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Brand Value Included in UN’s Global Innovation Index for the First Time

02 September 2020
This article is more than 1 year old.
  • Just published, the 2020 iteration of the Global Innovation Index includes a brand value metric for the first time in the history of the study
  • Brand Finance’s ISO-certified database of the world’s top 5,000 brand values has been used to create the new measure
  • Collaboration between UN’s WIPO and Brand Finance demonstrates international recognition of the importance of brands for value creation
  • Hong Kong SAR has emerged as the leading economy globally in the new brand value metric - as well as the leading region across the nation – with the highest global brand value scaled by GDP (at PPP$)

View the GII 2020 report here

For the first time in its 13-year history, the renowned Global Innovation Index includes brand value as one of its core indicators. The study uses findings from the ISO-certified database of the world’s top 5,000 brands compiled annually by Brand Finance, the world’s leading independent brand valuation consultancy.

Published by the World Intellectual Property Organization (WIPO), a specialised agency of the United Nations (UN), the GII provides detailed metrics about the innovation performance of 131 countries and economies around the world. Its 80 indicators explore a broad vision of innovation, including the political environment, knowledge and technology, infrastructure, business sophistication, and now also brand value.

The results of Brand Finance’s public study on the world’s 5,000 most valuable and strongest brands have been used to create a novel GII indicator in 2020. The values of all the top brands of each economy are summed and scaled by gross domestic product (GDP). The indicator captures the contribution of brands as intangible assets to innovation in an economy. It takes place among the metrics capturing an economy’s creative outputs, and adds a new dimension to the assessment of the world’s most innovative economies as captured by the GII.

Hong Kong SAR has emerged as the leading economy globally in the new brand value metric - as well as the leading region across the nation – with the highest global brand value scaled by GDP (at PPP$). Relative to the size of its economy, Hong Kong SAR is the most successful region at developing valuable brands, and this is a clear indicator of what is likely to happen across Mainland China, which currently ranks 17th on the same metric.

Experts predict that China’s GDP will overtake the US’s by 2030. In contrast, Brand Finance's analysis of the performance of the world's most valuable brands over the last decade suggests that should China continue on this trajectory the nation will overtake the US in total brand value by 2025.

David Haigh, CEO of Brand Finance, commented:

“A nation’s brands are crucial drivers of both economic growth and economic development. Taking China as an example, we are witnessing the nation make significant strides in the development of home-grown brands, including TikTok and Huawei, and without a doubt the number of leading brands is going to continue to grow. If this accelerates, we at Brand Finance have predicted that China is likely to overtake the US as the leading economy globally by brand value by 2025.”

A leading reference for measuring an economy’s innovation performance, the GII ranking has grown to become the global benchmark for government and business leaders, facilitating public-private dialogue and helping practitioners and experts to credibly evaluate innovation progress worldwide on an annual basis. The inclusion of brand value among the GII indicators demonstrates international recognition of the importance of brands for value creation, especially in supporting economic recovery, and the growing consensus around the need for reliable and independent intangible asset valuation.

David Haigh, CEO of Brand Finance, commented:

“After 25 years of pioneering the discipline of brand valuation, Brand Finance is proud to partner with WIPO to create this exciting and important new measure of innovation. Brands create value and will help lead the world economy out of the recession caused by COVID-19. There has never been a more important time to recognise the role of brands.”

Sacha Wunsch-Vincent, GII Co-Editor and Head, Section, Department for Economics and Data Analytics, commented:

“Innovation and branding go hand in hand; brands are indeed a key way for firms to secure returns on their R&D investments. We are happy that the GII 2020 now captures this important branding and intangible asset dimension. “

Following the launch of the GII, David Haigh will be presenting at the International Advertising Association’s upcoming Creativity4Better Global Virtual Conference to discuss Brand Finance’s new “Why Brands Matter” report launching the IAA’s campaign demonstrating the role of brands as the engine of post-COVID recovery.

View the GII 2020 report here

ENDS

Note to Editors

Analysis on the new brand value metric

Hong Kong SAR has emerged as the leading economy globally in the new brand value metric - as well as the leading region across the nation – with the highest global brand value scaled by GDP (at PPP$). Relative to the size of its economy, Hong Kong SAR is the most successful at developing valuable brands, and this is a clear indicator of what is likely to happen across Mainland China, which currently ranks 17th on the same metric.

With world-renowned confectionary, watchmakers, and financial services, Swiss brands have emerged as global leaders in quality and excellence. Swiss giant Nestlé, for example, has produced several brands that are now household names. Switzerland has one of the world’s best regimes globally for the protection of intellectual property - a key factor in promoting innovation and building successful brands. Additionally, strong controls over the use of the ‘Swiss made’ mark has also allowed qualifying Swiss brands to differentiate themselves and leverage their nation’s reputation effectively.

Several small and successful economies like Sweden, the Netherlands, and Malaysia emerge amongst the top ranks for economies that produce the most valuable brands.

Brand Finance’s analysis in Fig1. illustrates how economies stack up in terms of their rank based purely on brand value, compared to brand value relative to GDP.

Economies that fall above the trendline are those that are most successful in developing brands in proportion to their size. Economies that fall below the trend line are those where the brand value to GDP ratio is lower than what is expected for the size of the economy. For instance, large and fast-growing BRIC nations fall below the line, suggesting that their rank on global brand value relative to the size of their economies leaves significant potential for the growth of home-grown brands. China and India especially, have been encouraging the development of brands on home soil, over the previous few years, a trend further advanced by COVID-19. As demand for these brands increases, nations will need to ensure they are equipped to facilitate effective and efficient innovation to ultimately support the development of successful global brands.

About Brand Finance

Brand Finance is the world’s leading independent brand valuation consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands.

Every year, Brand Finance values the world’s top 5,000 brands. The findings of this annual study are made available to the public on Brandirectory.com through nearly 100 rankings and reports on the most valuable and strongest brands across all sectors and countries.

Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671. Brand valuations performed by Brand Finance have since been certified by independent auditors as compliant with both ISO standards.

Brand Finance’s brand valuation methodology has also been certified by the United States’ Marketing Accountability Standards Board (MASB) through the Marketing Metric Audit Protocol (MMAP), the formal process for validating the relationship between marketing measurement and financial performance.

Brand Finance is a chartered accountancy firm regulated by the Institute of Chartered Accountants in England and Wales (ICAEW), and also the first brand valuation consultancy to join the International Valuation Standards Council (IVSC).

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Konrad Jagodzinski
Communications Director
Brand Finance
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Associate Communications Director
Brand Finance

About Brand Finance

Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.

Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.

Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.

Methodology

Definition of Brand

Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.

Brand Strength

Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.

Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.

Brand Valuation Approach

Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.

The steps in this process are as follows:

1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.

3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.

4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.

5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.

6 Apply the royalty rate to the forecast revenues to derive brand revenues.

7 Discount post-tax brand revenues to a net present value which equals the brand value.

Disclaimer

Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.

The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.

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