Ramdas Shenoy gives an insight on ways and means of brand valuation.
Brand Valuation, helps you determine what a brand is worth, and in companies where budgets are tight, it may be hard to explain the importance, what returns it gives to the investment of the marketing spent. You can no more tell the world that it is intangible, when everything is getting quantified. Moreover, a specific marketing campaign and its impact on the brand value will help us determine the success or failure of the campaign.
There are multiple ways to calculate brand valuation.
What is included in Brand Valuation, also warrants the need for understanding the overall gamut or the eco-system in which the brand operates. Brand is your first identity or face to the outside world and also builds a sense of pride for the internal employees(who all are your spokesperson—even if they leave the organization).
When I say ecosystem, for example you will have to look at customers, consumers, employees, vendors/suppliers — it would range from your material suppliers, your house keeping contractors, your stationery guys, your tax and financial consultants, your HR recruitment agencies…the entire outside world who are offering you services.
One needs to consider the value of anything that people associate with your brand and image, such as your trademark, brand name, visual assets such as a logo or colors, communication, digital assets or licenses, and level of customer loyalty.
There are multiple ways to approach the valuation of a brand, and which method you choose will depend on your business, industry, and situation.
Cost-Based Brand Valuation
Similar to the pricing model, suppose you want to build a price to a product, what traditionally you will do is to look at all elements that goes on to build the product and price it accordingly. So cost based brand valuation, works on similar pattern, where you consider all costs that you incur to build a brand – advertising, IP, campaign costs, licensing, trade marks registration. Taking all the costs into consideration, you could arrive at the cost based brand valuation. The only limitation of such an exercise would be that it may not indicate the present value of the brand.
.Market-Based Brand Valuation
Every product has a perceived value, based on jow much the customer is ready to pay. Market-based valuation is similar, where it uses one or more points of comparison between your business and similar brands that have been sold. Based on competitive perception, market transaction price, one could arrive at the brand value.
Income Approach to Brand Valuation
Once the product is sold, basedon its earnings, one could estimate the brand value to its current value.This method is often referred to as the “in-use” approach. To calculate the brand value, the income approach uses future net earnings that can be attributed directly to the brand to determine its current value.
Income plus Customer experience
An extension to the Income approach where you consider the opinion of all the stakeholders in the ecosystem, namely the customers, employees, partners and vendors. The perception score of the stakeholders is captured and then used as a multiplying factor with the Income value and an ‘Income+CX’ brand valuation is arrived.
In conclusion, Brand Valuation plays an important role on how you determine the value and how the investors value it. It plays a vital role in the start-up scene where the entrepreneur would like to get an additional value for their efforts in building the brand.