Thought Leadership on Intellectual Property as a Business asset presented by IP Works, PLLC.
Apple, Louis Vuitton, Nike and Coca-Cola. What do they have in common? Their trademarks are worth over $20 billion dollars – thanks to their leadership teams making smart decisions about them.
Companies with strategic and proactive approaches to branding and trademarks add significant value to their bottom line year after year. They develop their trademark portfolios into assets that drive revenue and deliver high multiples when they are sold.
Identifying potential trademarks
The first step is realizing that trademarks are not just your house brand and your logo. Anything that customers recognize as an identifier of your company is a trademark. There are many things you may not realize are your business’s trademarks: special colors or designs, unique naming schemes for product lines, custom smells or sounds, and even stores, trucks, products or packaging that have particular looks.
However, not all of your business’s trademarks are equal in value. As with any other business decision, your company should only invest in trademarks that are valuable.
How to identify which trademarks are valuable
The value of a trademark is a function of the business’s revenues. The higher the revenues connected with that trademark, the more valuable it is to the business.
Here is a useful rule of thumb to follow when trying to determine whether an identifier (mark) is valuable:
- How much would it cost to change the mark if forced to do so?
- Consider out of pocket cost – changing marketing collateral, domains, signage, packaging, websites, etc.
- Consider how long your company has used the mark – the cost to re-educate your customers and community to recognize the new identifier and forget about the old one. (For example: marks you just started using cost much less to change than marks that are well-established in your industry)
- Consider opportunity cost – investing company resources in changing the mark instead of producing value.
- Consider reputational cost and morale drain – being forced to change the mark to avoid a lawsuit, and the possibility of embarrassing media coverage.
- What would happen if you could not prevent competitors from using your mark?
- Consider the effect on revenue – sales lost to customers who are looking for your company and buy from a competitor instead (confusion).
- Consider online confusion – social media and internet searching delivering customers and prospects to others instead of your company.
- Consider reputational cost – if others using your company’s marks cheat customers or deliver goods or services of lesser quality.
- Consider marketing cost – trying to stand out from others using your mark
- Consider time – would these effects get better or worse over time?
- How much would the mark be worth if you could prevent others from using it?
- Consider the value of protecting your goodwill – trademarks keep your marks distinctive, which adds value to your company.
- Consider marketing savings – unique marks that cannot be copied help your customers identify you easily and allow customers to buy with confidence.
- Consider royalty revenue – if the mark has a loyal following, others will pay you to use it
Most executives find that when they apply this valuation analysis they have an easy time separating the critical marks from the marks they do not care about. By applying this analysis early and often, executives gain insights that help them focus company resources on their valuable trademarks, while avoiding a diversion of resources on less significant identifiers.
The first step toward becoming the next Apple, Louis Vuitton, Nike or Coca-Cola is to understand which trademarks are the most valuable to your business, and then be proactive about protecting and leveraging them.
For a spreadsheet to help determine the value of your company’s trademarks click here.