Brand equity is a financial valuation of the firm’s brand contribution to profit.
Most brand equity valuation firms – such as Millward Brown (as discussed in the link below) – look at brand equity on economic use basis.
So what is an economic use basis?
Economic use in the brand equity valuation is the proportion of extra profitability generated by the firm overtime due to to to the firm’s brand name/s.As a simple example, if you had a local hamburger shop and then re-branded (through a franchising agreement) as McDonald’s – then the extra profitability delivered through the new name would be the value of brand equity.
The top 100 brands in the world has just been announced for 2015, with Apple remaining the most valuable brand in the world. But a key reason for this is their ongoing underlying product quality. As you can see in the quote below, the iPhone 6 product was released, which enabled additional sales and profitability to be generated by the new product – and a portion of that extra profitability is a direct result of their strong brand.
Main components of a firm’s value
If we continue with the Apple example, the overall value of Apple as a business consists of three major components, namely:
- Value of their physical assets
- Value of the intangible assets, such as innovation and product development skills
- Value of the brand
Announcement and full list of the top 100 brands for 2015
“Apple’s increase was very much driven by the iPhone 6 launch and demonstrating its ongoing commitment to innovation and convenience for consumers,” noted Mario Simon, CEO of Millward Brown Vermeer. “Though some were skeptical of Apple’s new leadership, the company has remained true to its brand and continued to build on its strong heritage of beautifully simple products and innovation.”
Read a great article at: Here Are the Top 100 Brands in the World | Adweek