International Brand Company believes that the basis for establishing brand value is the assessment of the current value or the cash flow that the brand expects to achieve in the future. In order to estimate the value of a brand, it is necessary to identify the portion of revenue that can truly be derived from the brand, multiply historical revenue, and base the discount rate on future cash flows. Brand revenue may come from the product itself or from non-brand factors (such as distribution systems). Therefore, revenue not directly generated by the brand must be excluded. Generally speaking, brand revenue requires a weighted average of actual profits over the past three years. Brand revenue is calculated by subtracting the following items from brand sales: (1) cost of brand sales, (2) marketing costs, (3) variable and fixed management fees including depreciation and amortization, (4) capital compensation Fees, (5) taxes.
While calculating the brand, these revenues need to be adjusted from the perspective of brand development research, so we need to introduce valuation analysis of brand power. Brand power is a combination of 7 elements (the percentage in brackets is the highest value):
1. Leadership (25%) A brand influences its market and has a large market share and displays a prominent role to As for the ability to set price points, direct distribution, and resist competitive aggression. A brand that leads a market or market segment has more stable and valuable characteristics than other brands that follow.
2. Stability (15%) A brand’s ability to survive over a long period of time based on consumer loyalty and past history. Brands that have been established over time and have become part of the "structure" of their market have special value.
3. Market prospects (10%) The brand’s trading environment in terms of development prospects, instability and market entry barriers. Brands in markets such as food, beverages and publications are inherently more valuable than brands in markets such as high-tech or apparel, which are susceptible to changes in technology or trends.
4. Geographical communication (25%) A brand’s ability to cross geographical and cultural boundaries. International brands are inherently more valuable than national or regional brands, partly due to their economies of scale.
5. Development Trend (10%) The direction and ability of brand development to maintain the status quo and relevance for consumers.
6. Support (10%) Number and intensity of marketing and communication activities. Brand names that receive consistent investment and focused support are more valuable than those that do not. While the amount of money spent supporting a brand is important, the quality of support is equally important.
7. Level of protection (5%) Legal rights of brand owners. A registered trademark is a legal right to a name, device, or a combination of both. Other protections may exist at common law, at least in some countries. The strength and scale of brand protection are meaningful in the process of assessing its value.
The valuation of brand power is expressed as a percentage. This percentage is multiplied by brand revenue to get the corresponding value. A so-called perfect brand has 100% brand power value and may have a 5% discount rate; a weak brand has a lower multiple ratio and a higher discount rate. The so-called brand strategy refers to the research on consumers' positioning expectations of the brand and the future development direction of the brand. Brand audits can be used to determine the strategic direction of a brand. Are the current sources of brand interest satisfactory? Do brand associations need to be strengthened? Does the brand lack future competitiveness? What brand opportunities and potential challenges exist in brand development? Thanks to this strategic analysis, marketers can develop a marketing plan to maximize brand benefits over the long term.
When companies consider important changes in strategic direction, they should conduct a brand audit. A strategic brand audit involves maximizing the value of a brand through procedures for creating, measuring and managing it. Creating a strong brand requires careful strategy. The core of a successful brand is a great product or service, supported by innovative design and excellent marketing. The strategic brand management process includes 4 main steps: determining brand positioning; planning brand marketing; measuring brand performance; and maintaining brand value.
The result of brand positioning is to create positioning differences. Brand knowledge consists of thoughts, feelings, images, experiences, beliefs, etc. related to the brand.
Therefore, the brand must convince consumers that it is powerful, desirable and unique, such as transportation vehicles, Volvo emphasizes safety, Hummer emphasizes care, and Harley-Davidson emphasizes adventure. Good brand positioning makes it easy for satisfied consumers to choose the product again. A brand strategy audit requires understanding the development of a brand from the perspective of both the company and the consumer. From a company's perspective, it needs to understand what products and services are currently being offered to consumers and how they are marketed and branded. From a consumer perspective, it is necessary to deeply explore consumer insights and show what the true meaning of the brand and product is. As consumer tastes and preferences change, the emergence of new competitors or new technologies, or any new developments in the marketing environment, can potentially affect a brand's development strategy. When a company decides to use existing brand elements to introduce a new product, this is called brand extension. When a new brand is combined with an existing brand, this brand expansion can be called a sub-brand, and the original brand that produces the brand expansion is called a parent brand. If the parent brand is already associated with many products, it can also be called a family brand.
Virgin is the brainchild of Englishman Richard Branson, and it vividly illustrates the power and responsibility of brand expansion enjoyed by a strong brand. Branson's Virgin Group, which originally started with Virgin Music, now spans three continents and covers more than 200 businesses, including Virgin Atlantic, Virgin Mobile, Virgin Energy, Virgin Money (insurance, mortgages and investments), and Virgin Hotels. In product expansion, the parent brand is used to expand the brand for new products targeting new markets, such as expanding an existing product catalog with new flavors, forms, colors, additional ingredients, and packaging. Mengniu has used product expansion to introduce many new products - such as fruit-flavored yogurt, plain yogurt and sour yogurt. Honda already uses its parent brand on products as diverse as cars, motorcycles, skis, lawnmowers, marine engines and snowmobiles. On the negative side, product line expansion may cause the brand name to become generic and fail to evoke strong brand awareness due to the large number of products. This is the “product expansion trap.” Brand dilution occurs when consumers no longer associate specific products or very similar products with a brand and begin to ignore those brands. Brand extension audits analyze whether a company launches a brand extension and consumers consider it inappropriate. The worst extensions may not just fail, but they harm the image of the parent brand. When only a small number of consumers are attracted to a brand, you fall into the product expansion trap. For example, Shanghai General Motors' Buick cars were sold in China from 120,000 to more than 500,000, forming a series. The advertising slogans of the series of products diluted its "professional" brand positioning in the United States, and the company gave up its own unique image, thinking that Chinese consumers don’t understand the brand’s positioning in the United States and fooling them. The result is that I think it must be a failure.
A major mistake in evaluating expansion opportunities is failing to consider all consumers' brand knowledge structures together. Often, marketers make the mistake of focusing on one or a few brand associations as potentially suitable bases, while neglecting other, perhaps more important, brand associations. Keller came to the following important conclusions after studying brand extension: (1) Successful brand extension occurs when the parent brand has a popular and beneficial cooperation and there is a reasonable perception between the parent brand and the extended product. occur. (2) There are many bases for brand expansion: product-related attributes and benefits, as well as non-product-related product attributes and benefits related to common usage situations or user types. (3) Brand expansion depends on consumers' knowledge of the category, perceptions of suitability based on technology or production community, or more superficial considerations such as necessity or situational complementarity. (4) Although both high-quality brands and average-quality brands have boundaries, the former can expand to a wider range than the latter. (5) It is very difficult for a brand that is seen as a prototype of a product category to expand beyond the product category. (6) Tangible quality associations are often more difficult to expand than abstract benefit associations. (7) Consumers tend to transfer positive original product category associations to negative extensions. (8) Consumers sometimes even infer their extended negative associations based on other positively inferred associations. (9) Expanding into a product category that seems easy can sometimes be difficult.
(10) Successful brand extension not only contributes to the image of the parent brand but also enables a brand to be extended further. (11) Vertical brand extension may not be straightforward and often requires a strategy of sub-brand substitutes. Brands need a portfolio audit. A brand portfolio is a collection of all brand lines that a company offers to buyers and sellers in a specific category. Companies design different brands and use them for different market segments.
A brand portfolio must be judged on its ability to maximize brand equity. The best brand portfolio is one where each brand is combined with all other brands to maximize equity. In the process of designing an optimal brand portfolio, marketers generally need to weigh market reach and other considerations, such as cost and profitability. If profits can be increased by reducing brands, the brand portfolio is too large; if profits can be increased by adding brands, a brand portfolio is not large enough. Usually, the basic principles of designing a brand are to maximize market coverage, potential customers are not ignored, and to minimize brand overlap, the brand is not eager to get all the approval of users. Each brand should be clearly differentiated and appeal to a large enough marketing segment to justify its marketing and production costs.
Brand portfolios need to be carefully monitored over time to identify weak brands and eliminate unprofitable ones. In the late 1990s, consumer durables manufacturer Electrolux supplied a variety of professional food service equipment in Western Europe. The company has 15 brands in the professional food service equipment market, but only Zanussi is sold in multiple European countries. By moving from a segmented plan based on price – low, medium, and high (based on user needs), essentially addressing the prestige gourmand approach – Electrolux went from 15 local brands to 4 pan-European brands . The resulting economies of scale and opportunities helped Electrolux's brand equity shift in another direction, so that even though Electrolux dropped many brands, its Professional Kitchen Products division's sales never shrank and it was finally profitable in 2001. Additionally, there are many specific character brands that can be part of a brand portfolio.
1. Helper Brands Helper brands are brands that are positioned to compete with competitor brands so that the company's more important (and more profitable) flagship brands can retain their desired positioning. P&G's Luvs diapers are used to protect the company's flagship brand, Pampers. Marketers must be careful in designing these warrior brands. Warrior brands will not be so attractive that they will not take away sales from higher-priced brands or related products. At the same time, if the Warrior brand is seen as being associated with other brands within the brand portfolio (e.g., the strength of a common strategy), then the Warrior brand cannot be designed to be too cheap.
2. Cash Cow Brands Some brands may be maintained despite a gradual reduction in marketing volume because they still manage to retain a sufficient number of customers and maintain their profitability without market support. . These "cash cow" brands can effectively gain capital by retaining existing brand benefits. For example, Gillette still retains its old Trac II, Atra, and brand names, even though technological developments have left most of Gillette's market occupied by the new Edge 3 razor. Because taking back these brands won't necessarily lead to customers switching to another Gillette brand, it could be more profitable for Gillette to keep them within the brand.
3. Low-end tier brands The role of a relatively low-priced brand in a brand portfolio is usually a way to attract customers as brand holders. Retailers like this "conveyor" approach because they can lure customers into converting to a higher-priced brand. For example, BMW introduces its 3 Series cars to customers as a way to attract new customers to the brand franchise, thereby moving them to a higher purchase price level when they negotiate their car decisions.
4. High-end prestige brands The role of a relatively high-priced brand in a brand family is usually to add prestige and credibility to the entire brand. For example, the real value of General Motors' launch of the Chevrolet Corvette high-performance race car is "... its ability to attract curious customers into showrooms while helping to promote the image of other Chevrolet sedans. There is no doubt that this will increase customer traffic."
"The technical image and prestige of Corvette cars are considered to have cast a halo over the entire Chevrolet brand.
Science is the summary of practical experience, and practice is the only criterion for testing truth. Through marketing audits, companies can often Find the direction of your brand.