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  • Digg it UP - Comparing Branding To The Accounting Principle Of Goodwill

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    ium to buy a business? An established business normally has an established customer base that knows the business, is familiar with it, and trusts it. This trust factor has worth. A new business may take a long time to develop this type of relationship with its customers. So Goodwill has value
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    When businesses engage in branding, they are trying to increase the value of their products beyond what the market values similar products. Many companies have successfully branded their products. Do you know why people choose Coca-Cola when there are similar sodas on grocery shelves? People trust and are familiar with the Coca-Cola name. They automatically choose Coke. This happens millions of times a day with millions of products and services worldwide. Choices are made based on the familiarity of a brand name.

    Branding may seem like an artificial way to increase the value of a product or service, but that is not the case. Familiarity and trust have worth and value. That is why billions of dollars are spent worldwide on branding.

    Take, for instance, the accounting principle of Goodwill. When a business is sold, an accountant will value the business by taking the purchase price minus the company's book value. The purchase price is normally higher than the book value, or what the company is worth on paper. The difference is called Goodwill. Goodwill is the premium someone would pay to buy a business. Why would someone pay a premium to buy a business? An established business normally has an established customer base that knows the business, is familiar with it, and trusts it. This trust factor has worth. A new business may take a long time to develop this type of relationship with its customers. So Goodwill has value

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    trust and are familiar with the Coca-Cola name. They automatically choose Coke. This happens millions of times a day with millions of products and services worldwide. Choices are made based on the familiarity of a brand name.

    Branding may seem like an artificial way to increase the value of a product or service, but that is not the case. Familiarity and trust have worth and value. That is why billions of dollars are spent worldwide on branding.

    Take, for instance, the accounting principle of Goodwill. When a business is sold, an accountant will value the business by taking the purchase price minus the company's book value. The purchase price is normally higher than the book value, or what the company is worth on paper. The difference is called Goodwill. Goodwill is the premium someone would pay to buy a business. Why would someone pay a premium to buy a business? An established business normally has an established customer base that knows the business, is familiar with it, and trusts it. This trust factor has worth. A new business may take a long time to develop this type of relationship with its customers. So Goodwill has value

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    e of a product or service, but that is not the case. Familiarity and trust have worth and value. That is why billions of dollars are spent worldwide on branding.

    Take, for instance, the accounting principle of Goodwill. When a business is sold, an accountant will value the business by taking the purchase price minus the company's book value. The purchase price is normally higher than the book value, or what the company is worth on paper. The difference is called Goodwill. Goodwill is the premium someone would pay to buy a business. Why would someone pay a premium to buy a business? An established business normally has an established customer base that knows the business, is familiar with it, and trusts it. This trust factor has worth. A new business may take a long time to develop this type of relationship with its customers. So Goodwill has value

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    ss by taking the purchase price minus the company's book value. The purchase price is normally higher than the book value, or what the company is worth on paper. The difference is called Goodwill. Goodwill is the premium someone would pay to buy a business. Why would someone pay a premium to buy a business? An established business normally has an established customer base that knows the business, is familiar with it, and trusts it. This trust factor has worth. A new business may take a long time to develop this type of relationship with its customers. So Goodwill has value
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    ium to buy a business? An established business normally has an established customer base that knows the business, is familiar with it, and trusts it. This trust factor has worth. A new business may take a long time to develop this type of relationship with its customers. So Goodwill has value.

    Goodwill has value just as a brand has value. It’s no wonder billions of advertising and marketing dollars are spent on branding worldwide.

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