How much would you pay for an Apple Mac if the logo wasn’t attached? Brands are estimated to account for 1/3rd of the stock market value in the top fortune 500 SMP index. However, if you want to manage a brand it is very complex.
What is brand value? Brand value is quite a subjective topic of discussion. This is because it can be construed as two things. It can be represented as the monetary valuation, as well as the perceived value that the brand contributes towards our business.
In this article, I will show you components that determine a brands value.
1. What Is Brand Value?
Brand value is discussed as both the monetary value of the brand image as well as the perceived value in the eyes of the customer.
Brand Value as a Monetary Value?
When we talk about brand value (or valuation) as a monetary value we are talking more specifically the estimated net worth of your brand and how much it contributes to the sales of your business. This means the percentage of revenue that is responsible for the yearly financial forecast. To get a more realistic forecast we need to look at brand as an asset or resource.
For example, Apple just recently bought the premium beats headphones. Evaluating the brand value was of the core elements to justify the acquisition. They did so knowing how this would make their brand more competitive in the market. But more so, increase the share value for their shareholders. If they did this solely on their brand equity. Then, they run a risk of not producing a profit from the acquisition.
Although, it is one of many measures to determine brand value, on its own it doesn’t really tell us a great deal to understand the net worth.
2. Why Is Brand Value Important?
Brand value then evaluates that we are living up to our promise. In general brands help you determine what businesses you like and the ones you don’t like.
But, more importantly brands help you fill in information that cannot be observed during the time of purchase. By this a brand promises two things which you cannot see…
- Functionality and Quality – The first is functionality and quality. It answers basic questions like: How good it is going to taste? How long will it function before it breaks?
- Emotional Response – The second answering an emotional response we may have. This can be things like: Is it something a person would wear that is in the higher class of society? Or, what type of person uses this product?
A strong brand value means that we are delivering our promise and more and will impact purchasing behaviour shown through return of investment. For example, you buy a Volkswagen Golf for its quality German engineering, and the prestige this holds. Over time Volkswagen’s are known to have less problems compared to Peugeot.
A weak brand value means that we are not delivering to your promise, which results in a bad reputation and a lack of trust. If people do not trust you they will not be willing to spend their money on your product. This means your return on investment will be low.
By understanding your brand value compared to your competitors you can put mechanism in place to compensate or increase the spending to build a better brand in the eyes of your ideal customers.
Overall, by managing the value of the brand you can maintain ROI.
3. How To Measure Your Brand Value?
There are five main components that contribute to your brand value:
- Regression analysis – For return on investment. You can work this out by asking how much people are willing to pay for an item without the brand label attached.
- Customer relationship management – this comes down to measuring the leads and enjoyment you are able to achieve.
- Brand equity – These are all aspect of the brand:
- Personality of your brand (brand personality) – do you talk to customer in a way they require from you and can relate to.
- Identity of your brand (brand identity) – do you offer a life style people want to be a part of and can relate to.
- Image of your brand (brand image) – does your brand look like the target customer, can they relate to it.
- How people interpret your brand (brand recognition) – can people see and understand the message you give them.
- Product category – This comes down to functionality and that your product work as promised.
Brand value is understanding how much your brand contributes to the overall revenue on your company. It is very difficult estimate, but it is knowing, or finding out what people are actually paying for. Brand value determines how much your brand is worth.
There are a various ways you can choose to measure this. A common method is to understand peoples perceptions from the brand equity. However, this wont give us the required information to judge accurate what the brand is worth. Other measures need to be taken into account such as a regression analysis, and understanding the perceived value of the product usage.