Why to measure Brand Equity?

If a company does not put a price on a brand, it would become acquisition by rivals at throw away price in the market. Brand equity is an intangible asset as much as a tangible asset; therefore a firm should estimate the brand value on the balance sheet, hence by misleading information to the stakeholders, shareholders and the public. If the true value of the brand is not reflected in the balance sheet the management would get away with murder. It is always important to show higher returns on assets than reality.

By measuring the brand value on the balance sheet we can evaluate the management’s performance by the change in the value year after year.

5 methods of measuring brand value

1.       Incremental Sales Method

Higher sales for a strong brand permit the brand to increase the price of the brand at higher prices. Price premium over its rival is a good measure of a strong brand value.

This method involves the use of the following mathematical equation

Brand Value = n₁p₁/1.r + n₂p₂/ (1.r)² +………………… + n_np_n/ (1.r)ⁿ

Where:

N = number of units sold over the years

P= price premium per unit year after year to the category of commodity it belongs to

R= discounting rate for converting the present value of future money

2.       Increased Market penetration

Sometimes brand management may not get price premium they want, it is important for the brand value to get reflected at the time of market penetration.

In this method the extra volume if sale results in unit cost reduction because of economies of sales. The brand value is accumulative of all annual savings of cost made by brands.

Brand Value = n₁c₁/1.r + n₂c₂/ (1.r)² +………………… + n_nc_n/ (1.r)ⁿ

3.       Green Field method

If we have to develop a brand of the same stretcher that of one of the existing brand we make estimate of how much time and money is required, we determine the discounted value of the present value of all future annual investment spread for the next ‘n’ number of years which will in turn become the brand value of the brand.

4.       Market Capitalization Method

Calculating brand value from the market capital owning to the brand if it is a single brand/corporate company.

Market capitalization = market shares issued by firm * market price of company share at that time

Market capitalization can be calculated any day.

5.       Brand strength multiplier method

Brand value is estimated by the formulae

Brand value = brand earnings * brand strength multiplier

Brand earnings i.e. brand related annual profits of the company

Brand Equity Concept

One of the most popular and potentially important marketing concepts to arise in the 1980s was brand equity. However, its emergence, has meant both good news and bad news to marketers. 

The good news is that brand equity had elevated the importance of the brand in marketing strategy and provided focus for managerial interest and research activities.

The bad news is that, confusingly, the concept has been defined a number of different ways for a number of different purposes. No common viewpoint has emerged about how to conceptualize and measure brand equity.

Despite the many different views, most observers agree that brand equity consists of the marketing effects uniquely attributable to a brand. That is brand equity explains why different outcomes result from the marketing of a branded product or service than if it were not branded.

Branding is all about creating differences. Most marketing observers also agree with the following basic principles of branding and brand equity:

• Differences in outcomes arise from the "added value" endowed to a product as a result of past marketing activity for a brand.
• This value can be created for a brand in many different ways.
• Brand equity provides a common denominator for interpreting marketing strategies and assessing the value of a brand.
• There are many different ways in which the value of a brand can be manifested or exploited to benefit the firm. 

Fundamentally, the brand equity concept reinforces how important the brand in in marketing strategies. It clearly builds on many previously identified principles about brand management. By virtue of the fact that it adapts current theorizing and research advances to address the new challenges in brand management created by a changing marketing environment, the concept of brand equity can also provide useful new insights.

 

How ready is your brand to compete for future market shares?

Measuring Brand Momentum puts you on the right marketing time cycle!

•Market Share and Brand Equity are static concepts

- Tell you where you ‘stand’ today

- Reflects your past performance

- Leave you one market time ‘cycle’ behind

•Brand Momentum is a dynamic concept

- Tells you how fast are you ‘moving’ towards tomorrow

- Reflects your current performance

- Keeps you on the ‘current’ market time cycle

It helps you drive on the right gear!

•The model tracks brand performance at all the key ‘consumer-brand interaction’ milestones

•Using a set of ‘quantitative’ diagnostic measures

•Helps you track:

- on parameters like ad recall, brand recall,  current  brand shares

- usage, intended usage, word of mouth

- on parameters like brand persuasion, consumer  brand performances

- pull, brand loyalty, brand sustenance

Why should you look at it?

•Know how well is your brand doing among your current and potential customers

•Know its Sustenance power, Persuasion power, Consumer Pull and Loyalty levels

•To Know your brands future readiness

•Know the key reasons why your brand is preferred more (or less) vis-à-vis the competing brands (brand differentiators and demotivators)