The strong brand is the most valuable intangible asset of the company. Although brands do not appear on corporate balance sheets, they play a key role in determining the success of the company in a long-term perspective. Successful brands enable companies to effectively manage premium prices, reduce the relative power of commerce, increase communication efficiency, attract managerial talent, and reduce vulnerability to recessions. Dashboards or KPIs based on brand equity drivers provide focused and actionable measures for optimal brand management.
According to research by Interbrand, one of the leading brand consultancies, strong brands account for more than a third of shareholder value. The stock prices of companies with well-known brands have significantly higher investment returns and a lower risk rate compared to the stock market as a whole.
The brand has a clearly identifiable financial value that is conveyed in the price tag associated with a specific brand. This financial value represents the economic value of the brand to the owner. Brand equity is a fusion of the capitalized value of consumer confidence in the brand and its future sales volume potential (brand commercial exploitability). Consumer awareness of the brand is a powerful motivation for the customer to consider purchasing the brand’s product. Additionally, the strength of brand equity promotes consumer loyalty and encourages customers to purchase these products consistently and repeatedly over a long period of time. It should be noted that brand equity is created only if continuous positive revenue streams can be generated as a result of customer purchases.
Brand equity is an intangible asset of the company. Therefore, to measure its financial value, company management must identify the key performance indicators (KPIs) of the brand’s business and then determine the degree to which the brand directly influences each KPI. The data for the analysis comes from market research, customer workshops, and interviews with (potential) customers.
Brand measurements can be classified into three categories: brand perception, brand performance, and financial value of the brand. Each category consists of several KPIs, which contribute to the total value of the brand.
For example, the brand perception category consists of the following measures or metrics: consumer awareness (measures brand recognition and differentiation), brand strength (measures brand stability, relationship with leaders market, profitability, geographic spread and protection), credibility (measures the extent to which the brand is trustworthy and responsible for customers, and the effectiveness (reliability) of brand advertising), Relevance (measures the brand’s modernity, the ability to enthuse, as well as its commitment to ethical or socially responsible non-consumer-driven values) and Consideration (measures the influence of brand familiarity on the consumer’s actual choice).
The financial value of the brand includes four main metrics: Revenue-generating capabilities (Measures the impact of brand familiarity on sales, including the future sales volume potential of the brand), Return on investment (Measures the ROI in brand marketing), Transaction value (Identifies the transaction value of the product / service and measures the current and potential value that the brand adds to a transaction) and the sustainability rate of growth (measures the impact of the brand at the maximum growth rate that the brand owner can sustain without increasing financial leverage).
As a result of the brand assessment using Balanced Scorecard or KPI, the company can determine the current value of the brand equity compared to its short-term and long-term goals. The final result includes percentage values of the actual and expected performance of the brand and identifies the strong and weak areas of the company’s brand management.