Certain aspects of business are easy to measure. At quarterly meetings and investor updates, executives can point to concrete items like personnel, new customers, revenue, and profits to illustrate the company’s progress and growth. Other things, like brand, are more slippery, but no less important. Brand value is difficult to measure, but that doesn’t mean it can’t be done. Indeed, it not only can be done – but it must also.
Measuring brand value is crucial for companies to understand the overall worth and impact of their brand. With quantifiable metrics, brands can track performance over time and benchmark against competitors. However, calculating brand value can be challenging as it encompasses both quantitative and qualitative factors. This article will provide a step-by-step guide to measuring brand value.
Create a Valuation Scope
The first step is to identify the valuation scope – which aspects of the brand will be measured. Common areas examined in brand valuation include:
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Brand awareness – how well the brand is known, including recall and recognition rates
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Brand associations – what qualities, values and personality traits consumers associate with the brand
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Perceived quality – how consumers judge the superiority and excellence of the brand
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Brand loyalty – how likely consumers are to choose the brand over competitors.
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Proprietary brand assets – trademarks, patents, channel relationships that provide a competitive advantage.
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Brand carrying value – the expected future revenue attributed to the brand itself.
Clearly defining the scope provides focus for the valuation and allows benchmarks to track performance over time.
Choose a Valuation Approach
There are three main approaches to measure brand value:
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Cost-based – Calculates the investment made to build the brand. This includes development costs and marketing expenditures.
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Market-based – Examines the brand’s market value and metrics like market share and price premium compared to competitors.
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Income-based – Analyzes the future income attributed to the brand itself. This involves isolating brand-driven earnings.
Each approach has pros and cons. Cost-based is relatively simple to calculate but doesn’t reflect ongoing brand strength. Market-based evaluates perception but is dependent on competitors. Income-based is future-facing but involves predictions. Most valuations use a combination of quantitative data from all three approaches.
Determine Brand Equity Strength
A key component of brand valuation is measuring brand equity – the value a brand adds over a generic or unbranded product. Strong brand equity indicates consumers have positive perceptions and are willing to pay more for the brand.
Brand equity strength can be evaluated through:
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Brand audits – Detailed examinations of brand awareness, associations, personality and loyalty metrics based on consumer surveys and focus groups.
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Blind vs. branded product tests – Comparing preferences between unlabelled and branded products. A strong brand will be chosen more often when its branding is visible.
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Conjoint analysis – Testing how much value individual brand elements like logos and taglines add to consumer perceptions.
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Price premiums – The extra amount consumers will pay for the branded over a base or private label product.
Evaluate Purchasing Decisions
Understanding how brand perceptions affect purchasing requires evaluating:
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Consideration – Is the brand included in the initial consideration set? Strong brands have high awareness and relevance to be considered.
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Preference – Where does the brand rank for consumer preference compared to competitors? Preference quantifies relative brand equity.
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Conversion – Does consideration and preference translate to actual brand sales? High conversion rates indicate ability to influence purchase decisions.
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Loyalty – How often do consumers purchase the brand? Frequent repurchases demonstrate loyalty strength.
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Price sensitivity – How do sales volumes fluctuate based on price? Strong brands often have lower price elasticity.
Surveys, purchase data, and consumer panels help quantify brand impact across the purchase funnel.
Compare the Brand with Market Competitors
Benchmarking against relevant competitor brands provides context on brand standing and performance. Useful metrics for comparison include:
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Brand awareness and associations – Brand recall, recognition, consideration rates and associated qualities.
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Market share – Overall and category-specific share of sales within a defined market.
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Growth rates – Brand sales and market share growth over time.
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Profitability – Profit margins compared to competitor brands.
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Media share of voice – Brand’s share of overall advertising and media messaging in the market.
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Social media metrics – Followers, engagement, sentiment, reach across social platforms.
Identifying where the brand trails competitors provides areas for improvement, while leading metrics highlight strengths.
Analyze Financial Standings
Financial metrics provide the quantitative basis for brand valuation. Key measures to examine:
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Revenue contribution – The portion of sales attributable to brand reputation rather than other factors like price.
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Profit contribution – The amount of profit derived from the brand itself.
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Brand value contribution – Brand’s contribution to overall company value. Approaches like discounted cash flow analysis quantify this.
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Return on investment – Brand marketing ROI indicates how effectively spending is enhancing brand performance.
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Growth forecasts – Projected future revenue growth based on brand strength provides basis for income-based valuation.
Isolating and forecasting financials driven by the brand reveals its monetary value.
Measuring brand value requires a multidimensional approach combining quantitative data and qualitative consumer perceptions. Valuation provides an objective framework to assess brand strength, track growth over time and identify areas for improvement. With the proper scope, methodology and metrics, companies can better understand and maximize the value of their brand. Regular valuation allows brands to monitor the impact of marketing initiatives and investments in driving growth. In today’s highly competitive landscape, quantifying brand value is imperative for enduring success.
This can be your:
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Trademark, logo, and tagline
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Visual assets
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Marketing and advertising strategy
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Digital assets
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Customer retention
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Social media engagement levels
6 Methods to Measure Your Brand’s Value
Having a definition helps nail things down a bit. And because the definition of brand value can be fuzzy, the challenge of measurement is still a big one. What’s more, brand value will mean different things to different people in different contexts. This doesn’t mean that it’s useless to calculate your brand’s value. What it does mean is that there are several different possible approaches to measuring it. Your company should pick the one that makes the most sense for your identity, circumstances, and goals:
This method calculates brand value based on how much it costs to build the brand. So, you’d add up all the expenses incurred in brand-building from the very beginning. Things like contracts with branding agencies, promotions, trademarks, salaries of employees who focus on brand, marketing, etc. This measurement gives a value based on what you put into your brand. It’s important to remember that it doesn’t necessarily reflect the current brand value in the public sphere. Based on the success of your branding investment, as well as other industry changes, your brand value could be higher or lower than this number.
This method looks estimates the value of your brand based on the current market climate. You can easily assess market-based valuation by looking at the sale price of similar brands. You can also look at valuation, stock performance, or ask leaders in other companies what they would pay for your brand. By gauging a variety of different market measures, you can land on a realistic estimated market value for your brand.
This method looks at the income generated by your brand currently. In other words, what money is your brand bringing in for the company? This takes some discernment, as you need to look at all the financial streams of your company. Then, you must assess which parts can be attributed directly to the reputation and awareness earned by your brand. While it’s tricky to land on a number, it’s a useful frame for understanding brand value.
In some ways, this method is a more specific form of income-based valuation. It compares your brand to non-branded alternatives to decide how much people will pay for a recognized brand. How can you get a clear and specific measure of brand value? By seeing if people pick your brand based on brand identity alone and extrapolating from there.
This method involves assessing the number of current customers, predicting numbers of future customers, and assigning lifetime values to each. This lifetime value can be an average that encompasses the typical customer, or customers in different categories with different values. Customers are a good measure of brand value, as loyal customers stick with a brand they identify with and like.
“Net promoter score,” in essence, is a measure of how well your brand does at inspiring organic, word-of-mouth promotion. You can calculate it by asking customers how likely they are to recommend your brand to someone they know. You can calculate the score by subtracting the percentage of detractors from the percentage of promoters. Do you want someone to recommend a product or service to someone in their community? Well, they need to know, like, and trust the brand, so this is a great measure of brand value.
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How do you assess market value for a brand?
You can easily assess market-based valuation by looking at the sale price of similar brands. You can also look at valuation, stock performance, or ask leaders in other companies what they would pay for your brand. By gauging a variety of different market measures, you can land on a realistic estimated market value for your brand.
How do you calculate brand value?
This method calculates brand value based on how much it costs to build the brand. So, you’d add up all the expenses incurred in brand-building from the very beginning. Things like contracts with branding agencies, promotions, trademarks, salaries of employees who focus on brand, marketing, etc.
How do you measure brand-building costs?
So, you’d add up all the expenses incurred in brand-building from the very beginning. Things like contracts with branding agencies, promotions, trademarks, salaries of employees who focus on brand, marketing, etc. This measurement gives a value based on what you put into your brand.
Should you measure your brand’s value?
All of these methods have pros and cons. This is natural, given the intangible and subjective nature of a brand and its value. Regardless of what method you choose, the exercise of measuring your brand’s value will clearly illustrate its monetary impact on your company.
