Brand Valuation: What It Means and Why It Matters?
Transforming a name into a brand is a painstaking process. It takes time, effort, and an immaculate strategy to achieve brand status in the market. Over a while, brands build a certain value around them, which helps them earn, endure and augment success.
Businesses that reach those levels are often curious to measure their brand value. But is it only the business built over time that matters while calculating a brand value? Or is there another dimension to it? Also, why is it important for companies to measure their brand’s value? Let’s delve into these crucial aspects in this blog.
What is Brand Valuation
Brand valuation is the process that helps calculate a brand’s value or the amount of money a particular buyer company is willing to pay for it or the brand’s financial worth. Brand value has four essential components – brand awareness, perceived quality, brand association, and brand loyalty. All these factors collectively contribute to the financial worth a that brand builds over time and play an important role in determining its value.
Importance of Brand Valuation
Brand valuation has various dimensions associated with it that make up for its importance in the corporate context. Let’s look at some.
- Investment Reviews
Typically, brand investment reviews encompass competitor comparisons across hard criteria like sales and market share and soft parameters like loyalty and reputation. But some brands also factor in their financial value. Brand valuation enables companies to assess their return on brand investments to build more appropriate and useful investment strategies.
- Mergers and Acquisitions
Often, companies do not pay a brand’s book value while buying it. The difference between the book value and the acquisition price paid is termed Goodwill. It is the company’s value that doesn’t directly stems from its tangible assets and liabilities. Calculating a company’s financial value via brand valuation helps companies calculate the premium over book value that a potential buyer should while buying the brand.
- Build Accountability
Using a tangible measure of impact helps. It helps evaluate leadership and marketing teams based on their efficiency in managing their brand asset in the long run. In other words, it helps build accountability and gives stakeholders and prospects an insight into the company’s level of responsibility when it comes to maintaining the brand’s value.
- Identify the Competitive Edge
A competitive brand valuation can help companies make relevant changes in their business expansion and growth strategies. Discovering the competitive value of a brand and the factors that drive it can help you fetch insights into maintaining and further enhancing your unique market advantage across areas that yield success. Understanding the competitive value of the brand and the market and identifying opportunities can help a business set the right business trajectory.
Brand valuation is done via various techniques. Some of the most significant brand valuation methodologies include income-based brand valuation, market-based brand valuation, and cost-based brand valuation. But how do you know which technique is right for your business, depending on the context?
Connect with Valuation India. We can help you evaluate your brand value via the most appropriate techniques relevant to your situation. Please email us at [email protected] to know more about our proposition.