What is brand value and how to measure and improve it?

The power of the brand

The recognition of a brand as a valuable asset is relatively recent. Back in the 1950s, business success and consumer choice was defined solely on product quality and value, not the name on the tin, according to the Atlantic. The advertising boom of the 1960s turned company identities into household names, bringing them into public consciousness through the medium of marketing. Brand names became a proxy for desirable characteristics like sleek design, durability, refinement, service and innovation.

Nowadays it’s hard to imagine making purchase decisions without brand coming into play, so immersed are we in the culture of brand identity and meaning. We reflexively look to the brand name of an item to help determine its value. Little wonder then that today’s brands are valuable commodities that are built, nurtured and even bought and sold between companies.

What is brand value?

Brand value definition:

Brand value is the monetary worth of your brand, if you were to sell it.

If your company were to merge or be bought out by another business, and they wanted to use your name, logo and brand identity to sell products and services, your brand value would be the amount they would pay you for that right. This is market-based brand value.

Another way to think of brand value is in terms of replacement cost (cost-based brand value). In this sense, brand value is the amount you would need to spend to design, execute, promote and amplify a totally new brand to the same level as your old one. That figure might include the cost of hiring a design agency, the time and effort spent on marketing and social media strategy, the cost of advertising, PR outreach and sponsorship, and so on.

Brand value vs. brand equity

Whereas brand value is a financial gauge of your brand’s worth, brand equity is to do with customer perceptions and how positive they are. Customers who prefer your brand to others and exhibit loyalty to your brand over time are contributing to your brand equity.

Brand equity can be viewed as a factor influencing brand value, since in building your brand equity, you’re contributing to the qualities that will make it valuable – things like brand recognition, positive associations with quality and service, or aspirational value. All these factors promote revenue by driving customer spend and loyalty.

However, a brand can also have value without having equity. For example, in the pre-release phase of a product, a company would spend money and invest value into developing a brand before its future customers ever see it. Brand equity is linked to both reputation and brand purpose, since these relate to how a customer’s personal values align to a brand’s, and the resulting bond that forms between them. Compared with brand value, brand equity is a more nebulous concept and harder to measure, since it relates to consumer motivation, opinion and behaviour rather than financial figures.

How to measure brand value

Today’s appreciation of the power of brands means that there is deep thinking, and as a result, a wide array of perspectives on what makes a brand successful, how brands interact with consumer psychology, and even what the true definition of brand should be. Unsurprisingly then, measuring brand value can be complex and confusing without a clear strategy in mind.

That said, the most fundamental ways of measuring brand value are still quite simple. One of the most straightforward methods is to ask other companies what they would pay for the rights to your brand. By doing this, you’d get a range of figures you could average out to arrive at a fair market value.

Likewise, you can gather quotes from providers or make internal projections to find out how much it would cost to develop a brand equivalent to your current one.

The brand value chain

An important milestone in the development of brand-building strategy is the brand value chain model. It’s a 4-step schematic developed by marketing experts Keller and Lehman in 2003. It describes how brand value can be built through marketing, and the variables that affect progress along the journey.

There are 4 brand value chain stages (marketing programme investment, customer mindset, market performance and shareholder value.) These stages are moderated by three “multipliers” – (marketing) program quality, marketplace conditions and investor sentiment, which may affect how fast and well brand value can be increased.

As it was developed in 2003, the brand value chain does not specifically take into account digital marketing and how brand value and reputation is built online, and in particular, how digital culture has changed consumer behaviour. However, it can provide a useful framework for building and quantifying brand value.

Building your brand value

Here are a few of the ways you can enhance your brand’s equity and ultimately, your brand value.

Marketing and advertising

Marketing helps you to move from brand awareness and recognition to understanding, alignment and loyalty from your customers.

According to the original definition, brand value chains start with marketing is the first step to realising brand value, since it establishes the brand in the mind of the customer.

Ambassadorship and sponsoring

Whether it’s sports stars, social media influencers or musicians, aligning with a well-known individual or group is a well-established form of brand-building. It not only raises awareness and recognition of your brand, it can be linked with brand purpose, where your company’s ethical and social values are enhanced and amplified by your choice of ambassador.

Customer experience

Providing great customer experiences is a powerful way to boost brand equity. As much as quality products and services, customers increasingly expect a good experience from brands, and research has shown that many are willing to pay more and choose brands ahead of their competitors when they’ve enjoyed a positive experience.