Page 280 - Marketing Management

CREATING BRAND EQUITY | CHAPTER 9 257

TABLE 9.4 The World’s 10 Most Valuable Brands in 2009

Rank Brand 2009 Brand Value (Billions)
1 Coca-Cola $68.7
2 IBM $60.2
3 Microsoft $56.6

4 GE $47.8
5 Nokia $34.9
6 McDonald’s $32.3
7 Google $32.0
8 Toyota $31.3
9 Intel $30.6
10 Disney $28.4
Source: Interbrand. Used with permission.

degree to which the brand directly influences each. The Role of
Branding assessment is based on market research, client work-
shops, and interviews and represents the percentage of Economic
Earnings the brand generates. Multiplying the Role of Branding by
Marketin
g
Marketing InsightInsight Economic Earnings yields Brand Earnings.
4. Brand Strength—Interbrand then assesses the brand’s strength
profile to determine the likelihood that the brand will realize
forecasted Brand Earnings. This step relies on competitive
What Is a Brand Worth? benchmarking and a structured evaluation of the brand’s clarity,
commitment, protection, responsiveness, authenticity, relevance,
Top brand-management firm Interbrand has developed a model to for- differentiation, consistency, presence, and understanding. For
mally estimate the dollar value of a brand. It defines brand value as each segment, Interbrand applies industry and brand equity met-
the net present value of the future earnings that can be attributed to rics to determine a risk premium for the brand. The company’s
the brand alone. The firm believes marketing and financial analyses analysts derive the overall Brand Discount Rate by adding a
are equally important in determining the value of a brand. Its process brand-risk premium to the risk-free rate, represented by the yield
follows five steps (see Figure 9.7 for a schematic overview): on government bonds. The Brand Discount Rate, applied to the
1. Market Segmentation—The first step is to divide the market(s) in forecasted Brand Earnings forecast, yields the net present value
which the brand is sold into mutually exclusive segments that help of the Brand Earnings. The stronger the brand, the lower the
determine variances in the brand’s different customer groups. discount rate, and vice versa.
2. Financial Analysis—Interbrand assesses purchase price, volume, 5. Brand Value Calculation—Brand Value is the net present value
and frequency to help calculate accurate forecasts of future brand (NPV) of the forecasted Brand Earnings, discounted by the Brand
sales and revenues. Once it has established Brand Revenues, it Discount Rate. The NPV calculation comprises both the forecast
deducts all associated operating costs to derive earnings before period and the period beyond, reflecting the ability of brands to
interest and tax (EBIT). It also deducts the appropriate taxes and a continue generating future earnings.
charge for the capital employed to operate the underlying busi- Increasingly, Interbrand uses brand value assessments as a dynamic,
ness, leaving Economic Earnings, that is, the earnings attributed to strategic tool to identify and maximize return on brand investment across a
the branded business. whole host of areas.
3. Role of Branding—Interbrand next attributes a proportion of
Economic Earnings to the brand in each market segment, by first
Sources: Interbrand, the Interbrand Brand Glossary, and Interbrand’s Nik Stucky
identifying the various drivers of demand, then determining the and Rita Clifton.