Can you place a dollar value on your company’s brand? You’d be smart to try, and for some companies the estimates are astonishing.
Coca-Cola has a brand worth nearly $70 billion, which accounts for a whopping 60% of its market capitalization. As brands become more measurable, companies are focusing on ways to increase their value. Use this tool to powerfully bring brand value to life, and initiate a deeper conversation in your company.
1. Price Premium. This approach measures how much you can charge for your products or services over and above what you could charge for their generic equivalents. The difference is the brand’s price premium, which correlates closely to brand value.
2. Customer Preference. If prices are very similar in a category, an alternate way to measure a brand’s value is to find out how likely customers are to buy your brand instead of a competing brand. The value of the brand, therefore, is the marginal value derived from the extra sales.
3. Replacement Cost. How much would it cost to replace your brand by building it again from scratch? This method is particularly useful if you’re buying or selling a brand. The total market value of the brand would be roughly equivalent to the cost of replacing it.
4. Stock Price. According to proponents of this method, the stock market will adjust the market capitalization of a company to reflect the future prospects of the brand. The formula that translates stock price into brand value approaches the complexity of rocket science, but it has the advantage of looking forward instead of backward.
5. Future Earnings. This method tries to predict the future earnings attributable to brand assets by using an earnings multiplier. The multiplier is a guesstimate based on historical models or comparable industries. Though somewhat crystal-ballish, this method gets at the real-life issues of brand valuation.