How much is your brand worth? | Two Ways to calculate your Brand Equity
By admin|25 January, 2022
Our clients always ask us this burning question: how much is our brand worth? This is a great question, but not easily answered. To get to understanding a brand’s worth, we’ll discuss three ways that value can be determined: brand equity, brand value, and brand strength.
No.1 Concept and Difference
Brand Equity:The concept of brand equity was first introduced by the United States in the 1980s. Brand equity is consumers’ cognition and attitude towards a brand. Customers tend to purchase a product they recognize and trust. The concept of brand equity takes advantage of this behavior to maximize profitable sales over time. Customers are willing to pay more for the products when the brand equity is positive. Even when the competitors charge lower, it won’t affect consumers’ choices. Brand equity promotes the creation of brand value. The higher the asset, the higher the value.Brand Value:Brand value refers to the monetary value, financial data, or the net present value of the future cash flow of the brand. You can determine the brand value at a certain time by performing marketing and financial analysis. Brand equity comes from consumers’ recall value, but the brand value is based on brand clarity, difference, authenticity, and so on.Valuation models for brand value include Interbrand’s brand valuation methodology; Yang & Rubicam’s brand asset valuator (BAV) ; World Brand Value Lab (WBL), etc.
No.2 Brand Equity Evaluation Method
The measurement of brand value may sound complex but it can be measured by specific formulas. However, the evaluation of brand equity can be vague. Today we will introduce two evaluation methods for brand equity:
Economic – Management and Operation data (O data)
Emotional – Experience data (X data)
O data mainly refers to the data generated by the management of supply chain, finance, sales, and other operations in the enterprise, while X data mainly refers to customer satisfaction, brand recommendation, and other data related to customer experience.Economic- Management and Operation data (O data)This is a quantitative approach that delves deep into a company’s operational data such as sales data, finance data, HR data, or anything that can be quantified and measured over time. We can evaluate brand equity from two sources:
One way to measure brand equity is by understanding the total value of the brand as a separate monetary asset, which can be included on a business’s balance sheet. The different metrics show the worth of the brand, reflecting the brand’s contribution to the company’s success. It’s worth considering the value in terms of Cost-Value, Market-Value, Income Value, Stock-Value, and Premium-Value.
The brand evaluation methods begin to consider the market benefits brought by the market performance of the brand. For the mainstream algorithm that integrates financial data and brand performance, you can refer to the metric created by Interbrand Group:Brand Value = Brand Revenue x Brand StrengthThis is the most commonly used formula for evaluating brand value from a market perspective. Brand revenue reflects the profitability of the brand in recent years (the measurement of brand revenue in the Interbrand method can be very complicated). Brand strength determines the ability of the brand to cash value in the future, with a maximum value of 20. For the Interbrand method, brand strength is mainly determined from seven factors including market leadership, stability, market characteristics (industry growth ability, entry barriers, etc.), internationalization ability, development trend (relevance with consumers), brand support, and legal protection. Then, through the detailed questionnaires designed by Interbrand, we analyze the scores of the brand’s performances in each factor and obtain the brand value comprehensively.But at the same time, the Intel brand method can be seen as a combination algorithm of operational data (brand benefit) and experience data (brand strength).According to the 2021 Top 100 World Brands released by Interbrand, the total value of the top 100 brands has reached 2,667.5 billion US dollars, of which the brand value of Apple, Amazon, Microsoft and Google has exceeded 100 billion US dollars, and the IT industry has also maintained the largest growth. Due to the impact of the worldwide pandemic, the rankings of major retail brands have declined, while the value of some brands has increased. For example, Nintendo grew by 26% compared to last year.Building a valuable brand is not easy. Sometimes, at the level of data analysis, the results are largely influenced by the evaluator. So subjectively, we have another rating system, Experience Data.Emotional— Experience Data(X Data)Experience data, in particular, aims to seek qualitative reasons to explain emotional decisions and how brands ‘sit’ in people’s minds. Brands that invest in their brand equity get a ‘mental advantage’ over other brands. This advantage results in a bias towards buying the brand’s product, even if it’s sold at a premium price. It comes from the customer attaching their ‘self-image’ to the brand’s messaging. By buying the product, they’re buying the brand values they identified. In this case, the product represents the customer’s prospects, inspires them, or boosts their self-esteem.
Brand strength, or the power of the brand, can be measured by emotional data – the differential value the brand has acquired in someone’s mind, as a result of multiple interactions over time.
Equity is almost synonymous with ‘attitudinal strength’ or ‘strength in the mind’ and is a proxy measure for the relative consumer demand for the brand.You can capture this data using consumer surveys, and a series of evaluative questions that assess the relative preference, or ‘wantability’ the consumer has for the brand.Review these common models for establishing brand strength:
Millward Brown’s MDF framework:
Three dimensions to create ‘The Meaningfully Different Framework’:Meaningful: Consumers feel an affinity for the brand or think it meets their needsDifferent: Feel different from other brands or set the trends for the categorySalient: Comes to mind quickly and readily when activated by ideas relating to category purchase2. Ipsos’ Brand Value Creator (BVC) consists of a holistic set of brand metrics that accurately predict what people will buy. BVC is a validated model tied to real business outcomes. The model is brilliantly simple in concept and execution for survey research.3)TNS Mode (Conversion Model, CM)The Conversion Model is a psychological model of consumer behavior that helps brand managers measure the strength of the relationship between consumers and brands.
This is how well your brand is known by your target customers, market, and key stakeholders. Since brand awareness is an emotional-based metric, it can be measured by asking:
A customer’s future intent to buy
A customer’s current brand awareness now and overtime
The purchase history of target customers
The ‘conversation share’ – The duration of the customers speaking about your brand in everyday conversations
This is connected to customer satisfaction but focuses on whether your customers agree that the brand provides unique value. This leverages your brand equity level as the brand is perceived as valuable, relevant to a target market, and can fulfill a specific purpose.You can measure this by the following:
Customer satisfaction (CSAT) surveys help to understand your customer’s satisfaction levels regarding your company’s brands, products, services, or experiences
Using a survey-based statistical technique called Conjoint Analysis to reveal key consumer decision-making processes and the value customers place on a brand’s features
You can determine brand equity through outputs like email marketing or social media messaging about the brand. They relate to ROI operational data and tell you whether your effort (e.g. number of communications out) was worth the investment. Email marketing won’t singularly determine your brand equity, but it will improve your brand awareness and perception, and as awareness grows, revenue should improve too. This information can be gained from sales transactions about promoted brand products. The pricing power, or the brand’s ability to command a premium without losing business to a competitor is often associated with “brand equity” in consumer and service markets.Other methodologies for investigating outputs are:
Customer responses back to communication call to actions – for example, signing up to an email list, joining a loyalty program
If your competitors are doing badly, or if they are giving you a run for your money and creating great marketing campaigns, their activities will have an impact on your brand.You can see how your brand equity performs within a competitive market, but in particular, you can conductCompetitor analysis to evaluate your competitors’ strengths and weaknesses, how their brand compares to yours.If their brands are performing well, you’ll see variances in:
Your acquisition rate against their rates
Your dominant position in the market – including sales, social media engagement, and following
Revenue generated through certain channels that are being used by other competitors
No.3 Recap and Summary
We all know that brand building is a long-term process, and brand equity promotes the creation of brand value, which is not just a selling price. Therefore, when we consider the brand value and brand equity, we should also measure it with a long-term and comprehensive vision.To measure and quantify brand equity, various mature and accurate evaluation models and computing mechanisms have been established in the market, which can quantify some emotional and habit-oriented indicators into intuitive numbers. And these calculation rules have also been verified by practice in the long-term marketing development process. Therefore, brand equity can be regarded as multi-dimensional data that integrates various mechanisms, not a single indicator, and needs a comprehensive assessment.There is no doubt that when a company has negative news, it will have a negative impact on the brand equity of the company, and when the reliability and intensity of the negative news are stronger, the consumer’s perceived risk is higher. But the brand value will not return to zero in the short term. Therefore, when negative news emerges, in addition to taking measures to curb the dissemination of information, the process of rebuilding the brand image can be more difficult after the storm.The establishment of brand equity must be a long and labor-intensive process. With the help of calculating the brand value, you will find that this is precisely the powerful pillar for the company to become bigger and stronger. If you are interested in more topics about brand equity or brand value, please leave us messages. We will dig more professional content for you!
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