Measuring the value of a brand

A brand is an identifying symbol, mark, logo, name, word and/or sentence that companies use to distinguish their product from others. A combination of one or more of those elements can be utilized to create a brand identity. Examples of strong brands are Zara, Mercedes, Apple, Tata, Amul, etc.

  • This provides us with a first step in measuring the value of a brand. Strongly advertised brands carry a higher-than-average price, so they are more profitable. They have lower price elasticity than less well-advertised or unadvertised brands.
  • A growing brand also becomes increasingly profitable for two further reasons: the first connected with consumer behavior and the second, with advertising.
  • In consumer terms, the sales of a brand can be calculated by multiplying its penetration (numbers of households buying the brand in a defined period) and its purchase frequency (the number of purchases of the brand during that period).
  • The second factor increasing the profit of large brands relates to their advertising. The normal pattern for a stable brand is for its share of all advertising in the category (share of voice or SOV) to be approximately equal to its share of the market (SOM).
  • Small brands over-advertise (with SOV higher than SOM) while large brands under-advertise (with SOV below SOM). Such underinvestment – often by 2 or 3 percentage points of SOV – represents large sums that go straight to the bottom line.
  • The brand’s health and buoyancy are expressed in its annual profit, and this becomes the basis of negotiation between the manufacturer and the buyer of the brand, the eventual sum being a multiple based on a number of years’ profit.

In a market like India, where there is significant growth in nearly all categories, the multiple is likely to be much higher, and a figure of 30 should not be unexpected.


8 thoughts on “Measuring the value of a brand”

  1. Hi, i think that i saw you visited my weblog thus
    i came to “return the favor”.I’m attempting to find things to
    improve my site!I suppose its ok to use a few of your

  2. I have been browsing online more than 3 hours
    today, yet I never found any interesting article like yours.

    It’s pretty worth enough for me. Personally, if all web owners
    and bloggers made good content as you did, the internet will be
    a lot more useful than ever before.

  3. Hi there! I’m at work browsing your blog from my new iphone 3gs!
    Just wanted to say I love reading through your blog and look forward to all your posts!
    Keep up the excellent work!

  4. I was recommended this web site by my cousin. I am not
    sure whether this post is written by him as no one else know such detailed about my problem.
    You’re incredible! Thanks!

Leave a Comment

Your email address will not be published.