Okonkwo Prelims

Ogilvy. This method views brands as a means to an end, the end being higher

earnings, revenues, cash-flows and profits. The significant difference

between this method and that of Interbrand is that the latter puts an absolute

value on brands as intangible assets and represents them on the balance sheet,

while the former indicates that brands cannot be absolutely valuated and

should only feature on the Profit and Loss accounts because their contribution

to a company are clearly represented there. The method use by Ogilvy uses

the regressed Compound Annual Growth Rate (CAGR) to measure strength

through its growth potential and the Capital Asset Pricing Model (CAPM) to

calculate the discount rate of companies with strong brands.

In addition to these methods, several branding experts such as Jean-Noel

Kapferer also propose that different methodologies can be utilized according

to the specific objective of the brand valuation. For example, if a brand is

being valuated in order to generate capital funding from a financial institu-

tion, then it is worthwhile to use a brand valuation method that places an

emphasis on the future earning potential of the brand.

Although the brand valuation methods that have been discussed can be

applied to companies in various sectors, the method that is most relevant for

the luxury sector is that which emphasizes the brand as an asset to companies.

This is because the luxury sector does not only have branding as one of its

core competences but also draws a high percentage of its value from the

power in the concept of branding. The complete branding process, which has

been discussed extensively in this chapter, is represented in Figure 5.4.

The luxury fashion marketing strategy

The process of branding begins from the marketing strategy, where the prod-

ucts and services are created and strategies for their pricing, distribution,

promotion and positioning are devised for the target market(s). Branding and

marketing have a mutually beneficial relationship. Branding is a core aspect

of marketing and also depends on the marketing strategy for its existence

because without products and services (which marketing devises), the brand-

ing process cannot exist. Marketing on the other hand benefits from branding

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luxury fashion branding

Step 1:

Brand concept

Step 4:

Brand positioning

Step 3:

Brand awareness

Step 2:

Brand identity

Step 5:

Brand loyalty

Step 6:

Brand equity

Step 7:

Brand value

Figure 5.4 The luxury fashion branding process