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Executive Summary
The authors develop and validate a conditional multiplier approach for valuing branded businesses. The approach enhances traditional multiplier-based valuation by explicitly incorporating brand characteristics into the model. The authors present theoretical arguments why, develop a model to demonstrate how, and provide an empirical illustration showing that brand assets are not fully reflected in contemporaneous margins, and therefore valuation accuracy can be improved by incorporating information about the properties of the firm’s brand asset directly into a valuation framework. The study covers seven sectors—(1) industrial, (2) finance, (3) retail and apparel, (4) high technology, (5) consumer nondurables, (6) consumer durables, and (7) travel and transport—and finds that brand metrics have statistically significant associations with valuation multipliers and add incremental explanatory power to accounting variables in explaining valuation multipliers. Out-of-sample analysis shows a 16% improvement in the mean absolute error for predictions that take into account brand metrics compared with predictions based on accounting variables alone.

Biography
Natalie Mizik is Gantcher Associate Professor of Business at the Columbia University Graduate School of Business, where she has been on the faculty since 2002. She holds a PhD in Business Administration from University of Washington, Seattle, and an MS in Economics from MGIMO University, Moscow. Her research focuses on financial implications of managerial decision making and on valuation of intangible assets. Her research has been recognized by the Marketing Science Institute (MSI Young Scholar’s Program 2005, MSI Grant Nos. 4-1316 and 4-1455) and ISBM (2001 fellowship). Her work has appeared in Journal of Marketing, Journal of Marketing Research, Marketing Letters, Marketing Science, Management Science, and Harvard Business Review. Natalie teaches core and elective marketing courses to MBA and executive MBA students.

Robert Jacobson is Professor of Marketing at the University of Washington, where he has been a faculty member since 1984. He received his BA and PhD in Economics from the University of California, Berkeley. His research interest is in the area of marketing strategy; his current work focuses on the interactions between firm strategy and the financial markets. Professor Jacobson’s work has appeared in various outlets, ranging from Journal of Marketing to Journal of Accounting and Economics to the Wall Street Journal. He is a two-time winner of Journal of Marketing's Alpha Kappa Psi Award for research contributing to the advancement of the practice of marketing.

Journal of Marketing, Volume 73, Number 6, November 2009
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