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How to calculate brand equity
Brand equity is a powerful tool that has contributed to business success for decades. It is the value that a brand adds to a product or service through customer perception, association, and loyalty. It contributes to shareholder value and other difficult-to-quantify values.
How to measure brand equity
There are several metrics for assessing brand equity. The most common is the BSI Brand Strength Index, which includes components such as:
- strength;
- capital;
- effectiveness.
Experts calculate the value using several metrics. They multiply the BSI strength by the brand’s royalty rate and revenues, which depend on the market in which the company operates. The sales forecast is based on the share of the parent company’s sales attributable to a particular brand. Brand equity is the present value of this income.
The equity measure includes other elements, like the recognisability of a logo or slogan. It is also essential to consider the business’s relevance to its target audience and customer loyalty. Equity depends on how the company positions itself to the general public. In addition, consumers’ associations with the company’s name are important.
Ranking of the most valuable companies
If we look at the value of global companies using the formula above, Apple is first. Its brand value grew by US$217 billion over the year to US$516.6 billion. Amazon, Google and Microsoft follow. However, there are also companies whose value has fallen. Facebook, for example, dropped from 9th place in 2023 to 18th in 2024. The decline in value is due to increased market competition and consumer preferences.
When considering value, it is also important to pay attention to the brand strength indicator. It reflects a company’s efforts to maintain and improve its image. Experts use several characteristics to assess this metric, including:
- the level of marketing investment;
- the amount of capital invested in the company by investors;
- the effectiveness of the company’s management.
Brand Finance experts analysed global companies using their unique system and surveyed 150,000 respondents from 28 countries. According to the results, the strongest global brand is the WeChat platform. The company’s BSI index was 94.3 out of 100, and its strength rating was AAA+.
One key indicator in this case was WeChat’s image and status in China. This messenger is an integral part of everyday life for people in the PRC and other Asian countries.
In addition to WeChat, the following companies have been given a brand strength rating of AAA+:
- YouTube,
- Coca-Cola;
- Google;
- ICBC;
- Netflix.
The list also includes several banks, hotels, and liquor manufacturers from China.
It is worth noting that building brand value and strength requires a comprehensive effort. It involves a well-thought-out marketing strategy, proper positioning, PR and other components.