Best Global Brands 2010 | Global Finance

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 JP Morgan in 2002 concluded that on average brands account for more than one-third of shareholder value.

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.”

However, some marketing experts find that in these rankings, as well as in other methods such as the BBDO Brand Equity Evaluator model, there are many subjective criteria that yield huge differences in evaluation. For example, Professor Eusebi Nomen from Esade Business School says: “The terms ‘value’ and ‘brand’ are two concepts used for quite subjective meanings, especially in the marketing domain. If you mean its economic value (quantification of perceived utilities – in the economic sense of the term, i.e., the perceived capacity to satisfy needs, either functional, social, emotional...) of a trademark (instead of a brand – that ‘garage concept’ used in marketing where to put whatever one may lack a place for), then we have a good starting point with the Guidance Note 4, International Valuation Standards (IVS). The valuation method used for rankings such as Interbrand does not comply with the fundamental IVS requirements. It contains so much subjectivity; it is more a divertimento to flag attention than a valuation that could be accepted in serious financial or legal contexts.“

According to brand consultant Matthew Healey, “Putting a dollar figure on a brand is like putting a dollar figure on how much you love your spouse. Anyone who works out a convincing model that covers all the bases will get a Nobel Prize in economics.”

Data is from Interbrand (September 2009 and September 2010).

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