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Two Tests Of Brand Value

The business of brand is difficult. Sometimes selling in the idea of "branding" (the discipline of managing meaning from a customer's perspective) can be tricky. Businesses are run on numbers. On ROI. On investments. On cash. Brand is not governed by such metrics.

Why should a business buy into something fluffy fuzzy and emotional called "brand" and how can we measure if any investments in time or money have been worth while? Are investments in "branding" simply a side thing? A 'nice to have'? A ego trip for business leaders?

I answer: No. Investing in branding could not be further from this.

True - branding is about the long term. True - branding is based on emotion and beliefs. But done correctly "branding" creates meaning. And meaning creates value.

Well that's lovely - but how can you assess that value?

If you run a global business and have huge budgets you can go to global consultants like Interbrand, Brand Finance or Millward Brown and they can do ongoing in depth high end analysis for you.

But what if you don't have huge budgets? What if you are not yet global? Well there are some simple things you could do in terms of ongoing research, either in-house or through smaller brand research companies. I'll come onto the types of tests you can do in a moment but first here are 2 simple ways you can measure brand value:

Two Measurements of Brand Value

1. Price premium - This is where you can charge more for your product or service than your competition. The reason for this is because consumers see value in connecting with your brand and are willing to pay for that connection. Once you know your brands price premium value the next question is how to reach out to your target markets in a consistent way, provide valuable experiences and continue to attract the right customers.

2. Customer preference - You know you have customer preference when price is not a factor and your target customers choose your brand over the competition's brands. This again indicates they value you more than your competition because of your brand investments and means that although you might have to keep pricing at a similar level you will have a healthy market share.

Two Tests to assess Brand Value

Here are some things which you can use to measure the value of your brand and base your research on:

1. Price premium - Take two of the same product or service. Apply your brand name and styling to one. Leave the other unbranded / branded with a fake name. Test if a target customer would pay more for yours. This indicates if you have a price premium - showing that a customer would pay more to be associated with your brand than a generic brand. How much more would be another interesting factor to consider. This can give you a tidy percentage. "Our brand is worth 32.5% more than a generic brand".

2. Customer preference - Take two of the same product or service. Apply your brand name and styling to one. Leave the other unbranded / branded with a fake name. Explain both products are exactly the same price, test if a target customer would choose yours over the generic brand. This indicates customers prefer your brand when not competing on price and indicates value on your brand. How many more people would buy your brand than others? If you invest more in customer experience and brand awareness could you increase this percentage. You can generate a super story "8 out of 10 customers prefer our brand compared to a generic brand when price is not a factor".

To keep your figure on the pulse of your brand value you would need to work with a research agency or inhouse customer research team and ensure these tests were run on an ongoing basis with members of your target audience. This, of course, assumes you have worked on defining who your target audience are. This, in turn, also assumes you know what you stand for, why you stand for it and who you stand for. These are big brand strategy questions. They come from your leadership culture. If you need help with them, let's talk, I may be able to help.

My suggestion is that you have these tests run on a regular basis - monthly, bi-monthly, half yearly or yearly. Have them reported on and review them with your leadership team so that you can begin to spot patterns between investing in brand, (via communications, customer experience and product development) and the value consumers are placing on your brand.

Brand & intangible value

It might surprise you to know that "Brand" is considered as one of the factors when estimating the value of a business. It falls under the category called "intangible value" on the accounts spreadsheets.

Zooming back to a global picture. Last year it was reported that global "intangible value" of brands topped $50 trillion. This constitutes 52% of the overall enterprise value of all publicly traded companies worldwide. See for example this report. The value of brand is growing. If you want to create a business worth anything you need to build a brand.

Jonathan Knowles, a Measurement Expert and Advisor recently published a very interesting report in The Marketing Journal. He analysed data from Interbrand, Brand Finance, Forbes and Millward Brown in relation to "intangible value", "mergers" and "brand value".

He points out that it depends which industry you are in as to how much of a factor brand currently is on value. In 5 of the 24 industry sectors (as defined by GICS – the Global Industry Classification Standard) brand value makes up 25-40% of a business value. These sectors are: Software, Automobiles, Food & Beverage, Banks, and Communications. If you run a business in these areas, brand is going to be an essential component to your business value - the trend is that "brand value" will continue to grow within the "intangible value" of businesses in these and the other sectors too.

See “How Much Of Intangible Value Does Brand Represent?” by Jonathan Knowles, via the Marketing Journal dated Jan 2019.

These trends though are mind bending. We are and have seen value shifting from tangible assets to intangible. From physical to mental. From products to experiences.

Your brand is valuable.

So - I hope you can see the value in brand and can begin to test it. One thing is for sure - managing customer meaning through the discipline of branding could not be more important for the modern business wanting to grow. Your brand is valuable.

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