There are three different perspectives of brand valuation, asset perspective, customer perspective, and comprehensive perspective.
2.3.1 Asset perspective
The asset perspective is to measure the value of brand asset from corporate finance, which means brand value is reflected in the financial benefits obtained by companies from the brand.
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The Interbrand method and Financial World method are examples of asset perspective. Interbrand method has a basic assumption:
“Brand value is reflected to ensure that brand owners can get a more stable income in the future.” Thus, it is necessary to assess brand value on the basis of the future earnings of company through financial analysis, market analysis and brand analysis.
First, use financial analysis to evaluate the residual earnings of a product or a business, which refers to the balance of the future income from the product or business minus the revenue from the tangible assets.
Second, clear the impact of brand on the industry of the product or service through market analysis, thus determining how many percentages of residual earnings are created by the brand, so as to calculate the brand’s future earnings.
Third, take the analysis from ten areas including authenticity, clarity, brand commitment, brand protection, adaptability, consistency, diversity, visibility, relevance and understandability to determine the coefficient of brand strength, then convert the brand strength coefficient to the discount rate of brand’s future earnings through an S-shaped curve (the discount rate is used when discounting brand future earnings for the current yield).
According to this idea, brand value is calculated as: brand value = future
earnings of brand × brand strength.
Based on the advantages of the Interbrand method, the Financial World method develops its own characteristic with the expert assessing brand market performance to obtain the data of brand’s earnings. Assessment is first built on the company’s sales. The expert judges the average profit margin of industry
according to his experience, and calculates the company’s operating profit, from which excludes profits that have nothing to do with the brand, to acquire the data of pure profit created by brand.
Next, calculate the brand strength coefficient using the Interbrand method.
Finally, calculate the brand value with the formula as follows: brand value =
brand net profit × brand strength.
2.3.2 Customer perspective
Customer perspective is to measure the brand’s status in customers’ hearts from the degree of such aspects as their familiarity with the brand, perception of the brand quality, and association of the brand, etc. Yu and Zhao (2003) believed that customers are the foundation of brand value, and argued that brand value is “the differential response of customers to enterprise marketing activities in the aspects of cognition, emotion, and behavior intention and behavior”.
On this basis, some scholars pointed out that customer- based brand valuation must consider three factors: brand loyalty, perceived quality and brand image. Wang (2004) thought besides the joint action of brand loyalty and brand awareness, brand valuation needs to consider the influence of whether the customer to buy on the real value of brand. Researches under customers’
perspective provide a basis for the quantitative assessment of brand value.
Brand valuation methods based on the customer perspective with quantitative indicators include the premium method and the loyalty factor method. The principle of the premium method is that by calculating how high
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an extra price that customers are willing to pay when buying a particular brand of product or service to determine the size of the brand value. It includes the following three steps.
First of all, through the market research to confirm the price of overflow, namely the extra price that customers are willing to pay for the purchase of a branded goods or services compared with buying a non-branded product or service.
And then calculate the excess profit by multiplying the price with the current sales of the branded product or service.
Finally, get the brand value with the excess profits divided by the industry’s average profit margin of the branded product or service, which is calculated as follows: brand value = the premium × sales/average profit
margin. On the basis of consideration of the premium as well as sales of a branded product or service, Fan and Leng (2000) added the element of
customer loyalty to further improve the brand valuation method. They believed that brand value embodies in that the brand can increase corporate benefits in the future, which depends on a broad customer loyalty. To this end, they used the “loyalty factor” to represent the proportion of customers deciding to start buying or repeat buying the branded product in the future to all the target customers, with the help of the customer’s brand loyalty and brand attractiveness to assess the brand value. The calculation formula is: brandvalue = theoretical target customer base × loyalty factor × cycle purchases
× (unit product price − unit unbranded product price) × numbers of cycle
within the time limit.
2.3.3 Comprehensive perspective
Brand value evaluation based on a comprehensive perspective exhibits establishing the link between brand asset and customers, considering the value brought to the enterprise and the customer at the same time by the brand.
Hence, Scholars pointed out that brand asset value based on the customer can be measured through three dimensions including brand loyalty, perceived quality and brand awareness/association. Washburn and Plank built the evaluation scale of brand equity value from the view of the customer. In addition, He and Zhao found that brand value assessment can be carried out by three factors seven dimensions, in which these three factors are common factor, basic common factor and special factor.
Common factor includes four dimensions: brand loyalty, brand image, entrepreneur image and brand support.
Basic common factor includes two dimensions: brand innovation and brand tenacity, and special factor include a dimension reflecting the industry.
In summary, these results enrich the study of brand valuation method under the comprehensive perspective.
More well-known brand valuation methods based on a comprehensive perspective include the ten elements model of brand equity and the model of customer-based brand equity. Aaker believes, brand value is “a group of assets and liabilities associated with the name and symbol of a brand, which can increase or reduce the value to the company or the customer caused by a
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product or services”, and takes five specific dimensions 10 indicators (that is, ten elements) for brand valuation.
The brand value under this model is calculated as: brand value = (price
advantage + satisfaction/loyalty) + (perceived quality + leading brand/popularity) + (perceived value + brand personality + organization association) + brand awareness + (market prices and distribution channels + market share).
In the same period when Aaker proposed the ten elements model of brand equity, Keller also put forward another influential method of brand valuation.
The core of this approach is how to measure brand equity value from the customer level, referred to customer-based brand equity model (CBBE).
Among them, the significance means the extent of difficulty and the frequency that the brand can be identified in a variety of situations by the customer. The performance and image are used to measure the degree of customer’s perception of brand connotation from the specific (functional) and abstract angle respectively.
The evaluation and perception measure the extent of customer’s reflection of the brand, the former of which refers to the customer’s view of the brand, and the latter is perceptual behavior of the customer to the brand, such as enthusiasm, self-esteem. The resonance is to measure the strength of the relationship between the customer and the brand. Therefore, the brand value under the CBBE model is calculated as: brand value = brand significance +
(brand performance + brand image) + (brand evaluation + brand feeling)
+ brand resonance.
Being different from these perspectives, the VA/VE method can be seen as the combination of asset perspective (because of cost coefficient) and customer perspective (functional coefficient from customer questionnaire). And the advantages of using this VA/VE method are as following
1. The combination of two viewpoints provides the more trusted result.
2. The enterprise can calculate their marketing activities by themselves.