Interbrand is a brand valuation and consulting firm established in 1974. The document discusses Interbrand's framework for assessing brand value, which involves quantifying a brand's contribution to company earnings and risk profile (role of brand), as well as the brand's strength determined by demand drivers and brand strength factors. Brand value is defined as the net present value of future earnings attributable solely to the brand, calculated by isolating brand earnings, applying the brand's role and strength, and discounting future earnings.

1. Interbrand
Brand valuation and brand value monitoring.
A conceptual framework.
Creating and managing
brand value

2. Who we are
Established
1974
Employees
1232
Offices
36
Countries
25
Interbrand
for GREM
04.02.2009

3. The agenda.
1. How does the brand generate value?
2. How can brand value be assessed?
3. What insight does valuation create?
4. How can performance be controlled?
Interbrand
for GREM
04.02.2009

4. “A central organizing principle,
symbolized in a trade mark which,
if properly managed, creates
influences and generates value”
A brand is:Interbrand
for GREM
04.02.2009

5. 0
20
40
60
80
100
1978 2008
Intangibles
Tangibles
5%
95%
28%
72%
%
Dow Jones Industrial Market Capitalization
Intangibles are the key source of corporate valueInterbrand
for GREM
04.02.2009

6. From this:
Brand – an element of your
communications strategy
Brand – one vision that drives
business performance, culture,
experience and attitude
Business
Strategy
Sales
Marketing
Manufacturing/
retail operations
Distribution
R&D
Finance
To this:
Brand
Strategy
Traditional
communi-
cation
HR
Sales
Marketing
Manufacturing/
retail operations
Distribution
R&D
Finance
HR
Brand
Strategy
Business
Strategy
An influential brand strategy creates top and bottom line
growth
Interbrand
for GREM
04.02.2009

7. How do brands create value?
The brand’s
benefits to the
customer
The brand’s
direct effect on
the customer
behavior
The brand’s
direct effects
on operations
The brand’s
indirect effects
on operations
Brand
Trust Differentiation Aspiration
“believed benefits”
Volume premium/Price premium
Certainty of future demand
Cost efficiency
Likelihood
to be chosen
Value for Owner
Economic value of business
Share of
purchase decision
Value for Customer
“purchased” benefits
Interbrand
for GREM
04.02.2009

8. The agenda.
1. How does the brand generate value?
2. How can brand value be assessed?
3. What insight does valuation create?
4. How can performance be controlled?
Interbrand
for GREM
04.02.2009

9. Brand value is defined as:
the net present value
of the future earnings
that can be attributed
to the brand alone.
Interbrand
for GREM
04.02.2009

10. Revenues
Cost energy, raw materials
Cost of R&D
Cost of communication and administration
. . .
Cost of aging assets
Taxes
Cost of capital tied in business (investments)
The value added by the
branded business rests on its
anticipated earnings derived
from all tangible and
intangible assets, the brand
being one of them.
Economic earnings from the business
EBITDA
EBIT
NOPAT
Cost of personnel
Value for Customer
“purchased” benefits
1. Assessing the economic success of the branded
business.
Interbrand
for GREM
04.02.2009

11. Value for Customer
“purchased” benefits
Revenues
Cost energy, raw materials
Cost of R&D
Cost of communication and administration
. . .
Cost of aging assets
Taxes
Cost of capital tied in business (investments)
Economic earnings from the business
EBITDA
EBIT
NOPAT
Cost of personnel
2. Isolating the brand’s contribution to economic
earnings.
The brand is one of the
business’s benefits provided to
the customer. A customer study
needs to reveal the relevance of
the brand relative to other
purchase decision criteria.
In essence, the brand’s promises
are isolated from the business’s
verifiable customer benefits.
Brand
Share in
purchase
decision
Price Service Innov Design
Interbrand
for GREM
04.02.2009

12. 3. Assessing the brand’s contribution to business risk.
The assessment needs to
quantify the deviation of the
brand’s probability of being
chosen from that of the
branded business as a whole.
The latter is set equal to the
risk of the business as a
whole (WACC).
Share in purchase
decision
Risk of Brand
Earnings
Risk of earnings
from other benefits
Likelihoodof
NOTbeingchosen
Weighted Cost of Capital (WACC)
Interbrand
for GREM
04.02.2009

13. What are the driver of brand value?
1) Economic Value Added:
The economic earnings of the
branded business.
2) Role of Brand: the share
of the brand in the economic
earnings of the business.
3) Brand Strength: the
probability of the brand being
chosen within its competitive
environment.
Economic earnings from the business
Share in purchase
decision
Likelihoodof
beingchosen
Interbrand
for GREM
04.02.2009

14. Assessing brand value
EBIT € 500
Taxes (€ 200)
Revenues € 1000
Assessment parameters
Brand earnings
€ 80
Derived parameters Assessment resultValue drivers
Stability 12%
Leadership 11%
Trend 5%
Support 6%
Internationalization 6%
Market 6%
Protection 4%
Economic Value Added
(EVA)
€ 200
Role of Brand (RBI)
40%
Brand value
(NPV of brand
earnings) € 450
Discount rate
12%
Brand Strength Score
(BSS)
60%
Cost of capital (€ 100)
Demand driver 2 0%
Demand driver 3 12%
Demand driver 4 20%
Demand driver 1 8%
Interbrand
for GREM
04.02.2009

15. Assessing brand value
EBIT € 500
Taxes (€ 200)
Revenues € 1000
Assessment parameters
Brand earnings
€ 80
Derived parameters Assessment resultValue drivers
Stability 12%
Leadership 11%
Trend 5%
Support 6%
Internationalization 6%
Market 6%
Protection 4%
Economic Value Added
(EVA)
€ 200
Role of Brand (RBI)
40%
Brand value
(NPV of brand
earnings) € 450
Discount rate
12%
Brand Strength Score
(BSS)
60%
Cost of capital (€ 100)
Demand driver 2 0%
Demand driver 3 12%
Demand driver 4 20%
Demand driver 1 8%
Interbrand
for GREM
04.02.2009

16. Assessing brand value
EBIT € 500
Taxes (€ 200)
Revenues € 1000
Assessment parameters
Brand earnings
€ 80
Derived parameters Assessment resultValue drivers
Stability 12%
Leadership 11%
Trend 5%
Support 6%
Internationalization 6%
Market 6%
Protection 4%
Economic Value Added
(EVA)
€ 200
Role of Brand (RBI)
40%
Brand value
(NPV of brand
earnings) € 450
Discount rate
12%
Brand Strength Score
(BSS)
60%
Cost of capital (€ 100)
Demand driver 2 0%
Demand driver 3 12%
Demand driver 4 20%
Demand driver 1 8%
Interbrand
for GREM
04.02.2009

17. Assessing brand value
EBIT € 500
Taxes (€ 200)
Revenues € 1000
Assessment parameters
Brand earnings
€ 80
Derived parameters Assessment resultValue drivers
Stability 12%
Leadership 11%
Trend 5%
Support 6%
Internationalization 6%
Market 6%
Protection 4%
Economic Value Added
(EVA)
€ 200
Role of Brand (RBI)
40%
Brand value
(NPV of brand
earnings) € 450
Discount rate
12%
Brand Strength Score
(BSS)
60%
Cost of capital (€ 100)
Demand driver 2 0%
Demand driver 3 12%
Demand driver 4 20%
Demand driver 1 8%
0% 10% 20% 30%
Quality
Design
Price
Service
Features
Distribution
Sustainability
Significance of demand drivers (total 100%)
Role of Brand Index (44%)
Interbrand
for GREM
04.02.2009

18. Assessing brand value
EBIT € 500
Taxes (€ 200)
Revenues € 1000
Assessment parameters
Brand earnings
€ 80
Derived parameters Assessment resultValue drivers
Stability 12%
Leadership 11%
Trend 5%
Support 6%
Internationalization 6%
Market 6%
Protection 4%
Economic Value Added
(EVA)
€ 200
Role of Brand (RBI)
40%
Brand value
(NPV of brand
earnings) € 450
Discount rate
12%
Brand Strength Score
(BSS)
60%
Cost of capital (€ 100)
Demand driver 2 0%
Demand driver 3 12%
Demand driver 4 20%
Demand driver 1 8%
Interbrand
for GREM
04.02.2009

19. Assessing brand value
EBIT € 500
Taxes (€ 200)
Revenues € 1000
Assessment parameters
Brand earnings
€ 80
Derived parameters Assessment resultValue drivers
Stability 12%
Leadership 11%
Trend 5%
Support 6%
Internationalization 6%
Market 6%
Protection 4%
Economic Value Added
(EVA)
€ 200
Role of Brand (RBI)
40%
Brand value
(NPV of brand
earnings) € 450
Discount rate
12%
Brand Strength Score
(BSS)
60%
Cost of capital (€ 100)
Demand driver 2 0%
Demand driver 3 12%
Demand driver 4 20%
Demand driver 1 8%
Interbrand
for GREM
04.02.2009

20. Assessing brand value
EBIT € 500
Taxes (€ 200)
Revenues € 1000
Assessment parameters
Brand earnings
€ 80
Derived parameters Assessment resultValue drivers
Stability 12%
Leadership 11%
Trend 5%
Support 6%
Internationalization 6%
Market 6%
Protection 4%
Economic Value Added
(EVA)
€ 200
Role of Brand (RBI)
40%
Brand value
(NPV of brand
earnings) € 450
Discount rate
12%
Brand Strength Score
(BSS)
60%
Cost of capital (€ 100)
Demand driver 2 0%
Demand driver 3 12%
Demand driver 4 20%
Demand driver 1 8%
%
Protection Leadership RelevanceSupport StabilityDiversification Market Position
Defense
Strategy
Awareness Preference
Extension
Strategy
Familiarity First Choice
Identity
Share of
Advertising
Satisfaction
Loyalty
Geographic
Diversification
Offer-related
Diversification
Market Share
Price
% % %% %% %
Factor Score Factor Score Factor ScoreFactor Score Factor ScoreFactor Score Factor Score
Average of
Attribute Scores
Average of
Attribute Scores
Average of
Attribute Scores
Average of
Attribute Scores
Average of
Attribute Scores
Average of
Attribute Scores
Average of
Attribute Scores
Average of Factor Scores = Brand Strength Score
Promotion PositionPerception
Interbrand
for GREM
04.02.2009

21. Assessing brand value
EBIT € 500
Taxes (€ 200)
Revenues € 1000
Assessment parameters
Brand earnings
€ 80
Derived parameters Assessment resultValue drivers
Stability 12%
Leadership 11%
Trend 5%
Support 6%
Internationalization 6%
Market 6%
Protection 4%
Economic Value Added
(EVA)
€ 200
Role of Brand (RBI)
40%
Brand value
(NPV of brand
earnings) € 450
Discount rate
12%
Brand Strength Score
(BSS)
60%
Cost of capital (€ 100)
Demand driver 2 0%
Demand driver 3 12%
Demand driver 4 20%
Demand driver 1 8%
Interbrand
for GREM
04.02.2009

22. Brand value calculation
2007
500
(407)
94
(25)
69
130
(13)
56
2008
520
(423)
97
(26)
71
130
(13)
58
23
1.09
21
101
277
378
2009
550
(447)
103
(27)
76
140
(14)
62
25
1.19
21
2010
580
(472)
108
(29)
79
150
(15)
64
26
1.30
20
2011
620
(503)
117
(31)
86
160
(16)
70
28
1.41
20
2012
650
(528)
122
(32)
90
160
(16)
74
29
1.54
19
2006
480
(390)
90
(24)
66
120
(12)
54
Year 2005
440
(357)
83
(22)
61
110
(11)
50
Branded revenue
Operating costs
EBIT
Tax 26%
NOPAT
Operating assets
WACC 10%
Economic Value Added (EVA)
RBI 40% (Brand earnings)
Discount rate 9%
Discount factor
Discounted earnings
Value until the year 2012
Terminal value (growth = 2%)
Net present value of the brand segment
Interbrand
for GREM
04.02.2009

23. Applications of Brand Valuation.
.
Revenue
Potential
Business
Risk
Investment
Efficiency
Risk Evaluation
(Insurance)
Internal business case
Impact of change in
architecture and
positioning
Purchase price allocation
Fairness opinion
Portfolio investment
Touch point investment
Value
reporting
Licensing
Transfer pricing
Internal compensation
Value creation/BUs
Joint ventures
Litigations
Investment advisory
Company financing
Due diligence
Performance tracking
Brand
extension
Interbrand
for GREM
04.02.2009

24. The agenda.
1. How does the brand generate value?
2. How can brand value be assessed?
3. What insight does valuation create?
4. How can performance be controlled?
Interbrand
for GREM
04.02.2009

25. Understanding the drivers of value
Medical Systems -
Asia Pacific
10.0%
9.9%
8.9%
8.5%
8.3%
8.0%
7.7%
7.5%
7.4%
7.0%
5.8%
5.8%
4.8%
0.4%
Role of
Brand
Relative
Importance
of Driver
Role of
Brand
Relative
Importance
of Driver
Role of
Brand
Relative
Importance
of Driver
Role of
Brand
Relat
Importa
of Dri
4.2% 10.0% 1.4% 3.5% 2.1% 8.6%
4.0% 9.9% 3.4% 8.7% 1.3% 5.3%
3.8% 8.9% 5.1% 10.2% 2.6% 8.1%
2.8% 8.5% 2.5% 8.1% 2.1% 6.7%
2.9% 8.3% 2.3% 7.5% 2.3% 8.8%
3.2% 8.0% 1.2% 2.8% 1.8% 8.2%
2.6% 7.7% 3.1% 7.3% 2.1% 9.1%
3.3% 7.5% 5.1% 10.5% 2.8% 9.8%
2.9% 7.4% 3.1% 8.4% 0.5% 1.9%
2.3% 7.0% 2.5% 7.5% 1.9% 7.2%
2.0% 5.8% 2.0% 7.0% 1.0% 4.8%
2.2% 5.8% 2.5% 5.6% 2.2% 7.1%
1.3% 4.8% 1.8% 6.6% 2.2% 8.2%
0.1% 0.4% 1.6% 6.3% 1.6% 6.1%
38% 38% 26%
38% 38% 26%
Relative Weigths of Purchase Drivers and Role of Brand
Interbrand
for GREM
04.02.2009

26. Philips differentiates positively from the competition on all
brand image attributes.
...best quality products
...worth paying more for
Differentiation
(based on performance difference from market average)
Relevance
(basedoncorrelationwithfirstchoice)
...stands for simplicity
...easy to use
...first to market
...easily accessible
...easy to do business with
...excellent value for money
...based on my business needs
...socially responsible
...leading in innovation
...wide variety of products
...environmentally responsible
...sophisticated
highlow
low high
Medical Systems -
Europe
Interbrand
for GREM
04.02.2009

27. Siemens proves to be a strong competitor on Philips’ key
image attributes.
Medical Systems -
Europe
low high
-2.3%-5.8% +3.8% +4.3%
Differentiation of key
competitors on selected
image items
...stands for simplicity
-1.0%-4.3% +4.1%+1.2%
...environmentally responsible
-2.6%-3.9% +5.0%+1.5%
...socially responsible
Relevance
(basedoncorrelationwithfirstchoice)highlow
Differentiation
(based on performance difference from market average)
Interbrand
for GREM
04.02.2009

28. GE
Siemens Toshiba
None
of
these
PHILIPS
20%
5%
23%
2%
21%
34%
39%
37%
Medical Systems -
Asia Pacific.
Source: Interbrand (Data Source: Heart Beat 2007)
The model reveals the likelihood of a customer of another
brand to switch to Philips and vice versa.
Interbrand
for GREM
04.02.2009

29. Transfer Rate (abs.)
(rel.)
Action/Attention Ratio (Philips) (Siemens)
-15%
-50%
24%31%
-4% -36% -27% -3%
-4% -37% -45% -9%
Philips
Siemens
Medical Systems - Asia Pacific.
Source: Interbrand (Data Source: Heart Beat 2007)
Attention RetentionActionDesireInterest
The purchase funnel uncovers strengths and weaknesses
in the ability of the brand to acquire customers and
sustain competition.
Interbrand
for GREM
04.02.2009

30. ...socially responsible
...environmentally respons.
...wide variety of products
...leading in innovation
...sophisticated
...worth paying more for
...based on business needs
...easy to use and install
...easy to do business with
...stands for simplicity
...first in the market
...excellent value for money
...best quality products
...easily accessible
Attention RetentionActionDesireInterest
evaluation of the brand on image items by continuers
evaluation of the brand on image items by drop outs
evaluation of strongest competitor brand on image items
2.5 3.0 3.5 4.0 4.5 2.5 3.0 3.5 4.0 4.5 2.5 3.0 3.5 4.0 4.5 2.5 3.0 3.5 4.0 4.5 2.5 3.0 3.5 4.0 4.5
Source: Interbrand (Data Source: Heart Beat 2007)
The potential customers that cannot be ‘converted‘ have a
different perception of the brand than those that move on
in the purchase funnel.
Medical Systems - Asia Pacific.
Interbrand
for GREM
04.02.2009

31. Germany
Competitive Positioning.
MP3.
Source: Interbrand
RoleofBrand
Brand Strength
BSS RBI
Philips 46% 25%
Sony 62% 25%
Panasonic 33% n.a.
Samsung 42% 27%
Apple/iPod 76% 45%
CreativeLabs/Nomad 33% 24%
(Data Source: Heart Beat 2007)
USA
RoleofBrand
Brand Strength
BSS RBI
Philips 32% 22%
Sony 51% 23%
Panasonic 31% n.a.
Samsung 31% n.a.
Apple/iPod 89% 38%
CreativeLabs/Nomad 40% 30%
* The regression of first choice on brand opinion didn’t provide a significant result.
For the brand valuation the RBI for the MP3 product division has been applied.
*
China
RoleofBrand
Brand Strength
* The regression of first choice on brand opinion didn’t provide a significant result.
For the brand valuation the RBI for the MP3 product division has been applied.
BSS RBI
Philips 55% 22%
Sony 64% 12%
Samsung 69% 13%
Apple/iPod 64% 32%
Aigo 39% n.a.
iRiver 17% n.a.
*
Interbrand
for GREM
04.02.2009

32. The agenda.
1. How does the brand generate value?
2. How can brand value be assessed?
3. What insight does valuation create?
4. How can performance be controlled?
Interbrand
for GREM
04.02.2009

33. The objective: increase brand value.
Brand (value)
Interbrand
for GREM
04.02.2009

34. Which information is required for this purpose?
Information on brand
perception
Brand (value)
The following questions
need to be answered:
How is the brand perceived?
How has perception changed?
How does the brand position
itself in the competitive
environment?
Have the measures had a
positive impact on perception?
How does the brand perform
with respect to strategically
important attributes and
values?
Which attributes are relevant
in decision-making?
Which attributes are
distinctive?
What do people say about the
brand?
Is the brand being perceived
at the individual touch points?
Interbrand
for GREM
04.02.2009

35. Which information is required for this purpose?
How high is the comparative
awareness of the brand?
Is the brand in the relevant
set?
Is the brand the first choice?
What is the brand’s share?
How comparatively loyal are
the customers?
Where are the strengths and
weaknesses of the brand in
the conversion of non-
customers to loyal customers?
The following questions
need to be answered:
Information on the
competitive position of
the brand
Information on brand
perception
Brand (value)
Interbrand
for GREM
04.02.2009

36. Which information is required for this purpose?
How large are the budgets of
the individual segments?
What have competitors
invested in the ATL channels?
How much are we investing in
the individual communication
channels and touch-points?
How efficient are our
investments in the brand?
Which projects are currently
ongoing and what is their
status?
The following questions
need to be answered:
Information on
investments in the
brand
Information on the
competitive position of
the brand
Information on brand
perception
Brand (value)
Interbrand
for GREM
04.02.2009

37. Which information is required for this purpose?
How is brand communication
perceived?
Are the strategically important
attributes being supported?
Are the messages
understood?
How readily can recipients
remember the messages?
Has the advertised business
evolved?
Which differences have been
identified between the
campaigns?
The following questions
need to be answered:
Information on the
success of brand
communication
Information on
investments in the
brand
Information on the
competitive position of
the brand
Information on brand
perception
Brand (value)
Interbrand
for GREM
04.02.2009

38. Which information is required for this purpose?
Information on the
success of brand
communication
Information on
investments in the
brand
Information on the
competitive position of
the brand
Information on brand
perception
Brand (value)
Output
Input
Interbrand
for GREM
04.02.2009

39. Which brand management functions need to be
supported with the information?
Information on the
success of brand
communication
Information on
investments in the
brand
Information on the
competitive position of
the brand
Information on brand
perception
Brand (value)
Information for
value shareholders
Information for
strategic planners (KPI)
Information for
brand managers
Information for
product and marketing
managers
Interbrand
for GREM
04.02.2009

40. How must the information perform at the operational
level?
Information on the
success of brand
communication
Information on the
competitive position of
the brand
Information on
investments in the
brand
Information on brand
perception
Operational level
Information on the analysis
of the brand
The information must
sharpen the awareness
of the dynamic, answer
explorative questions,
and allow short-term
monitoring.
Short survey cycles
Detailed information
Actionable
Interbrand
for GREM
04.02.2009

41. How must the information perform at the operational
level?
Information on the
success of brand
communication
Information on
investments in the
brand
Information on the
competitive position of
the brand
Information on brand
perception
Operational level
Information on the analysis
of the brand
The information must
sharpen the awareness
of the dynamic, answer
explorative questions,
and allow short-term
monitoring.
Short survey cycles
Detailed information
Actionable
Information on brand perception
Interbrand
for GREM
04.02.2009

42. How must the information perform at the reporting level?
Information on the
success of brand
communication
Information on
investments in the
brand
Information on the
competitive position of
the brand
Information on brand
perception
Reporting level
Information on the
documentation of brand
status
The information must
provide an overview and
enable a statistically
secured status report
that can be used for
internal decision-making.
Long-term survey cycles
(ideal: one year)
Consolidated information
Communication-related
Interbrand
for GREM
04.02.2009

43. How must the information perform at the reporting level?
Information on the
competitive position of
the brand
Information on
investments in the
brand
Information on brand
perception
Reporting level
Information on the
documentation of brand
status
Information on the
success of brand
communication
The information must
provide an overview and
enable a statistically
secured status report
that can be used for
internal decision-making.
Long-term survey cycles
(ideal: one year)
Consolidated information
Communication-related
Information on the success of brand
communication
Q18. What is the best way to receive information about each of the
following?
Indicates the total number of paired comparisons in which this
touch point was chosen as a preferred method of information
collection according to a Chi Square test
17
36
20
21
0
41
4
Interbrand
for GREM
04.02.2009

44. How must the information perform at the controlling
level?
Information on the
success of brand
communication
Information on the
competitive position of
the brand
Information on brand
perception
Controlling level
Information on strate-
gic objectives
The information must
focus on strategically
important value drives
and make them
measurable so that
brand management
deliverables can be
planned and reviewed.
Long-term survey cycles
(ideal: one year)
Strategic information
Controlling-related
Information on
investments in the
brand
Interbrand
for GREM
04.02.2009

45. How must the information perform at the controlling
level?
Information on the
success of brand
communication
Information on the
competitive position of
the brand
Information on brand
perception
Controlling level
Information on strate-
gic objectives
Information on brand
perception
Information on
investments in the
brand
Information on brand perception
The information must
focus on strategically
important value drives
and make them
measurable so that
brand management
deliverables can be
planning and reviewed.
Long-term survey
cycles (ideal: one year)
Strategic information
Controlling-related
Interbrand
for GREM
04.02.2009

46. How must the information perform at the goal level?
Information on the
success of brand
communication
Information on the
competitive position of
the brand
Information on brand
perception
Brand (value)
Goal level
Information for
value reporting
The information must
communicate to all
stakeholders the significance
of the brand with respect to
the corporate strategy,
measures for value enhance-
ment, and monitoring tools.
Long-term survey cycles
(ideal: one year)
Value reporting
Shareholder-related
Information on
investments in the
brand
Interbrand
for GREM
04.02.2009

47. How must the information perform at the goal level?
Information on the
success of brand
communication
Information on the
competitive position of
the brand
Information on brand
perception
Brand (value)
Goal level
Information for
value reporting
The information must
communicate to all
stakeholders the significance
of the brand with respect to
the corporate strategy,
measures for value enhance-
ment, and monitoring tools.
Long-term survey cycles
(ideal: one year)
Value reporting
Shareholder-related
Information on
investments in the
brand
Interbrand
for GREM
04.02.2009

48. Thank you.

49. A standard for the requirements on brand valuation will
be available next year.
Interbrand
for GREM
04.02.2009