Methodology

Applications for brand valuation

Interbrand’s brand valuation methodology seeks to provide a rich and insightful analysis of your brand, providing a clear picture of how your brand is contributing to business growth today, together with a road map of activities to ensure that it is delivering even further growth tomorrow.

The brand valuation model also provides a framework for conducting one-off business case models to evaluate brand strategy options—such as positioning, architecture, and extension—and make the business case for growing your brand in new directions.

Finally, when Interbrand conducts valuations for financial reasons, we provide strategic branding recommendations, in addition to delivering a rigorously analyzed and defensible valuation number. This delivers value to the business—beyond the knowledge of the valuation amount.

 A versatile approach to growth: applications for brand valuation

applications for brand value

Criteria for Inclusion in Best Global Brands

To be included in Best Global Brands, a brand must be truly global, having successfully transcended geographic and cultural boundaries. It will have expanded across the established economic centers of the world and entered the major growth markets. In measurable terms, this requires that:

  • At least 30 percent of revenue must come from outside of the brand’s home region.
  • The brand must have a significant presence in Asia, Europe, and North America as well as broad geographic coverage in emerging markets.
  • There must be sufficient publicly available data on the brand’s financial performance.
  • Economic profit must be expected to be positive over the longer term, delivering a return above the brand’s cost of capital.
  • The brand must have a public profile and awareness across the major economies of the world.

These requirements—that a brand be global, visible, growing, and relatively transparent with financial results—explains the exclusion of some well-known brands that might otherwise be expected to appear in the ranking.

Methodology

Having pioneered brand valuation in 1988, we have a deep understanding of the impact a strong brand has on key stakeholder groups that influence the growth your business, namely (current and prospective) customers, employees, and investors. Strong brands influence customer choice and create loyalty; attract, retain, and motivate talent; and lower the cost of financing. Our brand valuation methodology has been specifically designed to take all of these factors into account.

A strategic tool for ongoing brand management, valuation brings together market, brand, competitor, and financial data into a single framework within which the performance of the brand can be assessed, areas for growth identified, and the financial impact of investing in the brand quantified.

Interbrand was the first company to have its methodology certified as compliant with the requirements of ISO 10668 (requirements for monetary brand valuation) and has played a key role in the development of the standard itself.

There are three key components to all of our valuations: an analysis of the financial performance of the branded products or services, of the role the brand plays in purchase decisions, and of the brand’s competitive strength.

 

Components of Brand Value

  1. Financial Analysis

This measures the overall financial return to an organization’s investors, or its economic profit. Economic profit is the after-tax operating profit of the brand, minus a charge for the capital used to generate the brand’s revenue and margins.

 

  1. Role of Brand

This measures the portion of the purchase decision attributable to the brand as opposed to other factors (for example, purchase drivers such as price, convenience, or product features). The Role of Brand Index (RBI) quantifies this as a percentage. RBI determinations for Best Global Brands derive, depending on the brand, from one of three methods: primary research, a review of historical roles of brands for companies in that industry, or expert panel assessment.

 

  1. Brand Strength

Brand Strength measures the ability of the brand to create loyalty and, therefore, sustainable demand and profit into the future. Brand Strength analysis is based on an evaluation across 10 factors that Interbrand believes constitute a growing brand. Performance in these areas is judged relative to other brands in the industry and relative to other world-class brands. The Brand Strength analysis delivers an insightful snapshot of the strengths and weaknesses of the brand and is used to generate a road map of activities to grow the brand’s strength and value into the future.

Our 10 brand strengths are based on both internal dimensions and external dimensions:

Brand Strengths Internal Dimensions

 

Data Sources

We believe that a robust brand valuation requires a holistic assessment that incorporates a wide range of information sources. In addition to our extensive desk research and expert panel assessment, the following data feeds are incorporated into our valuation models:

Financial data: Thomson Reuters and company annual reports

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Consumer goods data: Canadean (brand volumes and values)

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Social media signal: Twitter

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Social media analysis by Infegy

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