By our count, there are four things that are impossible to predict: Weather, the World Cup, Human Behavior, and Brand Value. If anyone saddles up to you at a bar or coffee shop and tells you otherwise, politely nod and pretend to answer an extremely important text.
Of course there are predictive models, comps, metrics and so on to get you close to assessing a brand’s value, but ultimately, it’s a subjective sum of gut instinct, plus market zeitgeist, multiplied by logo and slogan. Basically no one can assess it with certainty.
Yet, understanding brand value is a must for creative and marketing teams. Knowing how to measure it is key to making strategic decisions.
With all of this in mind, we’re going to look at the significance of brand value, explain the different methods used to try and measure it, then give you a step-by-step guide to help you attempt to assess your brand’s worth.
Let’s do it!
What we'll cover
Table of contents
What is brand value?
Put simply, brand value is the financial worth of a brand. It measures how much a brand contributes to a company's overall worth and how it influences customer behavior. Brand value also reflects the premium it commands over generic products.
When you’re in the cereal aisle at the grocery store and you’re deciding between a box of Cheerios and a clear bag of “Donut-shaped Oat Niblets,” the gut-feeling that makes you pay an extra dollar for the former gives you an idea of what brand value is.
For your marketing and creative teams, understanding brand value is important because it impacts customer perception, influences marketing strategies, and drives business growth.
Brand value vs. brand equity
Brand value and brand equity often get thrown around interchangeably, which is a mistake because they have distinct meanings.
Brand equity refers to the intangible assets a brand holds, like customer loyalty, brand recognition, and perceived quality. It's the emotional and psychological associations customers have with your brand.
Brand value, however, quantifies these associations into financial terms, representing the monetary worth of your brand.
Basically, brand equity relates to hearts and minds, brand value relates to cash. Make sense?
Why is brand value important?
Big brand value is a powerful asset that can significantly impact your company's success. Here’s why it matters:
Better competitive advantage
If your brand value is high, you leave competitors in the dust. Take Apple’s brand value for example. Apple commands higher prices for its products, thanks to its reputation for innovation and quality (not to mention its top-tier shaming of PC / Android users over the years).
This distinct market advantage enables companies to maintain a competitive edge and attract a loyal customer base. According to Interbrand, Apple's brand value was estimated at $502 billion in 2023.
Increasing customer trust and loyalty
High brand value fosters customer trust and loyalty, leading to repeat business and positive word-of-mouth.
What do you think of when you hear HBO? Your mind probably goes to high-quality stories and binge worthy television. You’ll check out any new show that comes out on the network because HBO has developed high brand value over four decades. They have your trust, and because of this, they can have your money. (Interestingly, HBO’s name change to Max is a case study in ignoring brand value).
Attracting and retaining talent
Whether you’re an individual contributor or C-suite exec, you know this truth: Strong brand value attracts top talent. Companies like Amazon and Tesla, which have created titanium-strength brand value, attract and retain employees who would do anything to be associated with them.
This contributes to overall business success and innovation. In fact, according to LinkedIn, Amazon holds the number two spot of where people want to work, largely due to its strong brand value.
6 methods to measure brand value
Now that we’ve gone into what brand value is and why it’s important, we need to go back to the thrust of our article and explore the ways in which people attempt to measure it.
As we said, measuring brand value is an imprecise science, and no single method is going to get you all the way there. But, if you use these five widely recognized methodologies, you can at least make an informed calculation:
Market-based valuation
Market-based valuation assesses brand value by comparing it to similar brands in the marketplace. If Brand X is valued at $500 million and has similar market positioning and customer base as your brand, you can estimate your brand’s value based on this comparison. This method is really straightforward and easy to grasp, but it’s also heavily influenced by market fluctuations and may not always reflect intrinsic brand value.
You can see market-based valuation in action with Interbrand’s Brand Valuation method. Interbrand looks at three key aspects: financial performance, the brand's influence on customer choice, and the brand's strength. It’s a solid approach that helps determine a brand’s value by looking at its market presence and influence compared to its competitors.
Cost-based valuation
Cost-based valuation calculates brand value based on the costs involved in creating and developing the brand. Things like marketing expenses, promotional activities, and brand-building efforts all go into this method. Again, it’s a tangible measure using hard data, but it may not capture the brand's current market position or future potential.
If you look at a company like Procter & Gamble for example, you’d see it spends roughly $8 billion annually on marketing and brand-building activities. These costs can be used to estimate its brand value, but they might not account for the brand’s intangible benefits, like consumer trust and loyalty.
Income-based valuation
Income-based valuation measures brand value through future projected earnings and cash flows attributed to the brand. Nike’s brand value can be assessed by estimating its future revenue streams from brand-related activities. It’s a forward-looking perspective but requires accurate forecasting that can also be affected by market unpredictability.
Brand Finance is known for its income-based valuation approach, which calculates the value of brands by analyzing the financial strength of the business, the importance of the brand in driving demand, and the brand's future strength.
Customer-based valuation
Customer-based valuation evaluates brand value based on customer perceptions, preferences, and loyalty. Fun tools like surveys and focus groups can gauge how much customers are willing to pay for branded products over generic ones. It’s a great method for insights into customer sentiment, but beware: it can be subjective and influenced by temporary trends.
Companies like BrandZ by Kantar employ a customer-based valuation method, using consumer insights and financial data to estimate brand value.
Net promoter score (NPS) valuation
NPS valuation uses customer feedback on their likelihood to recommend the brand to gauge brand value. For instance, if your brand scores highly on NPS surveys, it typically indicates strong customer satisfaction and loyalty, translating into higher brand value. But NPS alone doesn’t capture the complete picture of brand performance, and there are those who think relying too heavily on NPS scores is a mistake.
Financial Metrics
In addition to all of these methodologies, financial metrics ultimately play a big role in assessing brand value:
Market Capitalization: This is the total value of a company’s outstanding shares. It gives an overall picture of the company's worth in the eyes of investors.
Revenue Attributable to Brand: This metric calculates the portion of a company's revenue that can be directly attributed to its brand. For example, if a luxury brand like Louis Vuitton generates $15 billion in revenue, a significant portion of this can be attributed to its brand, given its strong market positioning and premium pricing strategy.
Okay, you’re armed with some brand value know-how and a bit of skepticism — now you can try your hand at measuring brand value. Follow these five steps:
1. Identify the valuation scope
Define the objectives and scope of the brand valuation process. Determine what aspects of the brand you’ll measure, such as market performance, customer loyalty, or financial metrics. For instance, you might focus on evaluating brand value in a specific region or product line.
2. Choose your valuation method
Select the most appropriate method(s) for measuring brand value based on your objectives. You might combine multiple methods to get a comprehensive view. Maybe you’ll decide on market-based and income-based valuations to provide a balanced perspective.
3. Collect and analyze data
Gather relevant data from various sources, such as financial reports, market research, and customer feedback. Analyze this data to assess brand value. For instance, you might analyze sales data to estimate future revenue streams for an income-based valuation.
4. Benchmark against competitors
Compare your brand’s performance with competitors to identify strengths and areas for improvement. This benchmarking process helps in understanding where your brand stands in the market and what can be done to enhance its value.
5. Refine and track over time
Continuously monitor and adjust brand valuation strategies to ensure long-term accuracy and effectiveness. Regularly update your data and valuation methods to reflect market changes and evolving brand dynamics.
Further insights on improving and boosting brand value
Hopefully you’ve seen the importance of brand value, as well as how difficult it can be to calculate. Before you go, we want to leave you with one last bit of information about improving brand value.
In short, improving brand value requires consistent effort and strategic planning. Part of that is ensuring brand compliance to maintain a cohesive and recognizable brand identity across all channels. You should leverage customer feedback to make data-driven decisions and enhance brand perception. You should also regularly update your marketing strategies to adapt to changing market trends and customer preferences.
By understanding and measuring brand value, your creative and marketing teams can make informed decisions that drive business success. A strong brand value not only boosts customer trust and loyalty but also provides a competitive edge in the market.
