Brand evaluation through balanced scorecard and KPI

The strong brand is the company’s most valuable intangible asset. Although brands are not listed on company balance sheets, they play a key role in determining the success of the company in a long-term perspective. Successful brands enable companies to effectively manage premium pricing, reduce relative power of trade, increase communication effectiveness, attract managerial talent, and reduce vulnerability to downturns. Dashboards or KPIs based on brand equity drivers provide focused and actionable measures for optimal brand management.

According to research by Interbrand, one of the leading brand consultancies, strong brands account for more than a third of shareholder value. Stock 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 a fusion of the capitalized value of consumer trust in the brand and its future sales volume potential (commercial exploitability of the brand). Consumer awareness of the brand is a powerful motivation for the customer to consider purchasing the brand’s product. Furthermore, the strength of brand equity promotes consumer loyalty and encourages customers to buy these products consistently and repeatedly over a long period of time. It should be noted that brand equity is created only if continuous positive revenue streams can be generated as a result of customer purchases.

Brand equity 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. Data for the analysis comes from market surveys, 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 leaders market share, profitability, geographic distribution, and protection), Credibility (measures the degree to which the brand is trustworthy and accountable to customers, and the effectiveness (trustworthiness) of the brand’s advertising), Relevance (measures the modernity of the brand, the ability to excite, as well as its commitment to ethical or socially responsible values ​​not driven by consumer values) and Consideration (measures the influence of familiarity with the brand on the actual choice of the consumer).

Brand financial value includes four main metrics: revenue generation capabilities (measures the impact of brand familiarity on sales, including future brand sales volume potential), return on investment (measures the ROI on 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 growth sustainability rate (measures the impact of the brand to the maximum growth rate that the brand owner can sustain without increasing financial leverage).

As a result of evaluating the brand using the Balanced Scorecard or KPI, the company can determine the current value of the brand equity compared to its short- 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.