Brand Finance Why Brands Matter New Evidence 2022 Full Report
Brand Finance Why Brands Matter New Evidence 2022 Full Report
Brand Finance Why Brands Matter New Evidence 2022 Full Report
Matter 2022:
New Evidence
An analytical report on the role of brands in value creation
October 2022
In partnership with
Contents.
Foreword 4
Annie Brown, General Manager UK Consulting, Brand Finance
Janet Hull OBE, Director of Marketing Strategy, IPA
Executive Summary 6
Executive Summary 8
Conclusion 23
Our Services 28
Brand Finance Why Brands Matter 2022: New Evidence brandirectory.com/why-brands-matter-2022 2 Brand Finance Why Brands Matter 2022: New Evidence brandirectory.com/why-brands-matter-2022 3
Foreword - Annie Brown. Foreword - Janet Hull.
For over a quarter of a century, Brand Finance has helped We are delighted to join Brand Finance in their examination of the benefits
clients to understand the value of brands. Our global team study and performance of strong brands in 2022. This report comes at a most
thousands of brands each year, and this experience has helped appropriate moment, as companies look for guidance on how to manage
us to understand the key attributes of successful brands and other their brands and businesses to deliver sustainable profitable growth and
intangible assets to deliver financial results. shareholder return, at a time of economic uncertainty.
This new research is further evidence of the importance of We have always believed that intangible assets are a critical pillar of
maintaining brand strength, provides new insights from our latest competitive advantage and value creation. We supported the launch of
analysis of a range of studies, and underlines the critical role brands the Global Intangible Finance Tracker (GIFT) Report with Brand Finance in
play in the economy. The report considers how brands perform 1996. It is gratifying to see that commentators and specialists around the
in times of crisis and in recovery; how brands deliver stability and world are now focussing more on this vital area of investment, not cost.
reduce risk; how brands restart economies and build consumer
Annie Brown confidence; how brands improve national competitiveness and Janet Hull OBE
General Manager UK above all, how strong brands outperform their competitors to earn Director of Marketing
Consulting, Brand more money for brand owners. Strategy, IPA
Finance
We also look at some of the building blocks of strong brands and
outline the role that familiarity and consideration play in developing
that strength and how these factors can help to explain and predict
market share.
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Executive
Summary.
Executive Summary.
Executive Summary.
The gap increases to between five and seven
times in sectors such as financial services where
competitive advantage is anchored on
knowledge, which further validates the link
between brands, marketing, and the creation of The Brand Strength Index –
value. It also underlines that far from encouraging What it is and how it works
companies to reduce advertising investment,
governments who wish to accelerate economic One of the metrics used as an annual or semi-
growth should be supporting and fostering annual KPI is Brand Value, due to its ability to
investment in brands. reflect both financial outlook as well as brand
perception among key stakeholders.
+ Investment in intangibles also helps to drive
international competitiveness. The total value of UK The strength of the brand is clearly an important
intangibles dropped in 2020, compared to the USA, component of the valuation and Brand Finance
China, and Germany. In total Brand Value growth, the has created our own “Brand Strength Index”.
UK is also lagging behind global levels. Our latest
data reveals the value of the top 50 Global Brands The Brand Strength Index is measured according
have grown 17% year on year, but the top 50 UK to a balanced scorecard of metrics which are
brands have grown 11% between 2021 and 2022.
relevant to the sector in which a brand operates.
Attributes such as familiarity, consideration,
+ The overall image of the UK, as well as the and reputation, are relevant in every industry
+ Strongly branded companies continue to 3% less on their debt. The UK is slightly lower at products and brands it produces, are measured to varying degrees depending on stakeholder
outperform the market. Analysis using both S&P 1.7%, but for Kingfisher Plc an increase in brand in the Global Soft Power Index. Whilst the UK is decision-making and value chains.
and now new data for the FTSE 100 benchmarks strength across its portfolio could mean a saving of ranked 2nd overall in the Global Soft Power Index,
demonstrate how the strongest brands deliver up to £65 million in a year. the area in which it does less well is the
much higher shareholder returns. In the UK, the perception of the UK in having “Products and
top 50 brands delivered returns 30% higher in Brands the World Loves”, where we are ranked
+ Intangible assets continue to rise in value across the
2021 and even in the current climate, the 7th, behind Japan, US, China, France, Germany,
world. From 2020 to 2021, the total value of global
cumulative return is 10% higher. and Italy. This is another reason for governments
intangible assets grew faster than usual to exceed
to cultivate brand investment.
pre-pandemic levels by nearly a quarter to US$74
+ Organisations whose brands make up a larger share trillion. Economies have shifted and we are now
of their total value, i.e. have a high brand value to living in an intangible age. + Return on brand investment can be improved by
equity value ratio (high BV/EV) deliver even greater going back to basics and focussing on
growth, stability, and returns. familiarity and consideration. Brand Finance
+ Brand Finance estimates marketing intangibles to
has created a metric based on these factors
account for at least 20% of organisations’ intangible
Whilst the top 50 strongest brands delivered 30% called “BrandBeta”.
assets. But marketing related intangibles, the
higher returns than the FTSE 100 in 2021, the high Since 2007, Brand Finance has monitored the
investment they attract and the value, growth, and
BV/EV brands delivered 80%. The report asserts The BrandBeta model is calculated on the strength and value of the world’s most valuable
competitive advantage they deliver are now being
that this demonstrates strong brands are a critical proportion of people familiar with a brand who are brands. Today, this study is informed by our
analysed as never before.
strategic asset that deliver value, with their budgets willing to consider it. This metric measures the annual syndicated consumer research, which
an investment not a cost. popularity and mental availability of brands, which covers over 4,000 brands across 40 countries.
Brand Finance and the IPA have been advocating
we also use as a predictor of market share.
the value of economic competencies such as This data enables us to estimate the value of
+ Strongly branded companies recover quickly after a advertising and brands, marketing research, digital thousands of brands each year.
The BrandBeta score demonstrates that 80% of
crisis and retain their performance. Our UK data and analytical skills, and innovation for many years.
the variance in market share is explained by these
proves this for each crisis – 2012 / 2018 and we Princeton and McKinsey are now joining calls for This database also enables us to analyse of
2 metrics familiarity and consideration. Familiarity
now have data for 2020 which demonstrates this their importance to be better recognized. the predictive power of Brand Strength on
– when a customer knows a brand and what it
speed in recovery once again. financial outcomes.
does well, as opposed to just being ‘aware’ of it,
+ Recent analysis by McKinsey found that investment accounts for 65% of this market share variance,
+ Investors consider companies with strong brands to be in marketing intangibles such as these delivers and Consideration – whether the brand will
less of a risk, and companies benefit from a long-term economic growth. Top growing choose it, for 35%. The BrandBeta data reveals
consequential lower cost of capital. Global data companies invest 2.6 times more in intangibles that a 1% increase in BrandBeta score equates to
suggests strongly branded companies pay at least than slow growers across sectors. a 12% increase in claimed usage.
Brand Finance Why Brands Matter 2022: New Evidence brandirectory.com/why-brands-matter-2022 8 Brand Finance Why Brands Matter 2022: New Evidence brandirectory.com/why-brands-matter-2022 9
Brand Strength influences investors and performance.
0.5
Base 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Oct-22
Strongly branded organisations outperform the market on a © Brand Finance Plc 2022
global basis (USD Value of $1 invested)
Accelerated growth versus the FTSE was also seen This suggests that organizations which rely more on
for strong brands in 2020 and 2021, demonstrating their brand are more likely to deliver better returns,
• S&P 500 • Top 10 BSI • Top 10 BV/EV (Brand Value share of Enterprise Value) the importance of enhancing your brand in times of particularly in a crisis.
10 financial upheaval or deep uncertainty.
The impact of a high BV/EV versus the FTSE 100 was
The results so far in 2022 suggest that even strongly strongest in 2013, 2016 and 2019; all years which
branded organizations are struggling with market trailed financial downturn.
8 uncertainty and investor confidence.
Past results would suggest that top BV/EV
However, past performance indicates that these businesses will rebound faster following the current
6 stronger brands are more likely to rebound faster drop in prices. A high BV/EV relative to the industry
than other organisations. can also be reflective of undervaluation of the
business due to short term factors.
A more volatile, but ultimately successful, predictor
4 of share price growth is BV/EV. Brand Value is focused on the long-term value
generated by brands and therefore tends to be less
BV/EV is the proportion of total enterprise value volatile than share prices.
2
made up by the brand (trademark).
Our data is increasingly used by investment funds to
For example, Brand Finance valued Vodafone’s create investment products, but we are not investment
brand at £14.3bn as of the 1st of January 2022 whilst advisors. We conduct this analysis to demonstrate the
0 the corresponding enterprise value was £77.2bn. importance of investing in and strengthening brands to
Base 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Oct-22 This equates to a BV/EV ratio of 18.5%. support business value growth.
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Brand Strength influences investors and performance.
8%
7%
6%
Average Risk Premium 2018-2020
5%
4%
3%
2%
1%
0%
0 10 20 30 40 50 60 70 80 90 100
Brand Strength Index (/100)
Source: McKinsey (2021), “Getting tangible about intangibles: The future of growth and productivity?”, Discussion Paper
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The role of brand and intangibles in value creation. Intangible assets drive international competitiveness.
What is the value at risk today?
This gap increases to between five and seven Intangible assets drive
times in sectors such as financial services where international competitiveness
competitive advantage is closely correlated with
knowledge. In innovation-focussed sectors, the top Our analysis suggests that marketing intangibles are
growers including telecommunications, media, and currently worth £293 billion for UK companies.
technology, invest 5.2 times more than low growers.
The chart below demonstrates the mostly close
Intangible investment is defined in broad terms as correlation between this value and advertising
investment in computerised information (software investment in the UK, further implied by the sharp
or database development), innovation (R&D, rise as we emerge from the COVID era. Advertising
design, and product development) and economic spend has repeatedly been found to support
competencies (training, market research and economic development.
branding, among others).
The need for brand growth is paramount for UK
It is also important to stress that these types of brands. While the US, China and Germany retained
investment are now more interdependent than ever intangible value in 2020, the UK lost intangible value,
and work best together in the creation of sustainable demonstrating a slip in UK competitiveness in the
and defendable competitive advantage. Those that international arena.
invest across all perform better.
Advertising Expenditure vs Marketing Intangible Value in the UK © Brand Finance Plc 2022
40
500
35
25
300
20
15 200
10
100
5
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: McKinsey (2021), “Getting tangible about intangibles: The future of growth and productivity?”, Discussion Paper
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The role of brand and intangibles in value creation. Intangible assets drive international competitiveness.
Change in Total Intangible Value per Country During Historic Crises Total Brand Value growth in the UK is also lagging the
global level according to Brand Finance’s annual
• 2009 • 2012 • 2016 • 2020 brand value ranking studies. The aggregate brand
value of the top 50 UK brands grew at a similar rate as
120
the top 50 Global brands in 2011. Since then, with an
100
© Brand Finance Plc 2022
•UK Growth •Global Growth Brand Finance on previous crises, intangible value is
destroyed during volatile times, especially brand and
25
customer value.
20
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The role of brand and intangibles in value creation. Impact of familiarity and consideration on market share.
share: UK analysis Note: Amazon Brand Beta Calculation: (Familiarity = 90%, Consideration = 96%. BrandBeta = 90% x 65% + 96% x 35% = 9.2)
Our analysis shows that, when combined, The relationship between BrandBeta and market
familiarity and consideration explain over 80% of share varies by category. Where price is not really
the variance in market share within the categories driving choice, familiarity and consideration are critical. BrandBeta UK Market Share Explanatory Power © Brand Finance Plc 2022
covered. That is across all countries and sectors.
The BrandBeta® model is therefore highly The chart below demonstrates the difference between 0.99
Retail Fuel
predictive of share. markets. As a general statistical rule, an R-sq. figure
Food 0.95
over 0.7 would mean that the variable/s is having a
Analysing the impact of familiarity and significant effect. Utilities 0.89
consideration, we noted that familiarity accounts 0.86
Telecoms
for approximately 65% (of the 80% of the The data shows then that familiarity and consideration
variance) while consideration accounts for are more important in driving market share in food than Restaurants 0.85
approximately 35% insurance. A high R-sq. suggests that BrandBeta is Banks 0.84
good at predicting market share. Cosmetics/Personal Care 0.81
The BrandBeta® score is therefore a combination
Luxury Automotive 0.76
of the two measures in the ratio (65:35). This Analysis on a global level suggests that familiarity explains
combination creates a score out of 10 which our 65%, and consideration drives 35% of the variance seen Apparel 0.74
additional analysis shows can be used to predict in usage for BrandBeta®. For the UK, our analysis General retail & e-Commerce 0.70
market share growth. suggests a similar result, with slightly more weighting
Automotive 0.70
towards consideration than seen on a global level.
Therefore, BrandBeta® is a measure which, if Insurance 0.68
tracked over time, can be used to quantify the Technology 0.65 Adjusted R-sq
benefits of brand-building as a long-term investment. 0 0.2 0.4 0.6 0.8 1.0
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The role of brand and intangibles in value creation. BrandBeta: a case study in the importance of consideration.
BrandBeta: a case study in the This provides further anecdotal evidence as to BrandBeta Evolution 2019-2021
importance of consideration why BrandBeta, and consideration, are powerful
predictors of market share shifts.
Within the broader technology sector as covered by 10
• 2019 • 2020 • 2021
Brand Finance, a few categories of personal electronics Apple has invested significantly in advertising its
are included. This research includes the top three brand over the years. Since its global advertising
market share holders in the UK for mobile phones: budget was boosted to US$1.8 billion in 2015,
8
Apple, Samsung, and Huawei. annual disclosure of spend has been discontinued.
BrandBeta (/10)
6
mobile phones. The high BrandBeta for Samsung US$2.1 billion in advertising in 2020, making it
therefore is likely reflective of other technology products the 14th biggest advertiser in the world.
such as TVs.
Note: the BrandBeta for 2021 reflects fieldwork 4
Despite these confounding factors, BrandBeta shifts conducted in October 2021. The newly launched
over time appear to point to changes in market share for Huawei P50 was not available in the UK in 2021.
these three brands. In September 2021, Apple launched the iPhone
13, its latest model. At the time of this report’s 2
Our analysis finds that Huawei dropped in BrandBeta release, October 2022 market research is in
from 6.5 in 2019, to 5.6 in 2021. Familiarity was stable field and the impact of the iPhone 14 release in
over this time at 53%, and the drop in BrandBeta was September and the Huawei Mate Xs 2 is yet to
driven by a drop in consideration. be known. 0
BrandBeta (/10)
0.6 was lost in 2019.
© Brand Finance Plc 2022
Brand Finance Why Brands Matter 2022: New Evidence brandirectory.com/why-brands-matter-2022 20 Brand Finance Why Brands Matter 2022: New Evidence brandirectory.com/why-brands-matter-2022 21
The role of brand and intangibles in value creation.
BrandBeta: a case study in the importance of consideration.
Conclusion.
BrandBeta and market share growth © Brand Finance Plc 2022 UK businesses are facing inflated energy prices, in familiarity and consideration, it is instead a time to
(Mobile Handsets, UK) global supply chain issues, changes due to Brexit, ensure the premium of their goods or services remains
Source Market Share: Statcounter https://gs.statcounter.com/vendor-market-share/mobile/united-kingdom the fallout from Covid-19 and the uncertainty of a strong and to maintain margins and cash flow.
new political landscape with economic turbulence.
As the data in this report demonstrates, those who
• Huawei • Apple • Samsung Cutting marketing budgets may seem like a simple keep their nerve and ensure their brand strength, are
fix to help with these challenges. more likely to recover more quickly and profitably.
5%
4% 2019
2010 However, now is not a time for brands to lower the
Absolute Change in Market Share
1%
0%
2021
-1% 2020
2020
-2%
2021
-3%
-4%
2019
-5%
4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0
BrandBeta (/10)
7%
Change in BrandBeta (/10)
6%
5%
4%
3%
2%
1%
-2%
-3%
-4%
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About Brand Finance. Request your own
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Brand Finance is the world's leading brand
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Our experts helped craft the internationally recognised
standards on Brand Valuation – ISO 10668 and Brand
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Our Services.
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Make branding decisions using hard data
How are brands perceived
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Brand Research + Primary Research
What gets measured Brand Finance tracks brand fame and perceptions
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Brand evaluations are essential for insightful signals of brand performance, with data
+ Brand Drivers & Conjoint Analysis
understanding the strength of your mining options for those who want to dig deeper – all at
+ Soft Power
brand against your competitors. an accessible price.
Brand Strength is a key indicator of
future brand value growth whether + Are we building our brands’ strength effectively? What if I need more depth
identifying the drivers of value or + How do I track and develop my brand equity? or coverage of a more
avoiding the areas of weakness, + How strong are my competitors’ brands? specialised sector?
+ Are there any holes in my existing brand tracker?
measuring your brand is the only
+ What do different stakeholders think of my brand? Our bespoke brand scorecards help with market
way to manage it effectively.
planning and can be designed to track multiple brands
over time, against competitors, between market
segments and against budgets. Our 30-country
+ Brand Impact Analysis database of brand KPIs enables us to benchmark
Brand Valuation + Tax & Transfer Pricing performance appropriately.
Make your brand's business + Litigation Support
case + M&A Due Diligence Do I have the right brand
+ Fair Value Exercises architecture or strategy in place?
Brand valuations are used for a + Investor Reporting
variety of purposes, including tax, Research is conducted in addition to strategic
finance, and marketing. Being the + How much is my brand worth? analysis to provide a robust understanding
interpreter between the language of + How much should I invest in marketing? of the current positioning. The effectiveness
marketers and finance teams they + How much damage does brand misuse cause? of alternative architectures is tested
provide structure for both to work + Am I tax compliant with the latest transfer pricing? through drivers analysis, to determine which option(s)
+ How do I unlock value in a brand acquisition? will stimulate the most favourable customer behaviour
together to maximise returns.
and financial results.
Once you understand the value of What about the social dimension?
your brand, you can use it as tool +Which
brand positioning do customers value most? Does my brand get talked about?
to understand the business impacts +What
are our best brand extension opportunities
of strategic branding decisions in in other categories and markets? Social interactions have a proven commercial impact
terms of real financial returns. +Am
I licensing my brand effectively? on brands. We measure actual brand conversation and
+Have
I fully optimised my brand portfolio?
advocacy, both real-world word of mouth and online
+Am
I carrying dead weight?
buzz and sentiment, by combining traditional survey
+Should
I transfer my brand immediately?
+Is
a Masterbrand strategy the right choice for my business? measures with best-in-class social listening.
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Communications Services.
How we can help communicate your brand’s performance
in brand value rankings
With strategic planning and creative thinking, we develop communications plans to create dialogue
with stakeholders that drives brand value.
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The Brand Finance Institute is the educational division of Brand Finance, offering expert training on Germany/Austria/Switzerland Ulf-Brun Drechsel u.drechsel@brandfinance.com
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