Brand value is no small thing and relies on a number of dynamics to come up with a number. However, some say the valuation is subjective, as a factor that may be worth one value, may not be of the same value for a different person. In short, valuation can be a bit subjective rather than being objective. It could include a multitude of factors like the brand logo, marketing strategy, packaging, digital assets and even factors as the colors used in branding and the celebrities advertising the brand. The factor, basically, can be anything that the customer relates with your brand.
If you see the top brands, they have huge strong points on all fronts. According to Forbes 2018, following are the top 5 brands based on valuation –
- Apple ($182.8 Billion)
- Google ($132.1 Billion)
- Microsoft ($104.9 Billion)
- Facebook ($94.8 Billion)
- Amazon ($70.9 Billion)
It would not be too outrageous to think that more than half the population of the world knows about these 5 brands. Such is their marketing strategies and reach that, almost every other person knows something about them or have at least heard of them.
One can determine a brand’s value in multiple ways with all of them being quite debatable. Nevertheless, two different approaches stand out from the rest due to their extensive use in the field of valuation around the world.
Cost-based Brand Valuation
The cost-based brand valuation includes the compilation of all the costs involved in your brand right from its inception. Various dynamics like historical advertising, promotion expenditures, licensing, registration and many more play a crucial role in developing a brand from scratch and all the expenses involved in these should be included in your cost-based brand valuation. The next step is to restate the expenditure according to the current cost terms of the company and market. This is an ideal way to evaluate your brand if you are re-developing or re-launching your brand.
Income-approach Brand Valuation
It is a great approach with the valuation based on the future net earnings of the company according to the brand value of the brand at present. It includes the value of income, cash savings or cash flows that is due to the asset, actually or hypothetically.
Market-based Brand Valuation
This approach considers the brand’s market value at the time, which basically means – at what price could the company sell. It includes the sales of the brand, stock market quotations, and comparable company transactions. These comparable market transactions help evaluate a brand according to its peers, making the value comparative and relative. In this scenario, if your competitor’s market value increases, your company will face its impact in a negative manner. Such fluctuations may not be true in all cases as it can be a directly proportional relation as well in a few cases.
With many different approaches on the table, it is important to identify the right valuation method for your brand. Since there is no basic math or sure shot formula to understand the valuation of a brand, brand valuation can be termed more as an art than science. However, brand valuation is surely one of the key factors to improve your value proposition.