About Brand Finance
Brand financing is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance for over 25 years, Brand Finance assesses the strength of brands and quantifies their financial value to help organizations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries and offers services on every continent. Each year, Brand Finance conducts over 5,000 brand valuations, supported by original market research, and publishes over 100 reports that rank brands across all sectors and countries.
Brand Finance also operates the Global Brand Equity Monitor, which conducts original market research on more than 5,000 brands each year, surveying more than 150,000 respondents across 38 countries and 31 industries. By combining insights from the Global Brand Equity Monitor with data from its valuation database, Brand Finance provides brand executives with the data and analytics they need to improve the value of their brand and business.
Brand Finance is a regulated accounting firm, leading the industry in brand valuation standards. Brand Finance was the first to be certified by independent auditors as ISO 10668 and ISO 20671 compliant and has received official approval from the Marketing Accountability Standards Board (MASB) in the United States.
Brand Definition
Brand is defined as an intangible asset related to marketing including, but not limited to, names, terms, signs, symbols, logos and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand strength
Brand strength is the effectiveness of its performance on intangible measures relative to its competitors. Brand Finance assesses brand strength in an ISO 20671-compliant process, examining marketing investments, stakeholder equity, and the impact of these on business performance. Data used comes from Brand Finance’s proprietary market research program and publicly available sources.
Each brand is assigned a BSI (Brand Strength Index) score out of 100, which is taken into account in calculating the brand value. Based on this score, each brand is assigned a corresponding brand rating up to AAA+ in a format similar to a credit rating.
Branding approach
Brand Finance calculates the value of brands in its rankings using the Royalty Relief approach – an industry-standard brand valuation method defined in ISO 10668. It involves estimating the likely future revenues attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a “brand value” understood as the net economic benefit that a brand owner would obtain by licensing the brand on the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing marketing investment, equity, and business performance. Brand strength is expressed as a Brand Strength Index (BSI) on a scale of 0 to 100.
2 Determine the royalty range for each sector, based on the importance of the brand in purchasing decisions. In the luxury sector, the maximum percentage is high, while in the extractive industry, where goods are often commoditized, it is lower. To do this, you should review comparable licensing agreements from Brand Finance’s extensive database.
3 Calculate the royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in an industry is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of that brand in the given industry would be 4%.
4 Determine brand-specific revenues by estimating a proportion of the parent company’s revenues attributable to a brand.
5 Determine expected revenues using a function of historical revenues, stock analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the expected revenue to obtain the brand revenue.
7. Reduce the brand’s after-tax revenue to a net present value equal to the brand’s value.
Disclaimer
Brand Finance has conducted this study based on independent and impartial analysis. The values derived and opinions presented in this study are based on publicly available information and on certain assumptions used by Brand Finance where such data was insufficient or unclear. Brand Finance disclaims all liability and will not be held responsible in the event that the publicly available information on which it relies subsequently proves to be inaccurate. The financial opinions and analyses expressed in the study should not be construed as investment or business advice. Brand Finance does not intend to rely on the study for any reason and excludes all liability to any agency, government or organisation.
The data presented in this study is part of Brand Finance’s proprietary database, is provided for media use and may not be used in whole or in part for any commercial or technical purpose without the written permission of Brand Finance.
