I’ve seen over the years that brand managers and CCOs who are responsible for the brand are mostly unaware of this mechanism – they simply don’t know that it exists. It’s not a matter of understanding the process, that’s for the heads of tax and finance, but it is a matter of knowing the existence of such a process, to enable you to approach your head of tax to learn how they go about it. They will be happy to tell you how the internal charge works and, more importantly, on what brand value it’s been based! The beauty here is that if you take the brand value that’s been used for the transfer-pricing charge (internal for tax), and compare this with the brand values that the brand valuation firms publish, you’ll have a great bandwidth of real value that your brand represents. This will greatly increase the relevance of your internal conversations about the real value of the brand and, accordingly, the investment budgets you require to drive that value.
Benefits of internal corporate brand licensing
When looking at the internal use of corporate brand licensing, the advantages are evident:
• Central governance and control on the companies’ most valuable intangible asset: the brand.
• Obtaining an understanding of the internal valuation of the brand, from the heads of tax and finance.
• Changing the paradigm around the accounting for brand – shifting from cost to profit, which generates value.
• Legal contracts between a licensor and licensees ensure and enable discussions at arm’s length about the rights and obligations of both parties. This governance is quite a contrast to a central brand management function that governs the brand in a larger organisation, without having a clear mandate, which often leads to a lot of discussions triaging and negotiations as a consequence – all leading to a less orchestrated brand experience.
• Great preparation and governance to begin deploying corporate brand licensing with external parties, either in adjacent geographies, or to extent the current use of the brand across other categories.
Orchestrating brand governance
Apart from these valuable financial engineering considerations, there’s an even better reason to look at increasing governance for corporate brands: the changing paradigm on how to manage brands to be fit for the future. Whereas brand used to be ‘simple’ corporate identities, consisting of simple elements like a logo, colour, font and possibly tagline, it has now become an omnichannel and omnipresent brand experience. Managing or policing that has become impossible and ‘orchestration’ of that experience is the new way to go. This is all food for thought for my next blog: how to orchestrate brand governance!
Please let me know your thoughts or considerations, I’m always up for a good discussion or chat.
*This article was featured by Brandingmag.