■ First, the proportion of a company’s earnings that is generated “under the banner of the brand” is determined. In the case of Coca-Cola, for instance, some earnings are not branded Coca-Cola, but come from Fanta, Sprite or Minute Maid. From these branded earnings, we subtract capital charges.
This ensures we capture only value above and beyond what investors would require any investment in the brand to earn: the value the brand adds to the business. Earnings are then allocated to each brand in each country of operation. This provides us with a bottom-up view of the earnings of the branded business.
■ Only a portion of these earnings can be considered to be driven by brand equity. This is the “brand contribution”: the degree to which brand equity plays a role in generating earnings. MBO establishes it through analysis of country-, market-, and brand-specific customer research from the BrandZ database.
This guarantees that the brand contribution is rooted in real-life customer perceptions and behaviour, rather than subjective opinion. This allows us to capture differences in the importance of brands by category and by country, changes in customer priorities, and the role of brand versus other factors such as price and distribution.
■ In the final step, the growth potential of these branded earnings is taken into account. This provides an earnings multiple that is aligned with the methods used by the analyst community, and also takes into account brand-specific growth opportunities and barriers.
MBO has refined its analysis over the past six years to enhance the ranking’s power to help finance and marketing departments understand, and grow, the value of their brands.
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