Brand evaluation through balanced scorecard and KPI
The strong brand is the company’s most valuable intangible asset. Although brands do not figure on company balance sheets, they play a key role in determining the success of the company in a long-term perspective. Successful brands allow companies to effectively manage premium prices, reduce the relative power of trade, increase communication effectiveness, attract managerial talent, and reduce vulnerability to recessions. Scorecards or KPIs based on brand value drivers provide focused and actionable measures for optimal brand management.
According to research by Interbrand, a leading brand consultancy, strong brands account for more than a third of shareholder value. Share prices of companies with well-known brands have significantly higher investment returns and a lower rate of risk compared to the stock market as a whole.
The brand has a clearly identifiable financial value that is conveyed in the price tag associated with a specific brand. This financial value represents the economic value of the brand to the owner. Brand equity is an amalgamation of the capitalized value of consumer trust in the brand and its future sales volume potential (brand commercial exploitability). Consumer awareness of the brand is a powerful motivator for the customer to consider purchasing the brand’s product. Additionally, the strength of brand equity promotes consumer loyalty and encourages customers to consistently and repeatedly purchase these products over a long period of time. It should be noted that brand equity is created only if ongoing positive revenue streams can be generated as a result of customer purchases.
The brand value is an intangible asset of the company. Therefore, to measure its financial value, company management must identify key performance indicators (KPIs) of the brand’s business and then determine the degree to which each KPI is directly influenced by the brand. The data for the analysis comes from market research, customer workshops and interviews of (potential) customers.
Brand measures can be classified into three categories: brand perception, brand performance, and brand financial value. Each category consists of several KPIs, which contribute to the total value of the brand.
For example, the brand perception category consists of the following measures or metrics: consumer awareness (measures brand recognition and differentiation), brand strength (measures brand stability, relationship with leading market share, profitability, geographic distribution, and protection), Credibility (measures the extent to which the brand is trustworthy and accountable to customers, and the effectiveness (reliability) of brand advertising), Relevance (measures the modernity of the brand, the ability to move, as well as its commitment to ethical or socially responsible consumption). values) and Consideration (measures the influence of familiarity with the brand on the consumer’s actual choice).
Brand financial value includes four primary metrics: revenue-generating capabilities (measures the impact of brand familiarity on sales, including the brand’s future sales volume potential), return on investment (measures the ROI in brand marketing), transaction value (identifies the transaction value of the product/service and measures the current and potential value that the brand adds to a transaction), and the rate of growth sustainability (measures the impact up to the maximum growth rate the brand owner can sustain without increasing financial leverage).
As a result of brand assessment using Balanced Scorecard or KPIs, the company can determine the current value of the brand’s equity compared to its short-term and long-term goals. The final result includes percentage values of the actual and expected performance of the brand, and identifies the strong and weak areas of the company’s brand management.