Wednesday, April 6, 2011

How worth are intangible assets?

There is certainly a widespread acceptance that intangible assets such as brands, talent, speed, accountability are critical to the future prospects of a business. They may not be visible but it is important for companies to take stock of intangible assets and find ways to capture and preserve them. Why are intangible assets important? Strong brands influence customers decision making also ensuring premium prices can be charged. In consumer business this represents a guarantee of quality and in case of luxury brands, consumer even derive social status from the brand. Intangible assets therefore provide competitive advantage, but they demand special management. It highly relies on the ability of the top management to deliver its strategy, brands and performance of key employees. Intangible assets can be converted into tangible assets ultimately generating revenues. Can intangible assets be really managed? There is a significant management focus on brands to ensure that the brand is epitomized in all aspects. Brands are constantly adapted and refreshed to respond to seasons, trends and customer’s changing needs, thereby increasing their value. Customer relationship is important for many companies but there scarcity of information about the key customers. The company should develop key performance indicators to monitor the performance of the intangible assets. Financial KPI’s are the drivers that will help analyze full scale brand evaluation. For customer relationships the KPI’s could be average revenue per customer, frequency of purchase. They should conduct frequent assessments of their brand value. The company could also allocate a value to the brand or other intangible asset on a regular basis. What do you think is the best way to mitigate risks for intangible assets?

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