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BrandZ uses a mixture of financial information and customer surveys to arrive at its ranking of the 100 most valuable global brands.

The research covers 3m consumers and 10,000 brands in more than 50 markets. It assesses three aspects to evaluate the contribution that brands make to corporate value:

First, how “meaningful” they are — a measure of their appeal.

Second, how “different” they feel to consumers — their unique qualities and ability to set trends.

Third, how “salient” they are — whether they come spontaneously to mind when people make purchases.

The financial information used as an input to the valuation is based on what each company earns. For banks and insurance companies, the earnings metric used is net income. For all other companies it is earnings before interest and tax.

The next step is to predict “brand earnings” as a multiple of current earnings.

This involves creating a “brand multiple”, which is similar to a price/earnings ratio used by financial analysts to determine the market value of stocks.

Current brand earnings are then multiplied by this number to arrive at a brand’s “financial value”.

BrandZ then uses customer surveys, either online or face-to-face, to assess how meaningful, different and salient a brand is — including the qualities that make it stand out from competing brands.

The results from this research are multiplied by the financial value to arrive at the brand value. Brand value is the dollar amount BrandZ estimates a brand contributes to the overall value of a company.

Copyright The Financial Times Limited 2017. All rights reserved.
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