Cost Benefit Analysis Calculation

for a Brand protection Program

Analysis

A Comprehensive Guide to Evaluating the ROI of Brand Protection Solutions

In today’s business landscape, decision-makers are constantly faced with the challenge of evaluating the financial implications of various investments. Investing in a brand protection solution entails various costs, including initial setup, ongoing maintenance, and operational expenses.

A COST-BENEFIT ANALYSIS

One essential tool to assist a company is the Cost-Benefit Analysis (CBA), a method used to weigh the potential costs against the benefits of a particular project or investment. By quantifying both the positive and negative outcomes, organisation can make informed decisions about allocating resources and maximising returns.

In this eBook, we’ll explore the cost-benefit analysis for brand protection solutions and illustrate its application with a case study of our customer. We will highlight the supporting equations and also provide the calculation template for download.  Let’s delve into the cost-benefit analysis of investing in a brand protection solution. There are usually the initial fixed set-up costs and also the variable running costs.

COSTS

  1. Initial Setup Costs

When implementing a brand protection solution, initial setup costs cover a range of expenses. These include software licensing fees, which grant access to the necessary technology for monitoring and protecting your brand. Additionally, there may be hardware costs if specific equipment is required, such as scanners or tracking devices. Customization of the solution to fit your brand’s unique needs is another factor, ensuring seamless integration with existing systems and workflows. Finally, employee training is essential to ensure that your team can effectively utilise the brand protection tools.

2. Ongoing Maintenance

Beyond the initial setup, ongoing maintenance is crucial for ensuring the continued effectiveness of your brand protection solution. This includes regular software updates to address emerging threats and vulnerabilities, as well as technical support to troubleshoot any issues that may arise. As technology evolves, upgrades may be necessary to keep the system up-to-date and capable of defending against new challenges.

System maintenance

3. Operational Expenses

Running a brand protection program requires ongoing operational expenses. This includes the cost of monitoring and analysing data to identify potential threats to your brand, such as counterfeit products or unauthorised sellers. Investigating these threats and taking appropriate action, such as enforcing intellectual property rights or pursuing legal action against infringers, also incurs expenses. Depending on the scale of your operations, you may need to hire specialised staff dedicated to brand protection or outsource certain tasks to external agencies.

Expenses

4. False Positives

One potential challenge of brand protection solutions is the generation of false positives. These occur when legitimate sellers or products are incorrectly flagged as infringing upon your brand. Resolving these false claims can be time-consuming and resource-intensive, requiring investigation and communication with authorised sellers. Moreover, false positives can damage relationships with legitimate partners and erode trust within your supply chain, necessitating careful management and mitigation strategies.

BENEFITS

  1. Revenue Protection

A brand protection solution is instrumental in safeguarding your revenue streams from threats such as counterfeit products, unauthorised sellers, and intellectual property infringement. By detecting and addressing these threats proactively, you can minimise revenue loss and maintain profitability, ensuring the long-term financial health of your business.

Brand Reputation

2. Brand Reputation

Protecting the integrity of your brand is paramount for maintaining consumer trust and loyalty. A brand protection solution helps identify and remove counterfeit or unauthorised products from the market, preserving your brand’s reputation for quality and authenticity. By ensuring that consumers can trust the products bearing your brand name, you foster positive associations and reinforce brand loyalty. 

 

3. Legal Compliance

Investing in a brand protection solution demonstrates your commitment to upholding intellectual property rights and complying with relevant laws and regulations. By actively monitoring and addressing infringements, you mitigate the risk of legal disputes, fines, and reputational damage associated with intellectual property infringement. This proactive approach enhances your brand’s credibility and integrity in the eyes of consumers and stakeholders.

4. Consumer Trust

Ensuring product authenticity and protecting consumers from counterfeit goods are essential for fostering trust and confidence in your brand. A brand protection solution provides assurance to consumers that they are purchasing genuine products from authorised sources, reducing the risk of deception or dissatisfaction. By prioritising consumer trust, you cultivate positive word-of-mouth and drive brand loyalty, ultimately contributing to long-term success and growth

5. Competitive Advantage

Brands that invest in brand protection gain a competitive edge by differentiating themselves from competitors who may neglect these critical aspects. Consumers are increasingly discerning and value authenticity and trustworthiness when making purchasing decisions. By prioritising brand protection, you signal your commitment to quality and integrity, attracting consumers who prioritise these values and gaining a foothold in the market. This competitive advantage translates into increased market share, revenue opportunities, and sustainable growth for your brand.

Understanding the Cost Benefit Analysis (CBA) formulae

The primary objective of CBA is to determine whether the benefits outweigh the costs, thus providing decision-makers with valuable insights into the potential return on investment.

 

The Basic Equation

At the core of cost-benefit analysis lies a simple equation:

Net Benefit (NB) = Total Benefits (TB) – Total Costs (TC)

 

This equation calculates the net benefit derived from the investment, which represents the difference between the total benefits and total costs. A positive net benefit indicates that the benefits outweigh the costs, while a negative net benefit suggests the opposite.

Key Equations in Cost-Benefit Analysis

  1. Return on Investment (ROI) – ROI measures the return on investment as a percentage, indicating the efficiency of the investment in generating returns relative to the initial cost incurred.

2. Cost per Unit (CPU) – CPU represents the cost incurred per unit of output produced or service delivered, providing insights into the cost efficiency of the project.

3. Benefit-Cost Ratio (BCR) – BCR measures the relationship between the total benefits and total costs, with a value greater than 1 indicating that the benefits outweigh the costs.

BCR

4. Break-Even Analysis – Break-even analysis identifies the point at which total revenue equals total costs, enabling decision-makers to determine the level of output required to cover all expenses.

CASE STUDY:

Applying Cost-Benefit Analysis (CBA) for a FMCG Cosmetic Brand Customer

The customer in this case study has been with Nabcore for the past 3 years since 2021. A CBA review consideration was done before the implementation of the brand protection solution system. The aim is to prevent counterfeiting and grey market for a product with a retail price costing $30. The following data is provided:

 

COST

  • Initial Setup Costs: $3,500 (1 time cost)
  • 1 million security labels with mobile verification system for 1 million yearly product volume: $43,000
  • System annual maintenance costs: $1,500 (Starting from 2nd year onwards)
  • Label Applicator machine: $13,000 (1 time cost)

Total Initial cost for 1st year = $59,500

Total cost for 2nd & subsequent years = $44,500

BENEFITS

  • Profit Margin = 1% of retail price = $0.30 per product.
  • 10% gain back of loss sales volume with counterfeit prevention = $30,000 (Gain)
  • 5% loss volume prevention from grey market = $15,000 (Gain)
  • 5% increase profit from New Sales = $15,000 (Gain)
  • 5% increase repeat customers with better product/brand assurance = $15,000

Total Benefits per year = $75,000

ROI (For 1st year) = 26.05%

ROI (For 2nd year onwards) = 34.83%

Benefit Cost Ratio = 1.685

Based on the analysis, the investment for the brand protection program results in a positive net benefit and a positive ROI, indicating that the benefits outweigh the costs. The benefit-cost ratio is also more than 1, further highlighting the favourable nature of the investment for this customer.

While investing in a brand protection solution incurs certain costs, the benefits far outweigh these expenses. Revenue protection, brand reputation, legal compliance, consumer trust, and competitive advantage are among the key benefits derived from such an investment. The benefits derived from such programs often outweigh these costs. Conducting a comprehensive cost-benefit analysis helps businesses make informed decisions and prioritise brand protection initiatives in today’s competitive market landscape.