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Our Vision for Improving Brand Valuation

David Haigh
01 April 2021

2021 is the 25th Anniversary of Brand Finance plc as a company. We have been ‘bridging the gap between marketing and finance’1 continuously since 1996. We have maintained the same principles throughout those 25 years and are now present and respected in over 25 countries worldwide. 

I set Brand Finance up in 1996 because I was dissatisfied with the state of brand valuation at the time. In 1996 Brand Valuation was regarded as a ‘black box’, a dark art, where brand strength and brand value conclusions were generally considered to be opaque and subjective. Particular criticism was aimed at the means of determining the level of brand equity with stakeholders, and how this could be tracked into financial performance and thence into a brand valuation result. 

So, in 1996 Brand Finance set out its vision for improving brand valuation practice. This had three key elements: 

1. Define the Brand in the Business 

We wanted to ensure common understanding of where brands added most value. To do this, we needed to define what revenues of the business were attributable to a given brand. This is particularly important in the case of group companies with wide portfolios of brands.  

We set about doing this by improving the segmentation of brand data and analysis, breaking down brands by industrial sector, geography location and customer group. We coined the term ‘Brand Due Diligence’ to describe this process and the term ‘Branded Business’ to indicate that we would include in a brand valuation only revenues sold under the subject branded entity. 

Prior to Brand Finance pioneering the concept of Branded Business value it was common for brands to be valued on a standalone basis rather than in the context of the business that operated them. This meant that brands might be over or under valued because they could not be sense checked against the host branded business. 

The reality is that while many directors want to know the value of the brand alone, they also want to know the value of the branded business to make strategic decisions about how to optimise value. 

2. Incorporate Brand Stakeholders

We believe that all stakeholders respond to brands and all have preferences which ultimately lead to economic benefits for the brand. We sought to demonstrate how those perceptions directly affect behaviour and the resulting economic impacts such enhanced perceptions and preferences have.  

It was clear that we needed to improve the incorporation of stakeholder research to better understand how each discreet stakeholder group perceived and acted upon subject brands. Stakeholder research should be based on quantitative market research and statistical analysis.  

We called this ‘Brand Economics’ and Brand Finance was the first consultancy to refer to brand economists to analyse Brand Economics. We also coined the term ‘Brand Value Added’ to describe the ‘Brand Contribution’ made by a brand to the financial performance of each ‘Branded Business’.  

Our job both then and now is to identify the extent of the uplift to the Branded Business model by the subject brand and put a capital value on that uplift. Such uplifts and capital values are now regularly used for technical, legal, commercial and strategy purposes. 

3. Transparency Above All Else

We needed to improve financial transparency in terms of the financial forecasts used, and in the derivation of cost of capital. At the time, financial forecasts used by brand valuation ‘experts’ were widely considered by CFOs to be highly subjective.  

As our corporate strap line (‘Bridging the Gap Between Marketing and Finance’) implies, Brand Finance has always striven to improve best practice from both Marketing and Finance disciplines. We have always sought to be transparent and to share our technical innovations with the Brand Valuation industry as a whole. 

We have done this consistently throughout the last 25 years. We established the Brand Finance Institute in 2006 to share best practice via guidelines, whitepapers and training. We led the initiative to create a global standard via the International Standards Organisation in 2010, which resulted in the publication of ISO 10668, the global standard in monetary brand valuation.  

We have always sought to enhance the reputation of the Brand Valuation sector as a whole, rather than defending our own narrow interest, in the belief that a rising tide of professionalism lifts all ships. 

Conclusion

I believe it is fair to say that many of the leading players in the Brand Valuation industry today either worked for Brand Finance earlier in their careers or learnt about brand valuation best practice from the freely available and transparent materials we have shared over the years. 

We continue to drive forward open standards. Brand Finance has been instrumental in developing ISO20671 on brand evaluation and is leading the subcommittee of ISO Technical Committee 289, which will update ISO10668 on monetary brand valuation. We will strive to continue as thought leaders and contributors in the space. We do this in collaboration with IVSC and MASB, and through our very own Brand Finance Institute.  

As a company, we believe in promoting open standards and professionalism freely and transparently in brand, branded business valuations, and strategy. At the heart of our vision is bridging the gap between marketing with finance by building a common understanding of how brands work, and how they impact business performance. We will continue to enact our original vision that we set out with 25 years ago, and as the brand valuation discipline grows every year, we will continue to hone and share our understanding of this rather wonderful intangible asset we call brand. 

References

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About the Author

David Haigh
Chairman and CEO
Brand Finance

David is the Chairman and CEO of Brand Finance Plc – the world’s leading brand valuation consultancy. He has worked in the area of branded business, brand, and intangible asset valuation since 1991. He specialised entirely in the field after becoming the Director of Brand Valuation for Interbrand in 1995. He subsequently left Interbrand in 1996 to launch Brand Finance which is celebrating 25 years in business this year.

David represented the British Standards Institution in the working parties responsible for crafting international industry standards: ISO 10668 on Brand Valuation in 2010 and ISO 20671 on Brand Evaluation in 2019.

David is a passionate writer and has authored many articles on brand valuation, published in numerous marketing and finance newspapers and magazines, such as: Financial Times, Accountancy Age, and Marketing Week. He has also lectured on the topic of brand valuation for Harvard, Chicago, and London Business Schools.

David graduated from Bristol University with an English degree, qualified as a Chartered Accountant with Price Waterhouse in London, and obtained a postgraduate diploma in Marketing from the Chartered Institute of Marketing (CIM). He is a Fellow of The Royal Institution of Chartered Surveyors (RICS) and has a practising certificate with the Institute of Chartered Accountants in England and Wales (ICAEW).

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