I recently stumbled upon a tweet by Mr. Matt Wallace (@mattwallace888 on X) revealing that Dior spends a mere $57 to produce bags that retail for a staggering $2,780. His blunt comment, “Anyone buying “luxury” bags is an idiot,” certainly stirred some thoughts (See picture below). While I am not holding any briefs for LVMH or Priyanka Chopra, these are my thoughts.
Brand Value refers to a brand's worth in the marketplace. It is a crucial asset for the business that reflects the brand's strength, reputation, and influence. Components of brand value include brand equity, financial performance, customer impact, brand strength, financial metrics, market-based metrics, and consumer-based metrics. For obvious reasons, I will limit this post to the financial performance component of brand value.
A brand's financial performance is directly related to
1. the financial return attributable to the brand,
2. the ability to charge higher prices compared to unbranded or less well-known competitors and
3. the brand’s market share in its category.
Interestingly, a discounted cash flow analysis can be computed to measure a brand's value, which will estimate the future earnings due to the brand for the business.
What is the importance of brand value?
Competitive Advantage: A robust brand value can differentiate a company from its competitors, empowering it to attract and retain customers more effectively.
Financial Benefits: A high brand value often translates into superior financial performance because of its ability to charge premium prices.
Business Sustainability: High-value brands are generally more resilient and can better withstand market fluctuations and competitive pressures.
Strategic Asset: Brand value is a crucial intangible asset that can enhance a company's overall valuation, making it more attractive to investors and partners.
Finally, in a cheeky response to a friend on the tweet mentioned above, I stated that the brand value of the Christian Dior bag by LVMH is:
Brand Value = Retail Price – Production Cost
= $2,780 - $56
= $2,724
#branding #marketing #lvmh #Christiandior #luxury #competitiveadvantage #businesssustainability #strategicasset
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