The return on brand (ROB) is an indicator used to measure
brand management
In marketing, brand management begins with an analysis on how a brand is currently perceived in the market, proceeds to planning how the brand should be perceived if it is to achieve its objectives and continues with ensuring that the brand is pe ...
performance.
It is an indicator of the effectiveness of brand use in terms of generating
net income
In business and accounting, net income (also total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales) is an entity's income minus cost of goods sold, expenses, depreciation and amortization, interest, a ...
. In fact, it is a special case of
return on assets The return on assets (ROA) shows the percentage of how profitable a company's assets are in generating revenue.
ROA can be computed as below:
:\mathrm = \frac
This number tells you what the company can do with what it has, ''i.e.'' how many doll ...
(ROA).
ROB is calculated as the ratio of net income to
brand value
A brand is a name, term, design, symbol or any other feature that distinguishes one seller's good or service from those of other sellers. Brands are used in business, marketing, and advertising for recognition and, importantly, to create an ...
:
:
Usage
Return on brand can be used in multi-criteria models for assessing the effectiveness of
branding
Branding may refer to:
Physical markings
* Making a mark, typically by charring:
** Wood branding, permanently marking, by way of heat, typically of wood (also applied to plastic, cork, leather, etc.)
** Livestock branding, the marking of animals ...
, as well as
intellectual capital Intellectual capital is the result of mental processes that form a set of intangible objects that can be used in economic activity and bring income to its owner (organization), covering the competencies of its people ( human capital), the value rela ...
(since the
brand
A brand is a name, term, design, symbol or any other feature that distinguishes one seller's good or service from those of other sellers. Brands are used in business, marketing, and advertising for recognition and, importantly, to create an ...
is a component of
relational capital
Relational capital is one of the three primary components of intellectual capital, and is the value inherent in a company's relationships with its customers, vendors, and other important constituencies. It also includes knowledge, capabilities, pr ...
).
It is believed that if the brand value of the
company
A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal person, legal or a mixture of both, with a specific objective. Company members share a common p ...
increases, its net profit should also increase, otherwise the value of ROB will decrease, which indicates a decrease in the effectiveness of brand management in terms of creating net profit. At the same time, if the brand value falls, and this does not lead to a decrease in the net profit of the enterprise, the ROB value increases, which indicates a relative increase in the brand management efficiency. The change in brand value itself, although it makes it possible to judge the effectiveness of brand management, is only indirectly, since the company does not sell the brand directly, because it is an
intangible asset
An intangible asset is an asset that lacks physical substance. Examples are patents, copyright, franchises, goodwill, trademarks, and trade names, as well as software. This is in contrast to physical assets (machinery, buildings, etc.) and finan ...
associated directly with company and its products. If a company sells its brand as an intangible asset to another organization, it terminates branding events with respect to it, since this function transfers to the new owner of the brand. Thus, ROB allows to clarify how effective it is for a company to change the value of the brand associated with it. For this reason, the diagnosis of the impact of brand value on a business is relevant only with a joint analysis of ROB.
Application examples
Return on brand can be applied in several branding assessment models:
The approach of T. Munoz and S. Kumar, who propose to build a branding assessment system based on three classes of metrics (perception metrics, behavioral metrics, financial metrics), which make it possible to evaluate branding effectiveness.
A model for assessing the effectiveness of branding based on the concept of contact branding, which is based on the fact that by isolating and controlling points of contact between the brand and the consumer, it is possible to evaluate the effectiveness of brand management.
[Davis, Scott M., Dunn Michael, Building the brand-driven business: Operationalize your brand to drive profitable growth, San Francisco, Jossey-Bass, 2002 ]
See also
*
Return on capital (ROC)
*
Return on equity
The return on equity (ROE) is a measure of the profitability of a business in relation to the equity. Because shareholder's equity can be calculated by taking all assets and subtracting all liabilities, ROE can also be thought of as a return on ''a ...
(ROE)
*
Return on investment
Return on investment (ROI) or return on costs (ROC) is a ratio between net income (over a period) and investment (costs resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favourably ...
(ROI)
*
Rate of return on a portfolio The rate of return on a portfolio is the ratio of the net gain or loss (which is the total of net income, foreign currency appreciation and capital gain, whether realized or not) which a portfolio generates, relative to the size of the portfolio. It ...
*
List of business and finance abbreviations
This is a list of abbreviations used in a business of financial context.
0-9
*1H – First half of the year
*24/7 – 24 hours a day, seven days a week
*80/20 – According to the Pareto principle, for many events, roughly 80% of the effects c ...
References
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Financial ratios