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Summary of Brand Finance Global 500 2017

Core Content

The Brand Finance Global 500 2017 report is an annual assessment of the world's most valuable brands, focusing on their financial performance and brand strength. It provides a framework for understanding how brands contribute to business value and highlights the importance of aligning brand strategy with financial outcomes. The report uses the Royalty Relief approach to calculate brand value, which estimates the financial benefit a brand provides by applying a royalty rate to forecasted brand-specific revenues.

Main Points

• Brand Value and Financial Impact: A strong brand is essential for generating revenue and shareholder value. It helps in attracting customers, building loyalty, and motivating staff, but ultimately, its value lies in its ability to contribute to profitability.
• Brand Contribution: This refers to the uplift in shareholder value that a brand provides compared to a generic brand. It is influenced by various factors such as brand equity, stakeholder behavior, and marketing investment.
• Brand Strength Index (BSI): A score from 0 to 100 that measures a brand's strength. Brands with higher BSI scores are more likely to maintain strong equity and financial performance. The BSI is used to determine brand ratings (from AAA+ to D), which reflect the brand's overall strength and management.
• Brand Architecture: Brands can be structured in different ways (mono-brand, hybrid, etc.), and this structure impacts how brand value is calculated and managed. A diversified approach can help mitigate risk and improve brand equity.
• Brand Value Calculation:
  • Brand strength is evaluated based on marketing investment, brand equity, and business performance.
  • Royalty rates are determined by analyzing comparable licensing agreements.
  • Brand-specific revenues are estimated based on historical data and forecasts.
  • The final brand value is calculated by applying the royalty rate to forecasted revenues and discounting to net present value.

Key Information

• Top Brands in 2017:

  • Google was the most valuable brand at $109.47 billion, up 24% from 2016.
  • Apple fell to $107.14 billion, a 27% decline, losing its position to Google.
  • Amazon rose 53% to $106.396 billion, nearly securing the top spot.
  • AT&T increased 45% to $87.016 billion, overtaking Verizon as the most valuable telecoms brand.

• Notable Brand Performances:

  • Nokia saw a 62% increase in brand value to $4.9 billion, with its BSI rating upgraded to AA+.
  • Lego regained the top spot in the BSI rankings, driven by its strong emotional connection, marketing efforts, and the success of the Lego Movie.
  • Coca-Cola and Pepsi both declined in value due to changing consumer preferences and health concerns.
  • Emirates lost 21% in brand value, affected by lower oil prices and increased competition.

• Sector Insights:

  • Technology dominated the rankings, with Google, Apple, and Amazon leading the charge.
  • Banking was the second-largest sector by brand value, with ICBC taking the top spot and Wells Fargo suffering due to reputational damage.
  • Telecoms saw AT&T and STC as top performers, with STC growing 11% to $6.2 billion.

• Strategic Brand Management:

  • Brand Finance emphasizes the need for brands to be monitored and managed with financial rigor.
  • Effective brand strategy can help in decisions such as rebranding, discontinuing products, and determining the right time to sell.
  • Brands that are well-managed and aligned with business goals can drive significant returns and long-term success.

Conclusion

The report underscores the importance of understanding and leveraging brand value for financial gain. It highlights that brands are not just marketing tools but critical business assets. The shift in leadership from Apple to Google and the resurgence of Nokia and Lego demonstrate how brand strength, marketing strategy, and consumer engagement can significantly influence financial outcomes. The methodology used ensures that brand value is tied to measurable financial performance, allowing businesses to make informed decisions and align brand strategy with profitability.