According to Millward Brown Optimor, “strong brands have the power to create business value. They impact much more than revenues and profit margins. Strong brands create competitive advantages by commanding a price premium and decrease the cost of entry into new markets and categories. They reduce business risk and help attract and retain talented staff.”
“Brand equity” is defined by the American Marketing Association as “the value of a brand” (although not in the financial sense of “value”), while, according to P. Kotler and K. Keller in their book Marketing Management, it is “the added value endowed to products and services.” Keller, in Strategic Brand Management, writes that a brand “has positive customer-based brand equity when consumers react more favorably to a product and the way it is marketed when the brand is identified than when it is not.” David Aaker (Managing Brand Equity) calls it “the set of assets and liabilities linked to a brand’s name and symbol that adds to or subtracts from the value provided by a product or service to a firm and/or that firm’s customers.”
The various definitions are important to define the concept but do not lead to a single measure of brand equity.
“Brand value” is often confused with brand equity, but the former refers more specifically to the financial value of a brand. Therefore, Kotler and Keller define “brand valuation” as “an estimate of the total financial value of the brand.”
In the past decade, the recognition of the importance of brand and its economic impact has grown, and there is widespread acceptance now that brands play an important role in generating and sustaining both the financial performance of businesses as well as shareholder value. A study conducted by Interbrand and J.P. Morgan in 2002 concluded that, on average, brands account for more than one-third of shareholder value.
There is no standardized or accepted definition of brand value or brand valuation. Nevertheless, Interbrand and Millward Brown Optimor (MBO) have developed rankings that are well respected. Interbrand characterizes its method as “proven, straightforward and profound. It examines brands through the lens of financial strength, the importance of the brand in driving consumer selection, and the likelihood of ongoing revenue generated by the brand.” Millward Brown Optimor calls its BrandZ “the most reliable, comprehensive and useful brand valuation ranking available,” a database that provides a “detailed, quantified, understanding of consumer decision-making worldwide.”
According to MBO, in 2012 “brand value grew overall, but only marginally, because of myriad economic and political issues that eroded consumer confidence in the developed economies and because the BRICs slowed somewhat.” The total value of the 100 most valuable companies in the Brandz ranking reached $2.4 trillion this year. Brands in the technology sector dominate the top of the list, occupying four of the first five spots. Apple retained its number one position, IBM came second, Google third and Microsoft fifth. Fast-food chain McDonald’s was the only non-technology brand in the top five.
Watch Eileen Campbell, Global CEO of Millward Brown, discussing the 2012 BrandZ Top 100 Most Valuable Global Brands in an interview with CNN
Coca Cola topped the Interbrand 2011 ranking (the latest available,) followed by three technology-sector giants, IBM, Microsoft and Google. McDonald's, fourth in the MBO list, ranked sixth. Apple, who leads Brandz, was only 8 for Interbrand, although it climbed 9 positions from the previous year. "For brands, the ups and downs of today's world make an already competitive marketplace all the more complex," states the 2011 Interbrand report. "These strong and highly innovative brands [the 100 most valuable] have responded to the needs of their people, their consumers, and the world beyond their corporate doors. In times like these, it's an admirable achievement worth celebrating and emulating."
Watch the presentation of the 2011 Interbrand ranking at the New York Stock Exchange