The Miracle of Brand Value Creation: Where Does the Value Come From?

Strong brands are the result of brand value creation within a company. Established brands may lead to higher market share, higher sales volumes, and higher price margins for the respective product or service. In this chapter, we analyze the sources of brand value creation from a functional perspective, both for B2C and B2B markets. We also show that the functions of reducing information cost and risk have a positive impact on the decision of a customer to purchase a product or service by reducing uncertainties in the decision-making (evaluation) process. In addition, the function of symbolic meaning can increase the perceived value of a product or service from a customer’s point of view. Moreover, we provide practical examples of each of these functions. As understanding a brand and its creation is fundamental for valuing intercompany transactions that concern the transfer or use of brands, this chapter outlines the basics of brands and the differences between B2B and B2C by reference to marketing literature. An understanding of the brand concept is prudent for identifying relevant DEMPE functions that are performed by related parties and is helpful to comprehend intercompany transactions related to brands, such as licensing. This basic understanding helps in finding, setting, and defending arm´s length prices for such transactions.