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.3
Agenda 1. Measuring Financial Value 2. Creating Financial value 3. Measuring the drivers of Financial Value4
How much is this brand worth? US$1.6 Billion
When Kraft acquired Cadbury for $18.9 billion, it did so to gain control of thecompany‟s portfolio of valuable brands. At the time of the acquisition, I estimateCadbury‟s Dairy Milk accounted for over 15 per cent of Cadbury‟s sales, making itworth more than $1.6 billion, but Kraft was not buying the brand for its value in2010. Instead, Kraft was betting on the ability of this iconic brand to produce acontinued 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 itprovides Kraft with a strong foothold in fast-growing markets like India, China, andBrazil. For the sake of consistency I have used US dollars throughout the bookconverted at the current exchange rate. 6
Strong brands outperform their peers BrandZ™ Strong Brands Portfolio vs. S&P 500 (Apr 2006 - Dec 2012) 60% 51.1% 40% 20% 15.3% 0% 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 -20% BrandZ™ Portfolio S&P 500 -40% Source: Bloomberg; MB Optimor London Analysis -60%
To further show the power of a strong brand (iethose with higher Brand Contributions), the Stockprice of the companies who own them (the white topline) is massively in credit, whilst the benchmark ofthe S&P 500 is flat at best. The „gap‟ is brand, andshows what a great investment a strong brand is. Itis true that the strong brands did decline at thebeginning of the recession, but not as far and theyrecovered significantly more quickly.I know where I would be happy to put my money! 8
Valuing a brand is more than just guesswork BRANDED EARNINGS $ What proportion of a company’s earnings can be attributed to a brand? % BRAND CONTRIBUTION How much of these earnings are due to the brand’s close bond with it’s customers? BRAND MULTIPLE M What is the growth potential of the brand-driven earnings?
First we calculate the global Intangible earnings for the brand. Then we use our BrandZ datato work out how much of that is actually driven by the brand. And finally we need to accountfor 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. 10
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 amethodology similar to that employed by analysts and accountants.The brand value published is based on the intrinsic value of the brand – derived from its abilityto generatedemand. The dollar value of each brand in the ranking is the sum of all future earnings thatbrand is forecast togenerate, discounted to a present-day value.and Value equals: Branded Intangible Earningstimes the Brand Contribution times the Brand Multiple 11
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? $74bn $95bn
Which is worth more? $34bn $17bn
Which is the world most valuable financial brand? $42bn $38bn
Which declined more between 2011 and 2012? -17% -18%
Which increased most between 2011 and 2012? +61% +74%
Global Top 10 in 2012 1. $183bn 6. $74bn 2. $116bn 7. $74bn 3. $108bn 8. $69bn 4. $95bn 9. $49bn 5. $77bn 10. $47bnHere are numbers 6 to 10. Vodafone is new in the Top 10 and the most valuableUK-owned brand. GE slips down from Number 2 last year (being exposed tomore challenging markets such as finance and industrials) and Apple continuesto do well.
The importance of brand equity differs by category
Agenda 1. Measuring Financial Value 2. Creating Financial value 3. Measuring the drivers of Financial Value23
Brands can create value in 4 ways Creating demand for the Commanding a brand or service now premium now Financial Value Growth Extending to new uses, countries and Creating the potential to grow categories future market share
Brand WhatWhat the consumersbrand does experience andand says remember 25
Your brand is your purpose, calls to action, customer service, communication withcustomers, your people and, yes, your logo and visuals too.A brand is essentially a promise incarnate. But there is another side to this coin. Theone that will determine how much the brand is actually worth. And that is how well thebrand lives up to its promise in the mind of the customer. You can care about yourbusiness as much as you like but unless your customers care too your brand is notworth anything. To create value from your brand you must create value for yourcustomer.A brand is the ideas, the memories, the feelings evoked every time someone thinks of thebrand. To create value those mental associations must make the associated product or servicemore salient, more interesting or more compelling than the alternatives. They must make thebrand meaningfully different in some way. That difference does not need to be tangible orsignificant but to create value for the brand owner that difference must resonate with thepotential customer more than the competition. The degree of differentiation required for a brandto create value will depend on the nature of the brand and category. The key question to ask iswhether your brand is perceived to be different enough given its competitive context. 26
Because people are predisposed to buy brandswhen they believe them to be meaningful.Meaning is in the eye of the beholder. It can bebased on tangible or intangible aspects of the brand.Brand meaning can originate from a multitude ofsources. It could come from your personal historywith a brand; for example, you might use the samebrand of detergent that your mother did. Or it couldcome from functional characteristics; you mightreally like the intuitive interface of that tabletcomputer. You might be attached to your carbecause you think it looks hot, or because it iseconomical and saves you money. Or a brand‟smeaning for you might simply be that it is familiarwhen others are not.
If a brand seeks to charge a price premium peoplewill only do so if they believe the brand ismeaningfully different in some way.If it is not meaningfully different then it had betterkeep its price low if it is going to attract a reasonablenumber of buyers.
And last, but not least, people buy the brands thatare most salient – the ones that come to mindquickest when the need arises.
Strong brands offer a meaningfully different experience Purpose Resonance Meaningfully Different Experience Delivery Difference33
Match the driver to the car Mukesh Ambani Ingvar Kamprad Prince Alwaleed bin Talal Alsaud Worth: $30bn Worth: $23bn Worth: $20bn Rolls Royce Phantom Mercedes Maybach 62 Volvo 240 GL34
Ambani, a petrochemical and oil businessman, is therichest man in India and very famous for his luxurylifestyle. The owner of Reliance Group possessesone private house like a tower with 60 floors in theheart of Mumbai and parking space for 168 cars. Healso has a Mercedes Maybach 62, a Mercedes SClass and Mercedes SL500.Swedish IKEA Furniture Entrepreneur, IngvarKamprad, is much more efficient than Warren Buffettwhen he only has an old Volvo, 240 GL.A member of the Saudi Royal Family, the Princeowns a $500m yacht, a private Boeing 747, andAirbus A380 and drives a Rolls Royce Phantom
IKEA: largest retailer of furniture in the world
IKEA’s purpose is to create a better life forpeople…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”HR Manager complains that work experience doesnot match brand image: "Well we have two choices. Either you make the bank a better place to work, or I can create a worse brand.“ Chris Clark Head of marketing, planning, and business strategy at HSBC
Delivery: how well the brand’s experience lives up to its purpose The more positive and distinctive sensory impressions come to mind, the more loyal people are to the brand. “The girl does not only tell it has good fragrance, NUMBER OF POSITIVE SENSES RECALLED but also teaches 70% me how to smell it 60% properly – should 50% not directly smell from the bottle, 40% but wave the 30% hands back & 20% forth to air the fragrance out, as 10% to smell the 0% perfume” 0 to 1 2 to 3 4 to 5 Source: BRANDsense survey conducted in US, UK and Japan39
Resonance: people appreciate the brand for what it does and how it makes them feel Made by companies you can trust Are leading the way Dove Natura Offer something different 0 50 10040
The data you see here explains why Natura can command both higher sales andpremium prices.A large proportion of Brazilian body care consumers agree that Natura isscientifically advanced, keeps skin in better condition and offers a good range ofproducts. These functional benefits ladder up to a strong emotional appeal. 74% arewilling to agree that Natura is a brand they trust and 65% that it is a company that isleading the way. Global brands like Dove and Avon may be as well known as Naturabut they simply do not inspire the same degree of passion. 54% of people claim tohave recommended Natura to a friend compared to 41% for Avon and 22% forDove.Natura espouses the Triple Bottom Line aiming for good financial results, socialimpact through generation of wealth for their consultants and environmentalsustainability.Brazilian consumers appreciate Natura products and find the brand‟s positioningappealing resulting in strong financial returns
Difference: provides a reason to choose and justifies a price premium Average Potential for Average potential for brand to grow Brands that brand to grow ARE different 1.3% 15.9% Brands that AREN’T different Average potential for brand to grow -7.2%42
The five facets of effective brand amplification43
Strong brands amplify their meaningful differencedrive financial value growth Findability Credibility Vitality Affordability Extendability
Findability: ensure your brand is everywhere people might want to find it Findability Availability Visibility45
Tropicana’s new packaging caused revenues todecline by $30 million in 2 months
Credibility: enhance meaningful differentiation through innovation and association47
Vitality: ensure your brand is seen as contemporary, salient, talked about and fresh in look and feel.48
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 115 But Audi remains considered but 110 not chosen 105 In 2010 the “Shock the Sheep” 100 campaign challenged the status Desire 95 quo Price 90 After shifting perceptions Audi has enjoyed strong sales growth and 85 improved margins 80 2008 2009 2010 2011 201250
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Affordability: justifying your price point while making it accessible to more people 80 60 Relevance 40 20 0 Bought Last 2007 2008 2009 201052
Extendability: leveraging a strong brand into new categories and countries Dove grew from global sales of about €300M in 1990 to becoming Unilever’s first €3B brand in 2011. 1955 1965 1991 1995 1997 1998 1999 2002 2007 2010 Bar soap 1 Global expansion: launched to 55 countries between 1991- Anti-aging 1994. range Facial Deodorant cleansers Dish soap Hair care Body wash Body lotion Men’s care products53
How successful brands drive financial value growth Define Amplify Grow Purpose Resonance Findability Meaningful Credibility Financial Difference Vitality Value Affordability Growth Extendibility Delivery Difference54
Agenda 1. Measuring Financial Value 2. Creating Financial value 3. Measuring the drivers of Financial Value55
BrandDynamics has evolved significantly over time1992 2012 1996 1998 2003 2005 2009 Launch of Launch of Bonding Factor Launch Development of New BrandDynamics BRANDZ analysis of D&A Voltage2.0 model 2003 2010 Launch of the Development „Paw Print‟ analysis of the Brand Strength Score 2010 Development of the Value Driver workshops56
People are more predisposed brands they find meaningful, different and salient Meaningful Brand ¥Associations Different £ € $ Brand In-market Predisposition Facilitators Salient 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 57
Top 100 Most Average Brand Valuable Brands Power Index 100 Power Index 171 SalientMeaningful Meaningful Salient 100 100 Power 116 127 Power 6 11 Different 124 Different 100
Handsets – France 2012 Power Index 199 Power Index 120 Meaningful 95 Meaningful Salient Salient 133 Power 120 Power 130 22 13 Different Different 240 59
South Africa 2012 Power Index 446 Meaningful 183 Salient Power 212 32 Different 162
Three new measures of brand equity A single, accurate measure of demand for the brand POWER The relative price point that the brand’s equity can support PREMIUM The likelihood that the brand will grow value POTENTIAL market share61
Stronger brands produce better returns Average operating profit reported as a percent of revenues 16% 15% 14% 13% 12% 11% High Potential 10% Low Potential Low Power High Power62 Source: BrandZ and annual company reports for 49 companies
How successful brands drive financial value growth Define Amplify Grow Purpose Resonance Findability Meaningful Credibility Financial Vitality Value Difference Affordability Growth Extendability Delivery Difference63
Conclusions •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 talkability64
Any questions? Please contact: Richard Stewart e. email@example.com t. 011 202 7000 Kim Reddy e. firstname.lastname@example.org t. 011 202 7000 Natalie Otte e. email@example.com t. 011 202 7000 Author: Nigel Hollis, Chief Global Analyst, Millward Brown65