[MUSIC] Even though putting a value to a brand is particularly difficult, I want you to focus on the following list created by the company called Interbrand that has listed the 100 strongest global brands in the world for over 15 years. Do you recognize some of these as your favorite brands? This picture only shows one third of them or 32 brands. Look at the top row and you will notice a couple of things. First of all, this list actually puts a precise value as to what is the value of a brand, in addition to indicating how much that value has gone up or down, during the last year. Look at Apple, Google, Coca Cola, Microsoft, IBM, Toyota, Samsung and GE as some of the eight most valuable brands in the world. I'm sure you would have put in the list some of those brands yourself, but perhaps not some of the other ones that show up over here in the top 32 most valuable brands in the world. An interesting thing to notice in this list is that 14 out of the 32 brands are composed of technology companies. The other ones that are weighed more heavily on the list are car companies, fashion retailers and some particularly, consumer packaged goods known world wide such as Gillette, Pampers, etc. How does Interbrand or other companies go about actually putting a value? Irrespective of whether you agree or disagree with the specific number that Interbrand gives to the value of some of these brands, you have to agree with me on one thing. If you notice, these values compose anywhere between 20% and 40% of these companies market capitalization. Which is to say that the brands that they have created for themselves in and of themselves represent a substantial value of these companies market capitalizations. Brands are important and they actually can be valued. Let's look at some of the important levers of how Interbrand goes about valuing this. There are some that are universal, Interbrand uses three. Let's look at them. The first one is financial performance. Interbrand tries to assess and to audit what is the percentage of the operating income that can be directly attributed to the brand and how is it evolving over time? Next is, what is the role of a brand in influencing consumer choices? Things such as price, design, quality, usability, convenience and special features will actually make up this category. Think of, for example, of El Bulli. What makes El Bulli such a strong brand? Even though it was a private company, and was not valued by Interbrand, you can agree with me that it was a highly sought-after experience. In part, it was scarcity. The fact that El Bulli consistently communicated and made us know that there were anywhere between one to two million reservation attempts every year for only 9,000 seats at the table, on any given year, made El Bulli particularly attractive to consumers worldwide. Finally, the third critical lever is the ability of the brand to command premium prices and to command loyalty. How will you go about estimating this? What will this lever entail? This will be composed of both internal and external factors. Internal ones such as what is the company's commitment to grow the brand, what is the company clarity of focus as to what the brand stands for and so forth. On the external one, there are things such as differentiation, authenticity and relevance that will make up part of this third lever. As you can see, not an easy task to evaluate. But nevertheless, many companies including this one, Interbrand, which is one of the most well known for trying to assess value of brands, have attempted to actually give a specific value. [MUSIC]
