The opinion that monetary evaluation needs require the following grounds.
- It is subject to management only when expressed in amount.
- It is the basis for collecting the company usage fee.
- There is a strong impact on top management.
However, these grounds are not always convincing. For example, a motivation of employees may be mentioned as being subject to management even if it is not expressed as an amount.
Rather, it is important what kind of suggestion is given to the management of the company assumptions used in the calculation process.
Brand value evaluation model of the Ministry of Economy, Trade, and Industry (reference) Outline
The brand value evaluation model of the Ministry of Economy, Trade and Industry is the following model.
- Usage data is only objective financial data centered on published financial statements
- It is judged that evaluating the brand financially with a marketing approach that indexes qualitative factors such as awareness indexes lacks the reliability of measurement
- Evaluate the brand value on a consolidated basis
- Calculate all brand values within the corporate group based on consolidated financial statements
- We do not separate the value of the corporate brand from the value of the product brand
- There are three components of brand value
- Prestige driver (PD) → price premiumProducts with brand value can be sold with a higher value than non-brand products.
- Loyalty Driver (LD) → RoyaltyBy having brand value, customers can be purchased repetitively and continuously.
- Expansion driver (ED) → brand expansion powerStatus high brands will enter not only the original industries and markets, but into similar industries, different industries and overseas markets.
Problems of Ministry of Economy, Trade and Industry
Criticism against the model of the Ministry of Economy, Trade and Industry is strong, and it seems that there are not many application cases at enterprises at present.
The main problems are as follows, but it is considered that the fundamental cause of these problems is a precondition that it calculates only by the numerical value recorded in the financial statements.
- I doubt the assumption that advertising costs and brand values are proportional
- I assert that we are evaluating the price premium, but the formula evaluates the cost rate
- Stability of cost of sales and customer loyalty are completely different things
- It is impossible to make assumption that the ratio of overseas sales and sales ratio other than main business are proportional to brand power
We will grasp the value of the brand from both the value expressed in the amount of money and the value not necessarily expressed in the amount.
Evaluate each stakeholder, and grasp the relative position with other companies.
Evaluation of brand value, our approach
You can understand the major drivers that influence brand value.
Based on mutual relationship among major drivers, we can guide priority of measures.
CRITERIA FOR CONSIDERATION / Evaluation criteria
For brands originating in the globe that are developed in Japan, we clarify their brand values and extract and evaluate brands that satisfy the following criteria with the aim of comparing their positions with “global common scale”.
· Being a brand from Japan: To be a corporate and business brand created by Japanese companies
· Various financial information has been announced: It is listed on the market as of October 31, 2017, and it is a company that can obtain forecasts by analysts
· In “Japan’s Best Global Brands”, in fiscal 2016 actual results, the overseas sales ratio of the brand-bearing business is 30% or more (less than 30% in “Japan’s Best Domestic Brands”, ranked “Best Global Brands 2017” In brand adopts the brand value of 2017))
· What is generally recognized globally
METHODOLOGY / Evaluation method
The brand value evaluation method of Inter brand is an evaluation of the brand value from the viewpoint of financial strength, the influence that brand has on purchasing decision making, and the firmness of future profits by brand. Just as securities analysts analyze and evaluate the value of the business, we analyze and evaluate the value of the brand based on the viewpoint of “How much profit is expected to be raised in the future”. It has been certified by the International Organization for Standardization (ISO) as ISO 10668 as a global standard for brand monetary value measurement, and is evaluated by the following three analyzes.
1. Financial Analysis
Forecast of the future profits generated by companies
First of all, we will forecast the current and future revenues of the brand-bearing business. Then we subtract the operating cost, taxes, capital cost according to invested capital from that sales, and calculate the future economic benefit. This analysis is based on published corporate information, and future forecast is based on analyst’s performance forecast (※).
* The forecasts of the analysts of this evaluation are based on future forecasts by analysts acquired from IFIS consensus data https://www.ifis.co.jp/ . Regarding future projections, we adopt those as of November 20, 2017.
2. Role analysis of the brand
Extract contribution of brand out of profit
Analyze the extent to which the brand influences the purchasing decision of the customer in order to extract the profit brought by the brand out of the future economic interest calculated by the financial analysis. In this evaluation, we will analyze benchmarks by industry by utilizing a database of brand value evaluation results of over 10,000 conducted by Interbrand for over 30 years on the role brand plays in purchasing trends of consumers. Based on that, we will calculate the score of the contribution of the individual brand’s brand by our own research and analysis.
3. Brand Strength Analysis
Evaluate the future certainty of profit by brand
Brand Strength Analysis is a measure of the ability to evoke client’s needs such as royalty in the market, continued purchase and enclosure of consumers (the ability to maintain future revenues), discounts the profit of the brand and converts it into present value . This evaluation is a systematic method to judge the risk of the brand, and it is evaluated in the following 10 items. Based on internal evaluations such as management and employee brand support and management system, brand position on the market, consumer awareness · favorability, images and other external evaluations, compared with other brands in the same industry 100 It is represented by a score from 0 to 100 which makes a perfect brand.
Next, this brand strength score is converted to a discount rate by Interbrand’s unique calculation method, and the brand value is calculated by discounting the future brand profit at that discount rate. “Brand Role Analysis” and “Brand Strength Analysis” are calculated based on multifaceted evaluations of our consultants using various published reports etc.