I am in the process of responding to another RFP that stipulates that brand valuation is one of the deliverables. Given the context, it is clear that the client does not mean valuation in its financial sense. What they appear to want is a methodology for brand evaluation.
I hate to pick nits but it is a source of considerable confusion when a term that has a specific meaning to a financial audience is used in a much broader sense by marketers. Marketers are often guilty of using financial terminology to describe anything that involves measurement - they overlook the fact that many forms of measurement are non-financial (such as awareness levels, repurchase rates, willingness to recommend and so on).
For that reason, I have found it useful to make the distinction between two forms of brand measurement:
- Brand evaluation is the discipline of developing a quantitative (but non-financial) understanding of the strengths of a brand on multiple dimensions and with multiple audiences. The focus of brand evaluation is understanding the level of customer value that the brand generates;
- Brand valuation is the discipline of determining the proportion of overall business value that is solely due to the impact of the brand on the behavior of key audiences. The focus of brand valuation is on measuring the level of shareholder value that the brand generates.
Brand evaluation is a discipline that should be embraced by any organization that wants to understand what is driving customer preference and internal engagement. Brand valuation is a specialist discipline that is of particular value when an organization is contemplating a merger or licensing transaction, or when it is engaged in a trademark dispute.
Despite the popularity of league tables of the world’s most valuable brands produced by Interbrand, Millward Brown and Brand Finance or of the world’s most powerful non-profit brands produced by Cone, the managerial applications of brand valuation are surprisingly limited. A brand does not become more valuable simply as a result of measuring it. What actually makes a brand more valuable is when an organization is able to enhance the preference for the brand among its existing audiences, and how to promote the brand to new audiences. The financial value of a brand is determined by the behavior of its audiences.
Brand evaluation is about strategy and management. Brand valuation is about accounting. My beef with brand valuation is that it distracts clients from the more productive task of identifying and measuring the sources of their brand’s value to customers, partners, and employees (brand evaluation) and on generating ideas for how this value can be increased.
