Many factors go into estimating a brand’s value and there are a variety of methods, each with pluses and minuses. Like any illiquid asset, a brand is worth what someone is willing to pay that day and nothing more or less. But a simple way to estimate brand value is to look at it from three points of view:
#1. What is the value of your brand to your customers? In other words, how much are they willing to pay compared to an alternative brand or even making no purchase at all? Millions of customers choose Oreo cookies over lower cost Hydrox every day. And these millions may never buy Hydrox in a lifetime, making their continued loyalty part of the Oreo brand’s worth as well. A brand like Coca-Cola has a multitude of loyal buyers but also has vastly greater distribution in fountain sales and vending machines than does its rival Pepsi. Sometimes people buy Coke because it’s there and Pepsi isn’t. And that’s part of a brand’s worth as well.
#2. What is the value of the brand in the marketplace? What can a company sell a brand for, including tangible assets like formulas, blueprints, manufacturing methods, and equipment as well as the intangibles of customer loyalty and brand preference? Major parent brands like Procter and Gamble and Unilever buy and sell brands virtually every year. P&G sold its Duracell brand for $4.7 billion in 2014 and Keurig sold its coffee maker and pods business for $13.9 billion in 2015. The motivation for P&G was part of a broad effort to dump underperforming brands and concentrate on growing their strongest. For Keurig, it was a financial decision that provided the best value for its shareholders.
#3 What is your brand worth to you, the owner? This is the brand valuation concept that Interbrand, the global brand-consulting firm, uses. Their concept is that a brand is likely to be most valuable to its current owner. After all, the owner has built the brand and knows (or should know) its strengths and weaknesses better than anyone. Interbrand’s top global brands for 2018 are Apple, valued at $214 billion, Google at $155 billion and Amazon at $100 billion. These are three very different businesses, but each has established their brands at the top of their categories and each is highly profitable. About the only companies that could afford to buy any of these three brands is, well, any of these three brands, so the market is slim anyway.
Of course, these estimates are all just educated guesses. Brand Finance, another brand consultancy with its own rankings, values Apple at just $146 billion and Amazon at $151 billion. Somehow I doubt that Tim Cook or Jeff Bezos is losing any sleep over either one of these evaluations, no matter how many billions of dollars apart they may be.
So, what’s your brand worth? Simple elements like price premiums, lifetime value of your customers, customer retention, and loyalty factors all come into play. If you elect to sell your brand, the market will decide how much those metrics are worth as well. In the end, the Interbrand approach may be the most appropriate. Your brand is worth most to the company that already owns it and keeping it can be the best option for return on investment there is.
Image courtesy of CHS Recruiting.