Firm devises equation to quantify brand value

By Published on .

A corporation’s brand has always been the ultimate business intangible. But Corporate Branding L.L.C., a Stamford, Conn.-based branding consultancy, has taken a crack at determining a precise value through a proprietary calculation it calls CoreBrand Equity. The results of this calculation can have important strategy and budget implications for marketing departments, according to Jim Gregory, Corporate Branding’s CEO.

"We believe that companies should always be out building their corporate brand as well as their product brands," he said. "When they do that, it adds significant value to the corporation in terms of increased market value and market capitalization."

Dollar values

Of course, branding consultants have been arguing that for years, but Gregory asserts that CoreBrand Equity can ascertain a specific dollar figure for a particular corporate brand. For example, the value of General Electric Co.’s brand is $61.2 billion, making it the most valuable corporate brand, according to the CoreBrand Equity data.

Immediately following GE is another b-to-b giant, Microsoft Corp., with $59.6 billion in estimated brand equity. Third is retailer Wal-Mart, with estimated brand equity of $42.0 million. On the b-to-b version of the list, IBM occupies the third spot, with a brand equity value of $27.1 billion.

Corporate Branding bases its calculations on data from its annual brand favorability and familiarity studies. The consultancy interviews directors and executives of the largest U.S. companies, asking them to rate more than 1,000 companies.

Using this data, Corporate Branding compares competitors and companies of similar revenues to determine the financial impact that a brand’s favorability and familiarity have on its market capitalization. Corporate Branding also determines the percentage that brand equity contributes to overall market capitalization. The highest percentage is that of Coca-Cola, whose brand contributes 19.4% to its market cap, according to the consultancy.

Among b-to-b companies, FedEx Corp. has the highest percentage, with an estimated $3 billion in brand equity comprising 18.4% of its market cap. Second is Microsoft, whose brand equity accounts for 18.3% of its market cap.

At the other end of the scale, pharmaceutical company Schering-Plough has the lowest b-to-b brand equity percentage at 4.2%. Abbott Laboratories also has a low brand equity percentage, 5.2%. By comparison, Bristol-Myers Squibb’s brand equity is 11.4%.

In Gregory’s view, Schering-Plough and Abbott, by allowing their brands to languish, are leaving money on the table. So is Eli Lilly, with a brand equity percentage of 8.6%. A branding campaign could boost the market capitalization of these companies by billions, Gregory said.

"They don’t have to increase that [percentage] by much to make it very valuable," he said. "If they increase it to 12%, it’s a huge benefit to the corporation at very little cost."

Most Popular
In this article: