We live in a very competitive world of 21st century where marketers are using different techniques to survive in this competitive environment. You won’t find any niche where people aren’t already working in it. However, branding is also one of those tools which give you a competitive edge while launching a new product. Now, we have to understand what brand is, its importance how it works.
What is Brand Value?
Branding is a recently emerged marketing strategy where the focus is on building a corporate brand instead of just a product brand. Branding strategy, however, is usually developed by the CEO and higher management of an organization. It’s above the pay grade of the marketing staff because it involves the whole image of the corporate brand.
In the past, it was difficult for approval of brand budgeting, but nowadays, brand value expense is accepted. Some brands have been in the market for the past fifty years like Coca Cola, Gillette, Nestle, Goodyear, etc. Now, these brands are recognized at a global level and they become so powerful that their presence can make or break the market.
In simple words, brand value is the net worth and value of the brand in the brand compared to other brands.
Importance of Brand Value
When we look at the multi-billion-dollar brands like Google, Apple, and Samsung; they have a powerful impact in the impact. Different people see the worth of your brand differently, but it’s important to know the net worth and value of your brand; because it gives you a competitive advantage in the market.
Knowing your brand value helps you in many ways like if you’re planning to merge or sell your business. Or you’re going to the investors for a loan, and then it’d be impossible for them to decline because of your current brand value.
Brand Value vs. Brand Equity
A brand is just limited to the name, logo or design of the company; brand equity goes much deeper than the surface and monetary value of a company. It’s the promising and emotional value of your company perceived by the people.
Brand equity is the perceived value of a customer based on their attachment, memories and emotional experience with the brand.
Brand value, on the other hand, is the calculation of brand in monetary terms; or the worth of brand in the market.
Brand equity shows you the success of a brand because more people would talk about it. The brand value will provide you the actual finances, sale value of the brand in the market.
Factors Affecting Brand Value
There are some factors which usually affect the brand value, and they’re as follows;
Brand loyalty is the deep emotional attachment of the customer towards certain brands; when a company makes a major change in the price or the product composition. Then the loyalty of the customer becomes dual and makes them switch the brands. As the loyalty of the brand among customers’ increases, then it becomes less likely for the customer to switch brands.
If the marketing strategy of a company is good; and the company successfully spread its message in the awareness stage of marketing. However, when a customer enters the market for shopping, and then it becomes most likely that he’d choose the product which he’s already with; then the product which he has never heard before.
There are certain images and labels about the quality of the product which are usually associated with some brands. They also play a very important role to attract the customer to a certain brand. It is because not every customer is going to read the whole specification details of the product. They just see the brand and make the decision.
Therefore, the perceived quality of the brand has to be good. It doesn’t matter whatever the context is, they perceive the value of the brand should be good in every context.
Certain qualities are usually associated with some brand; for instance, iPhones have a perception of technological superiority in the minds of the customer. Whenever a potential customer is looking for a good tech phone, then he’d always prefer the iPhones because of the perception he already has in his mind. Competitors can’t compete with such brand perception.
How to Calculate Brand Value
Now, the question is how to calculate the worth and value of the brand because it’s something intangible. It may seem a simple question, but the actual calculation of the brand’s worth is very difficult.
There are certain things to remember when you have to calculate a brand’s importance or worth; line of business in which the brand is in, history, and how the customers see brand image. It could be done by some other ways like;
Cost-Based Brand Valuation
Cost-based valuation means that how much amount cost has been incurred, or the amount of money spent on establishing and building the brand. It could also include things like;
- History of expenses
- License, registration and trademark cost
- Promotional and advertising cost
It tells you the list of expenses and the amount of money you incurred for the brand. It doesn’t mean that this would also be the current value of the brand. It just gives you the estimate whether you’re a new brand or an old one. When the perception of your brand changes, then the value of your brand would increase.
Market-Based Brand Valuation
Market-based valuation means that the worth of our brand compared to the price of competitive brands in the market. The contrast is usually done in some ways like;
- Sale of similar brand in the market
- Transaction of some competitive brand
It could be any similar transaction, bid, sale or anything similar to our brand fall in the category of market-based brand valuation.
Income Approach to Brand Valuation
Income-based valuation means that how much money the brand has been producing; it could be the future estimated earnings of the brand. Or the current revenue, sale, and cash flow of the brand also fall in this category. Such earnings and cash flows could be real or hypothetical, but they point to the same direction that similar business of this brand is producing this. Our brand is also capable of doing it.