a  trademark.   1. Valuing  the  trademark If,  in  valuing  a  brand,  one  removes  the  concept  of  its  trademark,  what  is  left?  As  stated   above,  what  remains  is  the  product,  which  may  be  distinctive  in  and  of  itself—the   McDonald  French  fries  come  to  mind—or  it  may  not  be  distinctive  vis  a  vis  its  competitors   –milk  in  a  carton  comes  to  mind.   So  if  one  is  valuing  the  trademark  of  a  brand  of  milk,  and  if  the  milk  itself  has  no  perceived   distinctiveness  compared  to  competing  brands  of  milk,  then  the  value  of  the  trademark  and   the  value  of  the  brand  are  equal.    However,  if  one  is  valuing  the  first  toothpaste  brand  that   contains  a  whitening  agent,  then  that  distinctive  brand  attribute  justifies  a  higher  price   point  against  its  competitors.    Once  that  difference  based  on  a  product  characteristic  is   calculated,  it  can  be  subtracted  from  the  total  brand  value,  with  the  remainder  the  value   attributed  to  the  trademark.     In  short,  trademark  value  can  be  calculated  by  measuring  the  value  of  the  product  itself   against  like  competing  products  and  subtracting  its  incremental  value  from  the  total  value   of  the  brand,  leaving  the  remainder  for  the  trademark.         3
  • 4. Caution:  A  Trademark  Can’t  Be  Valued  As  A  Brand     2. Consumer  or  business  product  or  service As  a  general  rule,  a  trademark  of  a  consumer  product  comprises  a  higher  proportion  of  a   brand’s  value  than  does  the  trademark  of  an  industrial  product.  The  major  reason  for  this  is   that  consumers  are  likely  to  be  introduced  to  a  branded  product  by  advertising,  which  is   not  the  case  with  a  business-­‐to-­‐business  product.  In  the  latter  case,  the  price  points  are   higher  and  the  introduction  is  accomplished  through  a  sales  force.  Thus,  name  recognition   is  most  important  as  a  consumer  breezes  by  supermarket  shelves.   In  the  much  higher  ticket  price  of  a  business-­‐to-­‐business  product,  the  buyer  is  heavily   influenced  by  previous  experience  with  the  brand  and  possibly  with  other  brands  from  the   same  company.    Obviously,  the  decision  in  a  business-­‐purchasing  situation  may  involve  a   committee  on  the  customer  side  and  the  depth  of  technical  expertise  on  the  seller’s  side.   Here,  advertising  is  less  consequential.     3. A  simple  trademark  valuation  research  design Given  the  increasing  attention  to  placing  intangibles  on  a  company’s  balance  sheet,  a   number  of  consulting  firms  are  available,  many  of  which  offer  their  own  approach—often   somewhat  complicated—to  valuing  a  brand,  thereby  providing  a  ceiling  for  the  value  of  its   trademark.  For  those  not  in  a  Coca-­‐Cola  or  Intel  financial  realm,  one  relatively  inexpensive   way  to  measure  the  value  of  a  trademark  is  by  placing  your  product  in  a  lineup  with   competing  products  and  asking  consumers  how  much  they  would  reasonable  pay  to  buy   your  product  if  a  standard  product  sold  for  X.   This  is  known  as  a  price  premium  approach  to  valuing  a  brand,  as  compared  to  more  highly   technical  accounting  methods,  or  those  that  value  brand  as  a  proportion  of  market   capitalization. An  actual,  although  somewhat  disguised,    assignment  by  the  author  was  to  calculate  the   trademark  value  of  an  automobile  tire.  The  design  called  for  showing  a  lineup  of  four  tires   where  the  Goodyear  tire  was  priced  as  the  price  anchor  at  $125  and  the  consumer  was   asked  what  he  or  she  might  pay  for  the  test  tire  and  the  two  others  included  as  controls.   One  interesting  finding  was  that  the  test  tire’s  perceived  value  was  different  depending  on   geographic  location:  it  was  higher  where  it  maintained  a  higher  market  share.  In  the  New   York  metropolitan  area,  where  the  test  tire  had  a  9%  market  share,  its  expected  retail  price   averaged  $109,  as  was  the  case  in  other  geographic  areas  with  similar  market  shares.  By   contrast,  in  most  Western  states,  where  the  test  tire’s  market  share  was  only  5%,  the  price   consumers  expected  to  pay  was  $94.  Presumably,  then  the  value  of  the  trademark  would   vary  as  the  brand  value  varied. The  same  test  could  be  employed  for  toothpaste,  packaged  bread,  branded  clothing  or  any   other  widely  available  standardized  consumer  products.  Because  many  industrial  products   may  not  be  standardized,  it  is  not  clear  if  such  a  test  would  be  worthwhile.  However,  it   might  be  employed  for  services  such  as  hospital  stays,  eye  examinations,  oil  changes,  or   package  delivery.           4
  • 5. Caution:  A  Trademark  Can’t  Be  Valued  As  A  Brand       About  Endeavor     Endeavor  Management,  is  an  international  management  consulting  firm  that   collaboratively  works  with  their  clients  to  achieve  greater  value  from  their   transformational  business  initiatives.  Endeavor  serves  as  a  catalyst  by  providing  pragmatic   methodologies  and  industry  expertise  in  Transformational  Strategies,  Operational   Excellence,  Organizational  Effectiveness,  and  Transformational  Leadership.     Our  clients  include  those  responsible  for:   •   Business  Strategy   •   Marketing  and  Brand  Strategy   •   Operations   •   Technology  Deployment   •   Strategic  Human  Capital   •   Corporate  Finance     The  firm’s  40  year  heritage  has  produced  a  substantial  portfolio  of  proven  methodologies,   deep  operational  insight  and  broad  industry  experience.    This  experience  enables  our  team   to  quickly  understand  the  dynamics  of  client  companies  and  markets.    Endeavor’s  clients   span  the  globe  and  are  typically  leaders  in  their  industry.       Gelb  Consulting  Group,  a  wholly  owned  subsidiary,  monitors  organizational  performance   and  designs  winning  marketing  strategies.    Gelb  helps  organizations  focus  their  marketing   initiatives  by  fully  understanding  customer  needs  through  proven  strategic  frameworks  to   guide  marketing  strategies,  build  trusted  brands,  deliver  exceptional  experiences  and   launch  new  products.     Our  websites:   www.endeavormgmt.com   www.gelbconsulting.com   www.gulfresearch.com     5