About Brand Finance
Brand Finance is a leading brand valuation consultancy, bridging the gap between marketing and finance. The company’s work helps organizations make strategic decisions by assessing brand strength and quantifying financial value. Headquartered in London, Brand Finance operates in over 25 countries and conducts over 6,000 brand valuations annually. These valuations are supported by original market research, published in over 100 reports ranking brands across various sectors and countries.
Brand Finance also operates the Global Brand Equity Monitor, which conducts original market research annually on 6,000 brands, surveying more than 175,000 respondents across 41 countries and 31 industry sectors. By combining the perceptual data from this monitor with data from its valuation database (the largest brand value database in the world), Brand Finance provides data, analytics, and strategic guidance to help brand leaders enhance brand and business value.
In addition to calculating brand value, Brand Finance also determines the relative strength of brands through a balanced scorecard of metrics that evaluate marketing investment, stakeholder equity, and business performance. This process is compliant with ISO 20671. Brand Finance is a regulated accountancy firm that is committed to standardizing the brand valuation industry. It was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671 and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Definition of Brand
A brand is defined as a marketing-related intangible asset that includes, but is not limited to, names, terms, signs, symbols, logos, and designs. These are 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 measures the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, considering Marketing Investment, Stakeholder Equity, and their impact on Business Performance. The data used comes from Brand Finance’s proprietary market research and from publicly available sources. Each brand receives a Brand Strength Index (BSI) score out of 100, which contributes to the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates brand values in its rankings using the Royalty Relief approach, a brand valuation method that is compliant with the industry standards set by ISO 10668. This method estimates the likely future revenues attributable to a brand by determining a royalty rate that would be charged for its use. This results in a ‘brand value’ understood as the net economic benefit a brand owner would achieve by licensing the brand in the open market. The steps of this process are:
- Calculate brand strength using a balanced scorecard of metrics that assess Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
- Determine a royalty range for each industry, reflecting the importance of the brand in purchasing decisions. In luxury, the maximum percentage is high, while in extractive industries, where goods are often commoditized, it is lower. This is achieved by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
- 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 a sector is 0-5% and a brand has a BSI score of 80 out of 100, the appropriate royalty rate for the use of the brand in the given sector would be 4%.
- Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to the brand.
- Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
- Apply the royalty rate to the forecast revenues to derive brand revenues.
- Discount post-tax brand revenues to a net present value, which equals the brand value.
Disclaimer
Brand Finance produces its studies using independent and unbiased analysis. The values derived and opinions presented in the study are based on publicly available information and certain assumptions that Brand Finance utilized where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study do not constitute investment or business advice and are not intended to be relied upon for any reason. Brand Finance excludes all liability to any body, government, or organization. The data presented in this study, which forms part of Brand Finance’s proprietary database, is provided for the benefit of the media and is not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.
