How much is your challenger brand really worth? 6 ways to tell

If you understand the value of brand-building, then you'll already know that your brand is so much more than just a logo and a colour palette. It's the space you occupy in your buyers' minds and hearts. And it's valuable space. The power of a strong brand can result in 33% increased revenue, 306% higher lifetime value, it can triple your speed to profitability as you can afford to charge bigger margins, it increases loyalty and provides a foundation for the holy grail of marketing; brand advocacy, a.k.a. word of mouth. A.k.a. £0 CPA ;)

But, if we take a step back and look at the bigger picture: your brand can go as far as accounting for 20% of the overall company valuation. At unicorn status, where a privately-held tech "startup" reaches a valuation of $1 billion, this means your brand could be worth an eye-watering $200 million.

We've come a long way from a nice logo and pretty colours now, haven't we?

So, how do we go about defining the actual monetary value of your brand? Well, there are actually six ways to calculate brand value; using a cost-based valuation, a market-based valuation, income-based valuation, "revenue premium" valuation, customer-based valuation, or Net Promoter Score (NPS) valuation. Let's break down each of these and see which formula would be best for your future-unicorn tech scale-up:

Cost-Based Valuation

A "cost-based valuation" method, put simply, calculates brand value based on how much it cost to build the brand. So, you’d add up all the expenses incurred in brand-building from the very beginning. Things like contracts with branding agencies, promotions, trademarks, salaries of employees who focus on brand, marketing, etc.

This measurement gives a value based on what you put into your brand, although it’s important to remember that it doesn’t necessarily reflect the current brand value in the public sphere. (Based on the success of your branding investment, as well as other industry changes, your brand value could be higher or lower than this number.)

Market-Based Valuation

Depending on the market landscape when you come to valuing your brand - and the position in which your brand is - this could be one of the best ways to calculate your brand value.

A market-based valuation estimates the value of your brand based on the current market climate, easily assessed by firstly looking at the sale price of similar brands. You can also look at valuation, stock performance, or ask leaders in other companies what they would pay for your brand.

By gauging a variety of different market measures, you can land on a realistic estimated market value for your brand.

Income-Based Valuation

This method looks at the income generated by your brand. In other words: what money is your brand bringing in for the company? This takes some discernment, as you need to look at all the financial streams of your company. Then, you must assess which parts can be attributed directly to the reputation and awareness earned by your brand.

While it’s tricky to land on a number, it’s a useful frame for understanding brand value.

Revenue Premium Valuation

In some ways, this method is a more specific form of income-based valuation. It compares your brand to non-branded alternatives to decide how much people will pay for a recognised brand.

How can you get a clear and specific measure of brand value? By seeing if people pick your brand based on brand identity alone and extrapolating from there ;)

Customer-Based Valuation

This method involves assessing the number of current customers, predicting numbers of future customers, and assigning lifetime values to each. This lifetime value can be an average that encompasses the typical customer, or customers in different categories with different values.

Customers are a good measure of brand value, as loyal customers stick with a brand they identify with and like.

Net Promoter Score (NPS) Valuation

“Net promoter score,” in essence, is a measure of how well your brand does at inspiring organic, word-of-mouth promotion. You can calculate it by asking customers how likely they are to recommend your brand to someone they know. You can calculate the score by subtracting the percentage of detractors from the percentage of promoters. Do you want someone to recommend a product or service to someone in their community? Well, they need to know, like, and trust the brand, so this is a great measure of brand value.

Various ways to assess the strength of your brand

All of these methods have pros and cons. This is natural, given the intangible and subjective nature of a brand and its value. Regardless of what method you choose, the exercise of measuring your brand’s value will clearly illustrate its monetary impact on your company. Use it to inform your goal-setting and brand strategy going forward.

If your tech business is looking to build its brand, then book a call here to find out about our marketing strategy services, content creation offer, campaign management, and social media marketing for challenger brands.

Bloom is an award-winning marketing agency specialised in brand performance, with work featured in the likes of Forbes, The Independent, and Sifted.