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.
Brand activation roadmap
Valuation analysis is also used to support the business case for Iconic Moves, combining market research with financial modelling to quantify potential impact, investment and ROI.
Brand impact business case
There are a wide range of brand-driven and commercially-driven uses cases for valuation where Interbrand has particular expertise:
- Target setting and brand roadmap activation
- Informing commercial negotiations or disputes
- Creation of brand licensing structures to comply with transfer pricing regulations and create budget for brand investment
- Supporting share price through investor communications
- Making the case for brand investment
When Interbrand conducts valuations for financial or commercial reasons, we also 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 value alone.
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 specific 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 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 sufficient awareness across the major economies of the world.
These requirements—that a brand be global, profitable, visible, and relatively transparent with financial results—explains the exclusion of some well-known brands that might otherwise be expected to appear in the ranking.
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.
Interbrand was the first company to have its methodology certified as compliant with the requirements of ISO 10668 (requirements for monetary brand valuation) and 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.
- 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.
- 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: commissioned market research, benchmarking against Role of Brand scores from client projects with brands in the same industry, or expert panel assessment.
- 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 strong 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 Strength factors are based on both internal and external dimensions.
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: Refinitiv (formerly Thomson Reuters), company annual reports, investor presentations and analyst reports Refinitiv (formerly Thomson Reuters’ Financial
and Risk Business), company annual reports, investor presentations and analyst reports.
- Consumer goods data: GlobalData (brand volumes and values)
- Text Analytics and Social Listening: Infegy