How Much is Your Brand Worth?

By Chris Wadsworth

In 2009 Google became the first brand in the world to be valued at over US$100 billion.

Research shows that companies with strong brands consistently out-perform their competition. A strong brand can affect the perceived value of a product or service leading customers, whether consumer or corporate, to pay a premium over the price of the competition’s offering. By helping to grow sales, increase price and build loyalty a brand can ultimately lead to larger profit margins, improving share price and increasing company value.

What is a brand?

A company’s brand is, in essence, its promise and how it delivers on that promise. It’s important to remember that if a customer’s expectations are set higher than what they actually receive it can lead to a negative brand experience. For this reason it’s essential to not only communicate your messages and values clearly to customers but also to staff and suppliers and ensure your team know what they need to do to deliver.

A brand can be seen as a covenant with the customer which results in less uncertainty and more trust at the time of purchase and ultimately leads to customer loyalty with ongoing sales and recommendation. The benefits however go beyond the customer as companies with strong brands can negotiate better terms with suppliers, perform better in new markets through relationships with new partners, and attract and retain the best employees.

Valuing a brand

Although intangible a brand is often a company’s most valuable asset. Because it influences the choice of customers, employees and investors it has significant financial impact which has led to the practice of brand valuation.

Due to the large number of mergers and acquisitions in the 1980s the value of brands began to gain widespread recognition and valuation methods were established to deal with intangible assets on balance sheets. The UK, Australia and New Zealand led the way with accounting standards that allowed for acquired brands to appear on the balance sheet and provided guidelines with how to deal with goodwill.

Despite an array of accepted ways to measure the manufacturing process or financial controls it is proving difficult to settle on techniques for measuring brand value and there are many competing systems in use. There are generally three approaches to valuing a brand. The first is cost whereby the historic cost of creating and establishing the brand is calculated. The second is income whereby the current and future revenue a brand produces is calculated. And the third is the market approach where transactions made by similar brands in the same market are studied. Usually a combination of the financial investment behind a brand and the revenue it brings in are used to establish brand value for balance sheets.

However, the true value of a brand goes beyond trademarks or goodwill and is about the role a brand plays in the customer’s purchasing decision. It is the ongoing advantage a brand brings a company through the customer’s perception of its products or services. This translates to increased sales and stronger profitability resulting in better shareholder returns and a higher price at the time of the company’s sale.

The importance of brand image

For a brand to benefit a business it needs to be instantly recognisable. A professional and cohesive brand image is essential to communicate brand position to the target audience.

In the past mass media advertising was key to a brand’s success. Today media is fragmented into a multitude of different channels and companies need to find new ways to engage customers and get noticed. To succeed brands needs to be relevant and differentiated now more than ever and visual branding is fundamental to achieve this.

The world’s most valuable brands all take an Integrated Marketing Communications (IMC) approach by applying their brand consistently across all of their activities, whether television, print or online and it’s the success of their visual communication that is key to bringing it all together.

Posted 11 May 2010

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