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Measuring Brand Equity

Traditionally, brand valuation looks very different to your CFO versus your CMO. The financial officer thinks in specific, quantifiable metrics, while your marketing manager focuses on the qualitative factors that are not so easily translatable to hard numbers. However, with the increase in service based companies, the advent of methodologies such as six sigma, and increased prevalence of applied statistics as a core business course, the financial and marketing perspectives concerning brand valuation are becoming less divergent.

SEE: Are Your Metrics Meaningful?

Using root cause analysis and analytics, marketers can now, within a reasonable degree of confidence, track down which campaign, which marketing vehicle, or which data produced the greatest customer interest or customer action; how many interactions occurred with a particular customer prior to an action; how many types of customer profiles are evidenced by the interactions, so that we can better target our audience and manage our budget. Financial officers (should) no longer receive unfounded guestimates for marketing budgets. Furthermore, they can see the value added by the marketing department; suddenly the intangible becomes tangible.

SEE: ROE No Banks Allowed

My favorite manner of brand equity valuation continues to be ROI. Although it takes a considerable amount of time to initially determine the appropriate factors for measuring gain on investment, the ROI calculation is uncomplicated. Moreover, it is a method that can be readily understood by both the finance and marketing departments, as well as shareholders. It is readily implemented across any company, large, small, product based, or service based. Finally, when applied appropriately, ROI is the only methodology that truly captures the value added by marketing initiatives to brand equity.

About the Author

Maisha Smart, MBA founded Finance and Marketing to help small businesses excel, by bridging the gap between finance and marketing processes. Some of her favorite activities include fine arts, a good debate, and social engagement.

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