Brand Equity vs.

Brand Value

Brand equity refers to the importance of a brand in the

customer’s eyes, while brand value is the financial significance
the brand carries. Both brand equity and brand value are educated
estimates of how much a brand is worth.

What’s the Difference Between Brand Equity & Brand Value?

Brand equity and brand value are similar, but not the same.
Oftentimes, there is confusion around how each differs so let’s
look at exactly what each means:

Brand Equity

Brand equity is a set of assets or liabilities in the form of

brand visibility, brand associations and customer loyalty that
add or subtract from value of a current or potential product or
service driven by the brand. It is a key construct in the
management of not only marketing, but also business strategy.
In the late 1980s, brand equity helped create and support the
explosive idea that brands are assets that drive business
performance over time. That idea altered perceptions of what
marketing does, who does it, and what role it plays in business
strategy.

Brand equity also altered the perception of brand value by

demonstrating that a brand is not only a tactical aid to generate
short-term sales, but also a strategic support to a business
strategy that will add long-term value to the organization.

Brand Value

Brand value, on the other hand, is the financial worth of the

brand. To determine brand value, businesses need to estimate how
much the brand is worth in the market – in other words, how much
would someone purchasing the brand pay?

It is important to note that a positive brand value does not

automatically equal positive brand equity.

How Should Brand Equity & Brand Value Be Measured?

While measuring brand value is fairly straightforward, the

process for brand equity is not quite so simple. Brand equity
is a set of assets or liabilities in the form of brand
visibility, brand associations and customer loyalty that add or
subtract from value of a current or potential product or service
driven by the brand. Here we’ll dive into each.
Brand Visibility

This means that the brand has awareness and credibility with
respect to a particular customer need—it is relevant. If a
customer is searching for a buying option and the brand does not
come to mind, or if there is some reason that the brand is
perceived to be unable to deliver adequately, the brand will not
be relevant and not be considered.

Brand Associations

Brand associations involve anything that created a positive or

negative relationship with or feelings toward the brand. It can
be based on functional benefits but also a brand personality,
organizational values, self-expressive benefits, emotional
benefits or social benefits.

Customer Loyalty

Customer’s loyalty provides a flow of business for current and

potential products from customers that believe in the value of
the brand’s offerings and will not spend time evaluating options
with lower prices. The inclusion of loyalty in the
conceptualization of brand equity allows marketers to justify
giving loyalty priority in the brand building budget.

Driving Brand Value in the Short Term

The value of a brand represents its impact on the short-run and

long-run flow of profits that it can generate. With respect to
short-term profitability, the problem is that programs that are
very good at driving short-run products – like price promotions
– can damage brands.

Looking at the ways a brand can help drive short-term financial

performance can help mitigate this tendency:

Brand Loyalty

 Reduced Marketing Costs

 Trade Leverage
 Attracting New Customers via Awareness & Reassurance
 Time to Respond to Competitive Threats

Brand Visibility
 Anchor to Which Other Associations Can Be Attached
 Familiarity Which Leads to Liking
 Visibility That Helps Gain Consideration
 Signal of Substance/Commitment
Brand Associations
 Helps Communicate Information
 Differentiate/Position
 Reason-to-Buy
 Create Positive Attitude/Feelings
 Basis for Extensions

Improving Brand Value in the Long-Run

One of the ongoing challenges of brand equity proponents is to

demonstrate that there is long-term value in creating brand
equity. The basic problems are that brand is only one driver of
profits, completive actions intervene, and strategic decisions
cannot wait for years.

There are, however, some perspectives that can be employed to

understand and measure the long-term value of brand equity:

Brand Value Approach #1: Estimate the Brand’s Role in

Business

One approach is to estimate the brand’s role in a business. The

value of a business in a product-market such as the Ford Fiesta
in the UK market is estimated based on discounting future
earnings. The tangible and intangible assets are identified and
the relative role of the brand is subjectively estimated by a
group of knowledgeable people, taking into account the business
model and any information about the brand in terms of its
relative visibility, associations and customer loyalty.

The value of the brand is then aggregated over products and

markets countries to determine a value for brand. It can range
from 10 percent for B2B brands to over 60 percent for brands
like Jack Daniel’s or Coca-Cola.

Brand Value Approach #2: Observe Investments in Brand

Equity

A second approach is to observe that, on average, investments

in brand equity increase stock return, the ultimate measure of
a long-term return on assets. Evidence comes from a series of
studies I conducted with Professor Robert Jacobson of the
University of Washington, using time series data which included
information on accounting-based return-on-investment (ROI) and
models that sorted out the direction of causation.

The consistent finding was that the impact of increasing brand

equity on stock return was nearly as great as that of an ROI
change, about 70 percent as much. In contrast, advertising, also
tested, had no impact on stock return except that which was
captured by brand equity.

Brand Value Approach #3: Reflect on Other Valuable Brands

A third approach is to look at case studies of brands that have

created enormous value. Consider, for example, the power of the
Apple personality and innovation reputation, BMW’s self-
expressive benefits connected to the “ultimate driving machine,”
and the ability of Whole Foods Market brand to define an entire
subcategory.

Or, the fact that from 1989 to 1997 two cars were made in the
same plant using the same design and materials and marketing
under two brand names, Toyota Corolla and Chevrolet (GEO) Prism.
The Corolla brand was priced 10% higher, had less depreciation
over time, and had sales many times more that the Prizm. And
consumers and experts both gave it higher ratings. The same car!
Only the brand was different.

Brand Value Approach #4: Consider the Conceptual Model

It’s important to consider to consider the conceptual model

surrounding a business strategy. What is the business strategy?
What is the strategic role of the brand in supporting that
strategy? How critical is it? Is price competition the
alternative to creating and leveraging brand equity? What impact
will that have on profit streams going forward? Management guru
Tom Peters said it well:

“In an increasingly crowded marketplace, fools will compete on

price. Winners will find a way to create lasting value in the

customer’s mind.”

Final Thoughts

Brand equity continues to be a driver of much of marketing,

indeed business strategy. For it to work, it needs to be
understood conceptually and operationally. And it is important
that it be tied to brand value in credible ways.
 BrandZ™ Brand Valuation Methodology

Introduction

The brands that appear in this report are the most valuable in
India. They were selected for inclusion in the BrandZ™ Top 50
Most Valuable Indian Brands 2015 based on the unique and
objective BrandZ™ brand valuation methodology that combines
extensive and on-going consumer research with rigorous financial
analysis.

The BrandZ™ valuation methodology can be uniquely distinguished

from its competitors by the way we obtain consumer viewpoints.
We conduct worldwide, on-going, in-depth quantitative consumer
research, and build up a global picture of brands on a category-
by-category and market-bymarket basis.

Globally, our research covers three million consumers and more

than 100,000 different brands in over 50 markets. This
intensive, in-market consumer research differentiates the
BrandZ™ methodology from competitors that rely only on a panel
of “experts”, or purely on financial and market desktop
research.

Before reviewing the details of this methodology, consider these

three fundamental questions: why is brand important; why is
brand valuation important; and what makes BrandZ™ the definitive
brand valuation tool?

IMPORTANCE OF BRAND

Brands embody a core promise of values and benefits consistently

delivered. Brands provide clarity and guidance for choices made
by companies, consumers, investors and other stakeholders.
Brands provide the signposts we need to navigate the consumer
and B2B landscapes.

At the heart of a brand’s value is its ability to appeal to

relevant customers and potential customers. BrandZ™ uniquely
measures this appeal and validates it against actual sales
performance. Brands that succeed in creating the greatest
attraction power are those that are:

MEANINGFUL

In any category, these brands appeal more, generate greater

“love” and meet the individual’s expectations and needs.

DIFFERENT
These brands are unique in a positive way and “set the trends”,
staying ahead of the curve for the benefit of the consumer.

SALIENT

They come spontaneously to mind as the brand of choice for key

needs.

IMPORTANCE OF BRAND VALUATION

Brand valuation is a metric that quantifies the worth of these

powerful but intangible corporate assets. It enables brand
owners, the investment community and others to evaluate and
compare brands and make faster and better-informed decisions.

DISTINCTION OF BRANDZ™

BrandZ™ is the only brand valuation tool that peels away all of
the financial and other components of brand value and gets to
the core – how much brand alone contributes to corporate value.
This core, what we call Brand Contribution, differentiates
BrandZ™.

The Valuation Process

STEP 1: CALCULATING FINANCIAL VALUE

PART A

We start with the corporation. In some cases, a corporation owns

only one brand. All Corporate Earnings come from that brand. In
other cases, a corporation owns many brands. And we need to
apportion the earnings of the corporation across a portfolio of
brands.

To make sure we attribute the correct portion of Corporate

Earnings to each brand, we analyze financial information from
annual reports and other sources, such as Kantar Retail. This
analysis yields a metric we call the Attribution Rate.

We multiply Corporate Earnings by the Attribution Rate to arrive

at Branded Earnings, the amount of Corporate Earnings attributed
to a particular brand. If the Attribution Rate of a brand is 50
percent, for example, then half the Corporate Earnings are
identified as coming from that brand.

PART B

What happened in the past – or even what’s happening today – is

less important than prospects for future earnings. Predicting
future earnings requires adding another component to our BrandZ™
formula. This component assesses future earnings prospects as a
multiple of current earnings. We call this component the Brand
Multiple. It’s similar to the calculation used by financial
analysts to determine the market value of stocks (Example: 6X
earnings or 12X earnings). Information supplied by Bloomberg
data helps us calculate a Brand Multiple. We take the Branded
Earnings and multiply that number by the Brand Multiple to arrive
at what we call Financial Value.

STEP 2: CALCULATING BRAND CONTRIBUTION

So now we have got from the total value of the corporation to

the part that is the branded value of the business. But this
branded business value is still not quite the core that we are
after. To arrive at Brand Value, we need to peel away a few more
layers, such as the in-market and logistical factors that
influence the value of the branded business, for example: price,
availability and distribution.

What we are after is the value of the intangible asset of the

brand itself that exists in the minds of consumers. That means
we have to assess the ability of brand associations in consumers’
minds to deliver sales by predisposing consumers to choose the
brand or pay more for it.

We focus on the three aspects of brands that we know make people

buy more and pay more for brands: being Meaningful (a combination
of emotional and rational affinity), being Different (or at
least feeling that way to consumers), and being Salient (coming
to mind quickly and easily as the answer when people are making
category purchases).

We identify the purchase volume and any extra price premium

delivered by these brand associations. We call this unique role
played by brand, Brand Contribution.

Here’s what makes BrandZ™ so unique and important. BrandZ™ is

the only brand valuation methodology that obtains this customer
viewpoint by conducting worldwide on-going, indepth quantitative
consumer research, online and face-to-face, building up a global
picture of brands on a categoryby- category and market-by-market
basis. Globally, our research now covers over three million
consumers and more than 100,000 different brands in over 50
markets. In India, our research includes over 100,000 consumers
and more than 1,000 different brands.

STEP 3: CALCULATING BRAND VALUE

Now we take the Financial Value and multiply it by Brand

Contribution, which is expressed as a percentage of Financial
Value. The result is Brand Value. Brand Value is the dollar
amount a brand contributes to the overall value of a corporation.
Isolating and measuring this intangible asset reveals an
additional source of shareholder value that otherwise would not
exist.

Why BrandZ™ is the definitive Brand valuation methodology

All brand valuation methodologies are similar – up to a point.

All methodologies use financial research and sophisticated
mathematical formulas to calculate current and future earnings
that can be attributed directly to a brand rather than to the
corporation. This exercise produces an important but incomplete
picture.

What’s missing? The picture of the brand at this point lacks

input from the people whose opinions are most important – the
consumer. This is where the BrandZ™ methodology and the
methodologies of our competitors part company.

HOW DOES THE COMPETITION DETERMINE THE CONSUMER VIEW?

Interbrand derives the consumer point of view from panels of

experts who contribute their opinions. The Brand Finance
methodology employees a complicated accounting method called
Royalty Relief Valuation.

WHY IS THE BRANDZ™ METHODOLOGY SUPERIOR?

BrandZ™ goes much further and is more relevant. Once we have the
important, but incomplete, financial picture of the brand, we
communicate with consumers, people who are actually paying for
brands every day, constantly. Globally, our ongoing, in-depth
quantitative research includes three million consumers and more
than 100,000 brands in over 50 markets worldwide. In India, our
research covers over 100,000 consumers and more than 1,000
different brands.

WHAT’S THE BENEFIT OF BRANDZ™?

The BrandZ™ methodology produces important benefits for two

broad audiences.

 Members of the financial community, including analysts,

shareholders, investors and C-suite, depend on BrandZ™ for
the most reliable and accurate brand value information
available.

 Brand owners turn to BrandZ™ to more deeply understand the

causal links between brand strength, sales and profits, and
to translate those insights into strategies for building
brand equity.

Eligibility criteria and definitions

ELIGIBILITY
The brands included in the BrandZ™ Top 50 Most Valuable Indian
Brands 2015 report meet two eligibility criteria:

 Brands are owned by an enterprise listed on a stock exchange

in India.

 Bank brands derived at least 25 percent of earnings from

retail business.

DEFINITIONS BRAND CONTRIBUTION

Brand Contribution is a BrandZ™ measurement of a brand’s

uniqueness in the mind of the consumer and the impact of brand
alone, without any other factors, on future earnings. Brand
Contribution is expressed on a scale of one to five, with five
being the highest.

BRAND POWER

Brand Power is a BrandZ™ measurement of a brand’s competitive

position in its category. It roughly correlates with volume
share. Brand Power is a BrandZ™ component of brand equity, which
is the consumer predisposition to choose one brand over another.

MEANINGFUL, DIFFERENT, SALIENT

These are the three BrandZ™ components of brand equity:

Meaningful, Different and Salient. Success on these components
predisposes consumers to choose a brand and pay a premium for
it.

Meaningful

Consumers feel an affinity for the brand or think it meets their

needs.

Different

The brand feels different to other brands in the category, or

sets trends for the category.

Salient

The brand comes to mind quickly and readily when activated by

ideas related to category purchase.