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90%of the world’s
L E A D I N G B R A N D S
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We help over 90% of the worlds leading brands make critical
business decisions to drive brand growth. We also have
unrivalled expertise in helping young brands thrive in
established and emerging markets.
Agenda
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1. Measuring Financial Value
2. Creating Financial value
3. Measuring the drivers of Financial Value
How much is this brand worth?
US$1.6 Billion
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When Kraft acquired Cadbury for $18.9 billion, it did so to gain control of the
company‟s portfolio of valuable brands. At the time of the acquisition, I estimate
Cadbury‟s Dairy Milk accounted for over 15 per cent of Cadbury‟s sales, making it
worth more than $1.6 billion, but Kraft was not buying the brand for its value in
2010. Instead, Kraft was betting on the ability of this iconic brand to produce a
continued and growing profit stream for years to come.
As bets go, this one does not seem that risky. Cadbury‟s Dairy Milk has a 108-
year track record that has seen its appeal extend around the world, and it
provides Kraft with a strong foothold in fast-growing markets like India, China, and
Brazil. For the sake of consistency I have used US dollars throughout the book
converted at the current exchange rate.
Strong brands outperform their peers
-60%
-40%
-20%
0%
20%
40%
60%
Apr 06 Aug 06 Dec 06 Apr 07 Aug 07 Dec 07 Apr 08 Aug 08 Dec 08 Apr 09 Aug 09 Dec 09 Apr 10 Aug 10 Dec 10 Apr 11 Aug 11 Dec 11 Apr 12 Aug 12 Dec 12
BrandZ™ Strong Brands Portfolio vs. S&P 500(Apr 2006 - Dec 2012)
BrandZ™ Portfolio
S&P 500
15.3%
51.1%
Source: Bloomberg; MB Optimor London Analysis
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To further show the power of a strong brand (ie
those with higher Brand Contributions), the Stock
price of the companies who own them (the white top
line) is massively in credit, whilst the benchmark of
the S&P 500 is flat at best. The „gap‟ is brand, and
shows what a great investment a strong brand is. It
is true that the strong brands did decline at the
beginning of the recession, but not as far and they
recovered significantly more quickly.
I know where I would be happy to put my money!
BRANDED EARNINGSWhat proportion of a company’s earnings can be attributed to a
brand?
BRAND CONTRIBUTIONHow much of these earnings are due to the brand’s close bond
with it’s customers?
BRAND MULTIPLEWhat is the growth potential of the brand-driven earnings?
$
%
M
Valuing a brand is more than just guesswork
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First we calculate the global Intangible earnings for the brand. Then we use our BrandZ data
to work out how much of that is actually driven by the brand. And finally we need to account
for future earnings – so we calculate the brand growth rate .
These three then produce Brand Value.
1. Branded Earnings What proportion of a company’s earnings can be attributed to a brand?
We start with the published global earnings of the Corporation – split out those that are
named for the brand (for example in valuing Coca Cola we would not include Sprite or
Dasani but would value those separately). And we isolate intangible earnings for the brand.
2. Brand Contribution How much of these branded earnings are generated due to the brand’s
close bond with its customers? This is where we use the BrandZ Pyramid for each brand in
each country to determine exactly what proportion of customers actually buy the brand
because of a „brand‟ reason. We take those out, for instance, who just buy on habit or price
alone. This step isolates the role of brand equity, separating out the truly brand-driven
earnings. Brand generally plays an important buying decision role in luxury, for
example, while location is a more important factor for motor fuel.
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3. Brand Multiple What is the growth potential of the brand-driven earnings? Staring with
published Company growth rates, we adjust for the brand for whether it is a growing stable
or declining category and whether it is in a growth country (like one of those in many parts
of Asia) or a exposed in a more recessionary are (like Europe or the USA). Then we have
our BrandZ data which tells us for each country the level of Presence for the brand and its
likely future chances of growth (the Voltage metric – a Millward Brown validated leading
indicator of market share gain and revenue growth).
So Millward Brown Optimor applies an economic use approach to brand valuation, using a
methodology similar to that employed by analysts and accountants.
The brand value published is based on the intrinsic value of the brand – derived from its ability
to generate
demand. The dollar value of each brand in the ranking is the sum of all future earnings that
brand is forecast to
generate, discounted to a present-day value.and Value equals: Branded Intangible Earnings
times the Brand Contribution times the Brand Multiple
Guesswork!
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What is the world’s most valuable brand worth?
$182bn
$77bn
What is the world’s most valuable brand?
Which brand is the more valuable?
$95bn
$74bn
$34bn
$17bn
Which is worth more?
Which is the world most valuable financial brand?
$42bn
$38bn
Which declined more between 2011 and 2012?
-17%
-18%
+61%
+74%
Which increased most between 2011 and 2012?
7. $74bn
10. $47bn
9. $49bn
8. $69bn
4. $95bn
6. $74bn
2. $116bn
1. $183bn
5. $77bn
3. $108bn
Global Top 10 in 2012
Here are numbers 6 to 10. Vodafone is new in the Top 10 and the most valuable UK-owned brand. GE slips down from Number 2 last year (being exposed to more challenging markets such as finance and industrials) and Apple continues to do well.
The importance of brand equity differs by category
Agenda
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1. Measuring Financial Value
2. Creating Financial value
3. Measuring the drivers of Financial Value
Brands can create value in 4 ways
Commanding a
premium now
Creating demand for the
brand or service now
Creating the potential to grow
future market share
Extending to new
uses, countries and
categories
FinancialValue
Growth
Brand
What
consumers
experience and
remember
What the
brand does
and says
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Your brand is your purpose, calls to action, customer service, communication with
customers, your people and, yes, your logo and visuals too.
A brand is essentially a promise incarnate. But there is another side to this coin. The
one that will determine how much the brand is actually worth. And that is how well the
brand lives up to its promise in the mind of the customer. You can care about your
business as much as you like but unless your customers care too your brand is not
worth anything. To create value from your brand you must create value for your
customer.A brand is the ideas, the memories, the feelings evoked every time someone thinks of the
brand. To create value those mental associations must make the associated product or service
more salient, more interesting or more compelling than the alternatives. They must make the
brand meaningfully different in some way. That difference does not need to be tangible or
significant but to create value for the brand owner that difference must resonate with the
potential customer more than the competition. The degree of differentiation required for a brand
to create value will depend on the nature of the brand and category. The key question to ask is
whether your brand is perceived to be different enough given its competitive context.
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Meaningful
Because people are predisposed to buy brands
when they believe them to be meaningful.
Meaning is in the eye of the beholder. It can be
based on tangible or intangible aspects of the brand.
Brand meaning can originate from a multitude of
sources. It could come from your personal history
with a brand; for example, you might use the same
brand of detergent that your mother did. Or it could
come from functional characteristics; you might
really like the intuitive interface of that tablet
computer. You might be attached to your car
because you think it looks hot, or because it is
economical and saves you money. Or a brand‟s
meaning for you might simply be that it is familiar
when others are not.
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Different
If a brand seeks to charge a price premium people
will only do so if they believe the brand is
meaningfully different in some way.
If it is not meaningfully different then it had better
keep its price low if it is going to attract a reasonable
number of buyers.
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Salient
And last, but not least, people buy the brands that
are most salient – the ones that come to mind
quickest when the need arises.
Strong brands offer a meaningfully different experience
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ResonancePurpose
Delivery Difference
Meaningfully
Different
Experience
Match the driver to the car
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Prince Alwaleed bin Talal
AlsaudMukesh Ambani Ingvar Kamprad
Rolls Royce Phantom Mercedes Maybach 62 Volvo 240 GL
Worth: $30bn Worth: $23bn Worth: $20bn
Ambani, a petrochemical and oil businessman, is the
richest man in India and very famous for his luxury
lifestyle. The owner of Reliance Group possesses
one private house like a tower with 60 floors in the
heart of Mumbai and parking space for 168 cars. He
also has a Mercedes Maybach 62, a Mercedes S
Class and Mercedes SL500.
Swedish IKEA Furniture Entrepreneur, Ingvar
Kamprad, is much more efficient than Warren Buffett
when he only has an old Volvo, 240 GL.
A member of the Saudi Royal Family, the Prince
owns a $500m yacht, a private Boeing 747, and
Airbus A380 and drives a Rolls Royce Phantom
IKEA: largest retailer of furniture in the world
IKEA’s purpose is to create a better life for people…but how?
By removing squeezing out every cent from the
design, manufacturing and transport of its products.
Prices fell by 2.6 per cent in 2011.
Delivery: any brand needs to “mind the gap”
"Well we have two choices. Either you make
the bank a better place to work, or I can
create a worse brand.“
Chris ClarkHead of marketing, planning, and business strategy at HSBC
HR Manager complains that work experience does
not match brand image:
Delivery: how well the brand’s experience lives up to its purpose
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0%
10%
20%
30%
40%
50%
60%
70%
0 to 1 2 to 3 4 to 5
NUMBER OF POSITIVE SENSES RECALLED
The more positive and distinctive sensory
impressions come to mind, the more loyal
people are to the brand.
Source: BRANDsense survey conducted in US, UK and Japan
“The girl does not
only tell it has
good fragrance,
but also teaches
me how to smell it
properly – should
not directly smell
from the bottle,
but wave the
hands back &
forth to air the
fragrance out, as
to smell the
perfume”
Resonance: people appreciate the brand for what it does and how it makes them feel
0 50 100
Offer something different
Are leading the way
Made by companies you
can trust
Dove
Natura
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The data you see here explains why Natura can command both higher sales and
premium prices.
A large proportion of Brazilian body care consumers agree that Natura is
scientifically advanced, keeps skin in better condition and offers a good range of
products. These functional benefits ladder up to a strong emotional appeal. 74% are
willing to agree that Natura is a brand they trust and 65% that it is a company that is
leading the way. Global brands like Dove and Avon may be as well known as Natura
but they simply do not inspire the same degree of passion. 54% of people claim to
have recommended Natura to a friend compared to 41% for Avon and 22% for
Dove.
Natura espouses the Triple Bottom Line aiming for good financial results, social
impact through generation of wealth for their consultants and environmental
sustainability.
Brazilian consumers appreciate Natura products and find the brand‟s positioning
appealing resulting in strong financial returns
Difference: provides a reason to choose and justifies a price premium
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Average Potential for
brand to grow
1.3%
Average potential for
brand to grow
15.9%
Average potential for
brand to grow
-7.2%
Brands that
ARE different
Brands that
AREN’T different
The five facets of effective brand amplification
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Findability
Affordability
Extendability
Credibility
Vitality
Strong brands amplify their meaningful difference drive financial value growth
Findability: ensure your brand is everywhere people might want to find it
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VisibilityAvailability
Findability
Tropicana’s new packaging caused revenues to decline by $30 million in 2 months
Credibility: enhance meaningful differentiation through innovation and association
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Vitality: ensure your brand is seen as contemporary, salient, talked about and fresh in look and feel.
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Break the mould, create something compelling & new
Click to view
Challenging preconceptions and creating a sense of momentum helped Audi boost sales
Six major car launches in 2008
But Audi remains considered but
not chosen
In 2010 the “Shock the Sheep”
campaign challenged the status
quo
After shifting perceptions Audi has
enjoyed strong sales growth and
improved margins 80
85
90
95
100
105
110
115
2008 2009 2010 2011 2012
Desire
Price
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Affordability: justifying your price point while making it accessible to more people
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0
20
40
60
80
2007 2008 2009 2010
Bought Last
Relevance
Extendability: leveraging a strong brand into new categories and countries
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Dove grew from global sales of about €300M in 1990 to
becoming Unilever’s first €3B brand in 2011.
Bar soap 1
Dish soap
Body wash
1955 1965 1995 19981991 1997 20102007
Deodorant
Hair care
Anti-aging
range
Men’s care
products
2002
Global
expansion:
launched to 55
countries
between 1991-
1994.
Body lotion
1999
Facial
cleansers
How successful brands drive financial value growth
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Findability
Affordability
Extendibility
Credibility
Vitality
Amplify
ResonancePurpose
Delivery Difference
MeaningfulDifference
Define
FinancialValue
Growth
Grow
Agenda
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1. Measuring Financial Value
2. Creating Financial value
3. Measuring the drivers of Financial Value
BrandDynamics has evolved significantly over time
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1996 1998
2010
2010
20092003
2003
20051992 2012
Launch of
BrandDynamics
Launch of
BRANDZ
Launch of the
„Paw Print‟ analysis
Bonding Factor
analysis
Launch
of D&A
New model
Development of
Voltage2.0
Development
of the Brand
Strength Score
Development of the
Value Driver workshops
People are more predisposed brands they find meaningful, different and salient
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Predisposed customers will be more likely to choose your brand, pay a premium for it and the brand will be better poised to grow market share
Meaningful
Salient
Different £ €$
¥Brand
Associations
In-market
Facilitators
Brand
Predisposition
Average Brand Top 100 Most
Valuable Brands
Power
11
Salient
127
Different 124
Meaningful
116
Power Index 171
Salient
100
Different
100
Meaningful
100Power
6
Power Index 100
Salient
120
Different
240
Meaningful
133Power
22
Power Index 199
Salient
130
Different
59
Meaningful
95
Power
13
Handsets – France 2012
Power Index 120
Salient
212
Different
162
Meaningful
183Power
32
Power Index 446
South Africa 2012
A single, accurate measure of demand for the brand
The relative price point that the brand’s equity can support
The likelihood that the brand will grow value market share
Three new measures of brand equity
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POWER
PREMIUM
POTENTIAL
Stronger brands produce better returns
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Low Potential
High Potential
10%
11%
12%
13%
14%
15%
16%
Low PowerHigh Power
Average operating profit reported as a percent of revenues
Source: BrandZ and annual company reports for 49 companies
How successful brands drive financial value growth
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Findability
Affordability
Extendability
Credibility
Vitality
Amplify
ResonancePurpose
Delivery Difference
MeaningfulDifference
Define
FinancialValue
Growth
Grow
Conclusions
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•Brands are the most valuable asset that many companies own – they
creating lasting financial value
•Brands exist in the mind – you can only assess their value and
potential if you know what people think
•Strong brands provide a meaningfully different experience to people –
marketers must not rest until they build this
•Once you have this then has to be amplified through all available
channels
•Vitality is a key battleground. Communications can frame your
brand, build salience and talkability
Any questions?
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Please contact:
Richard Stewart
t. 011 202 7000
Kim Reddy
t. 011 202 7000
Natalie Otte
t. 011 202 7000
Author: Nigel Hollis, Chief Global Analyst, Millward Brown
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