What makes a brand? Strong brands are readily identifiable – Coca-Cola, Apple, Google – but just how valuable are they, or indeed how are they determined to be so valuable?
British brand valuation consultancy, Brand Finance, this week released its annual league table of the world's 500 biggest and most valuable brands. Apple, Samsung and Google take the top three podium spots, with their rankings unchanged on the previous year. It says that a brand such as Ferrari may be the most powerful in terms of desirability and other measures, but Apple is top of the heap because it knows how to make money from its brand.
Brand Finance calculates brand value using so-called Royalty Relief methodology. That determines the amount of money a company would be willing to pay to licence its brand if it did not own it.
The approach, says Brand Finance, involves estimating the future revenue attributable to a brand and calculating a royalty rate that would be charged for the use of the brand. The firms says it uses the approach because it's also favoured by tax authorities and courts.
The company also awards each company a brand rating – similar to those awarded by credit agencies such as Moody's, S&P or Fitch. The top rank is AAA+, for "extremely strong", AA for "very strong" and so on down to DDD-D, which signifies "failing".
Apple's brand is the most valuable, but it gets a AAA rating. Google is ranked number three, but its brand gets a AAA+ rating.
"Apple has a powerful brand, rated AAA by Brand Finance," said Brand Finance chief executive David Haigh.
"However, what sets it apart is its ability to monetise that brand. For example, though tablets were in use before the iPad, it was the application of the Apple brand to the concept that captured the public imagination and allowed it to take off as a commercial reality."
Apple's dominance is being challenged by Samsung, Brand Finance points out. The Korean giant's improving reputation for reliability, a faster pace of innovation and wider range of devices are among many factors that have seen its brand value increase by $20bn (€14.5bn) to $79bn this year, according to the British consultancy.
Only 11 of the top 500 brands listed by Brand Finance has a AAA+ rating, including Coca-Cola, Disney, Rolex and Ferrari.
"The prancing horse on a yellow badge is instantly recognisable the world over, even where paved roads have yet to reach," said Mr Haigh.
"In its home country and among its many admirers worldwide, Ferrari inspires more than just brand loyalty, more of a cultish, even quasi-religious devotion; it's brand power is indisputable."
Netflix, which last week premiered its second series of 'House of Cards', starring Kevin Spacey and Robin Wright, makes its debut on the top 500 list. Nokia has been squeezed out, however. No Irish brands make the top 500.