Step 2-Brand Value using BVAO Approach egmont B Overall market and risk analysis Segment C evenue Financial Forecasts analysis Segment A Segment Branded Earnings → Segment B BVA analysis analysis SEgment C BvA@‘ Brand Value Discount Rate O Copy rights reserved, Zou Deqiang 21
21 21 © Copy rights reserved, Zou Deqiang Segment analysis Segment A Segment B Segment C Branded Earnings BVA® ‘Brand’ Value Forecasts revenue costs Overall market and risk analysis Financial analysis 3 1 2 Segment A Segment B Segment C 4 BVA® analysis 4 Discount Rate 5 Step 2 - Brand Value using BVA Brand Value using BVA® Approach Approach
Step 3-BrandBseta Analysis Scoring system used Competitor Set to establish levels of omp Comp Comp Comp Attribute brand-related risk 1. Distribution Competitiveness 2. Yield against key brand-related 3. Market Share attributes Analysis competitors 5. Sales Growth 6. Price premium strengths weaknesses, and arketing Spend 8. Price Elasticity X expected activity 9. Brand Awareness 10. Other volume return O Copy rights reserved, Zou Deqiang
22 22 © Copy rights reserved, Zou Deqiang Step 3 - ßrandßeta® Analysis • Scoring system used to establish levels of brand-related risk ¾ Competitiveness ranked against key brand-related attributes. • Analysis competitors’ strengths, weaknesses, and expected activity 10. Other volume return 9. Brand Awareness x x x x 8. Price Elasticity x x x x 7. Marketing Spend x x x x 6. Price Premium x x x n/a 5. Sales Growth x x x x 4. Position x x x x 3. Market Share x x x x 2. Yield x x x x 1. Distribution x n/a x x Comp 4 Comp 3 Comp 2 Comp Attribute 1 Competitor Set
simplified example Year 0 Year 1 Year 2 Year 3 ear 4 Year 5 500 520 580 Operating Earnings 78.0 82.5 87.0 93.0 975 Tangible Capital employed 25 260 275 290 Charge for Capital 5% b 125 130 13.8 14.5 15 16 Intangible Earnings 625 650 68.8 81.3 Brand Earnings 75% 469 48.8 51.6 Tax Rate 33% 33% 33% 33% 33% 33% 15.5 st tax Brand Earnings 31 32.7 34.5 36.4 38.9 408 Dis count Rate 1.15 1.75 Discounted Cash-flow 28.4 26.1 24.0 22.3 20.3 Value to year 5 524 Annuity Growth Brand value Source: Brand Finance plc
23 Discounted Future Earnings method - simplified example Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Net Sales 500 520 550 580 620 650 Operating Earnings a 75.0 78.0 82.5 87.0 93.0 97.5 Tangible Capital employed 250 260 275 290 310 325 Charge for Capital @ 5% b 12.5 13.0 13.8 14.5 15.5 16.3 Intangible Earnings c 62.5 65.0 68.8 72.5 77.5 81.3 Brand Earnings @ 75% d 46.9 48.8 51.6 54.4 58.1 60.9 Tax Rate 33% 33% 33% 33% 33% 33% Tax 15.5 16.1 17.0 17.9 19.2 20.1 Post tax Brand Earnings e 31.4 32.7 34.5 36.4 38.9 40.8 Discount Rate 15% Discount Factor f 1.0 1.15 1.32 1.52 1.75 2.01 Discounted Cash-flow g 31.4 28.4 26.1 24.0 22.3 20.3 Value to year 5 h 152.4 Annuity I 135.3 Growth 0% Brand Value 287.8 Source: Brand Finance plc
Interbrand Approach Monetary brand value is determined in a four-step process In the first step the brand value driver criteria for each of the seven influencing factors are ascertained and assigned a point score In the second step the seven scores are combined and weighted according to their significance as regards brand value to arrive at overall brand strength In the third step this point score-a standardized index value ranging from 0-100- is converted into a multiplier using a transformation function In the fourth step, the resulting multiplier value is multiplied by average earnings after taxes for the last three years to determine monetary brand value O Copy rights reserved, Zou Deqiang
24 24 © Copy rights reserved, Zou Deqiang Interbrand Approach • Monetary brand value is determined in a four-step process. ¾ In the first step, the brand value driver criteria for each of the seven influencing factors are ascertained and assigned a point score. ¾ In the second step, the seven scores are combined and weighted according to their significance as regards brand value to arrive at overall brand strength. ¾ In the third step, this point score – a standardized index value ranging from 0–100 – is converted into a multiplier using a transformation function. ¾ In the fourth step, the resulting multiplier value is multiplied by average earnings after taxes for the last three years to determine monetary brand value
Brand Strength: Interbrand Drivers lighting of drivers Operationalizing criteria(a selection) Brand leadership Market share(MS), market position relative MS, market segment, structure future aspects, Brand stability 15% History, current position, future development Market Overview, (structure of competition, value, volume, etc. ) trend(market dynamism, etc. ) prospects International reach of brand 25% Past(export history, etc. ) present (presence on foreign markets), future Brand trend 10% Development(sales volume, MS), status (competitive trend), planning (development plans Marketing support Qualitiy and continuity(advertising activities, sales promotions, etc. ) future strategy Legal protection of brand 5% Rights to name, registration, etc. O Copy rights reserved, Zou Deqiang
25 25 © Copy rights reserved, Zou Deqiang Brand Strength: Interbrand