Contents
- What is brand value?
- Why is brand valuation necessary?
- Methods of brand valuation
- Factors affecting brand value
What is brand value?
Brand value is the actual or potential profit that a business owner can derive from a loyal audience associated with their brand. This concept does not have a clear definition, as various professionals in law, economics, and marketing interpret it differently. For example, lawyers may refer to trademarks as part of intellectual property, while marketers view brand value as a reflection of the success of image investments and the company's reputation. In this context, if brand value is increasing, it indicates that marketing efforts are yielding results.
Why is brand valuation necessary?
Brand valuation has several important aspects:
- For selling or merging businesses: Intangible assets are becoming an increasingly significant part of the overall value of companies each year. During transactions, brand value can play a crucial role.
- For attracting investments: High brand value makes a company more attractive to potential investors. Unlike Western brands, in the Russian context, an increase in brand value does not always correlate with an increase in the company’s stock.
- For marketing planning: Analyzing brand value helps understand how effectively marketing strategies are working and what actions should be taken to increase its value.
- For damage compensation: Brand valuation helps determine the amount of compensation in cases of unauthorized use of its elements.
Methods of brand valuation
There are several approaches to brand valuation, each with its advantages and disadvantages. The most common methods include:
- Cost approach: Brand value is calculated based on all expenses incurred in its creation and maintenance. However, this method does not consider the brand's profitability.
- Market approach: Valuation is based on comparing prices of similar unbranded products. This method can be limited, as not all products may have suitable analogs.
- Income approach: This method treats the brand as a source of profit, subtracting all other assets from the market value of the company. This allows understanding what portion of total profits is represented by brand value.
Factors affecting brand value
When calculating brand value, various factors may be considered, including:
- Market share and level of loyalty of the target audience
- Financial condition of the company and the industry
- Time in the market and legal support
- Prospects for industry development
Thus, brand valuation is a complex and multifaceted process that requires consideration of various factors and methods. This concept remains conditional and depends on numerous circumstances, including reputation and potential profits, which are difficult to quantify.