About Brand Finance
Brand Finance is a premier consultancy specializing in brand valuation globally. With its headquarters in London, this esteemed firm bridges the gap between marketing and finance, meticulously evaluating the strength of brands while quantifying their financial value. This dual focus assists organizations in making informed, strategic decisions that can enhance their market positioning.
Operating across more than 25 countries, Brand Finance conducts over 6,000 brand valuations each year. Their evaluations are supported by original market research, and they publish an impressive collection of over 100 reports, ranking brands across various sectors and nations. This extensive reach underscores Brand Finance’s commitment to delivering valuable insights in the dynamic landscape of branding.
Additionally, Brand Finance operates the Global Brand Equity Monitor, which annually surveys approximately 175,000 respondents across 41 countries in 31 industry sectors, focusing on 6,000 different brands. This program integrates perceptual data with information from Brand Finance’s own valuation database—the largest of its kind in the world—equipping brand leaders with the analytics and strategic guidance needed to elevate brand and business value.
Beyond just calculating brand values, Brand Finance also evaluates brand strength through a comprehensive balanced scorecard. This scorecard encompasses metrics that assess marketing investment, stakeholder equity, and business performance, adhering to specified standards such as ISO 20671. This multifaceted approach enables a more nuanced understanding of how brands operate within their market contexts.
As a regulated accountancy firm, Brand Finance is a frontrunner in advocating for the standardization of the brand valuation industry. Being the first company certified by independent auditors for compliance with ISO 10668 and ISO 20671, it has gained recognition, including the endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Definition of Brand
A brand is recognized as a marketing-related intangible asset, encapsulating names, terms, signs, symbols, logos, and designs. These elements are strategically crafted to identify goods, services, or entities, invoking distinctive images and associations within the minds of stakeholders, all while driving economic benefits. Understanding the intricacies of what constitutes a brand is fundamental to appreciating its value in the marketplace.
Brand Strength
Brand strength refers to the effectiveness of a brand’s performance on intangible metrics when compared to its competitors. Brand Finance employs a rigorous process, compliant with ISO 20671, to ascertain brand strength. This entails analyzing marketing investment, stakeholder equity, and the resulting impact on business performance. The culmination of this analysis is a Brand Strength Index (BSI) score, rated out of 100, which ultimately contributes to the overall brand value calculation.
Each brand’s performance is scored and categorized into a tiered Brand Rating system that mirrors traditional credit ratings, with ratings reaching up to AAA+. This structured evaluation provides valuable insights for brand leaders seeking to enhance their market presence.
Brand Valuation Approach
Brand Finance’s approach to valuing brands employs the Royalty Relief method, complying with the established standards of ISO 10668. This method estimates the future revenues attributable to a brand, calculating a royalty rate that would typically apply if the brand were licensed in an open market setting. This systematic approach enables a clearer understanding of a brand’s economic contribution.
Here are the key steps involved in the valuation process:
1. **Calculate Brand Strength:** Using a balanced scorecard that evaluates marketing investment, stakeholder equity, and business performance, a BSI score is determined, ranging from 0 to 100.
2. **Determine Royalty Range:** Each industry has a specific royalty range based on the brand’s influence on purchasing decisions. For instance, luxury brands often exhibit high royalty percentages, while commoditized industries may reflect lower percentages. Brand Finance reviews comparable licensing agreements to derive these ranges.
3. **Calculate Royalty Rate:** The BSI score is then applied to the industry’s royalty range to establish a measurable royalty rate. An example would be a brand with a BSI score of 80, situated within a royalty range of 0-5%, yielding a royalty rate of 4%.
4. **Estimate Brand-Specific Revenues:** This involves determining what portion of the parent company’s overall revenues can be attributed to the brand in question.
5. **Forecast Revenues:** Historic revenues, together with equity analyst forecasts and projected economic growth rates, are utilized to project future revenues.
6. **Calculate Brand Revenues:** The established royalty rate is then applied to the projected revenues to obtain the brand’s revenues.
7. **Discount Revenues:** Finally, the post-tax brand revenues are discounted to arrive at a net present value, which effectively represents the brand’s overall value.
Disclaimer
This study by Brand Finance is based on an independent analysis, relying on publicly available information as well as assumptions used when data is unclear. Brand Finance disclaims any liability regarding the accuracy of the information used, stressing that the financial evaluations and opinions expressed are not to be construed as investment or business advice. The contents are intended solely for media benefit, and any commercial use requires explicit written permission from Brand Finance.
The data presented here is part of Brand Finance’s proprietary database, aimed at enhancing understanding and value within the brand valuation sector.
