The return on brand (ROB) is an indicator used to measure
brand management
In marketing, brand management refers to the process of controlling how a brand is perceived in the market (economics), market. Tangible elements of brand management include the look, price, and packaging of the product itself; intangible element ...
performance.
It is an indicator of the effectiveness of brand use in terms of generating
net income
In business and Accountancy, 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 (a ...
, 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
The phrase return on average assets (ROAA) is also used, to emphasize that average as ...
.
ROB is calculated as the ratio of net income to
brand value:
:
Usage
Return on brand can be used in multi-criteria models for assessing the effectiveness of
branding, 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 relat ...
(since the
brand
A brand is a name, term, design, symbol or any other feature that distinguishes one seller's goods or service from those of other sellers. Brands are used in business, marketing, and advertising for recognition and, importantly, to create and ...
is a component of
relational capital).
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 legal people, whether Natural person, natural, Juridical person, juridical or a mixture of both, with a specific objective. Company members ...
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, exclusive franchises, Goodwill (accounting), goodwill, trademarks, and trade names, reputation, Research and development, R&D, Procedural knowledge, ...
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
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Return on capital
Return on capital (ROC), or return on invested capital (ROIC), is a ratio used in finance, valuation and accounting
Accounting, also known as accountancy, is the process of recording and processing information about economic entity, economi ...
(ROC)
*
Return on equity
The return on equity (ROE) is a measure of the profitability of a business in relation to its equity;
where:
: Jason Fernando (2023)"Return on Equity (ROE) Calculation and What It Means" Investopedia
Thus, ROE is equal to a fiscal year's net in ...
(ROE)
*
Return on investment
Return on investment (ROI) or return on costs (ROC) is the 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 favorab ...
(ROI)
*
Rate of return on a portfolio
*
List of business and finance abbreviations
A list is a set of discrete items of information collected and set forth in some format for utility, entertainment, or other purposes. A list may be memorialized in any number of ways, including existing only in the mind of the list-maker, but ...
References
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Financial ratios