Monday Mornings with Madison

What Drives A Brand’s Value?

Given the global marketplace and the pervasive impact of technology on reputation, a company’s brand is increasingly becoming a major factor in its success.  While most business owners and managers understand the general importance of a company’s brand, they are a little less clear on what can increase or decrease a brand’s value.  Most business owners don’t know how to go about increasing and leveraging the worth of its company’s brand.

To better understand brands, let’s consider what factors are used to evaluate the biggest mega-brands.  There are now a number of brand consultants that conduct surveys to identify and rank how the top brands are doing and how those brands are impacting corporate bottom lines.  For example, Interbrand conducts an annual survey entitled 100 Best Global Brands.  Milward, Brown also puts out an annual ranking of brand value entitled BrandZ’s Top 100 most Valuable Global Brands.  Credit Suisse also issues an annual report called Great Brands.  There are many other such reports.

Each of the rankings looks to monetize the value of a company’s brand.  The factors assessed vary from survey to survey.  They are also weighted differently according to industry or category.  That said, the major surveys are based on hundreds of thousands of interviews examining tens of thousands of brands globally.  They parse billions of pieces of data that are then calculated to generate a brand value score for each company.  They examine the point where a company’s sales, marketing, operations and financials collide with public perception.  So what factors do these brand experts consider in calculating a brand’s value?

Brand Value

To understand how brands are assessed, one first has to know that ‘brand’ is not synonymous with ‘logo’.  The iconic Apple brand, for example, is vastly more than the unmistakable apple with the missing bite that appears on all of its products.   Brand is the class of goods or services identified by name as the product of a single firm or manufacturer.  Brand comes through in every single action and opportunity that a company has to interact with the public (not just its customers).  Much more than the checkmark swoosh on every Nike product, Nike’s brand extends to every product it makes, every interaction the company has with customers from stores to sporting events to advertisements, and every individual that represents the company from its employees to its spokespeople (think Michael Jordan, who is himself a brand).

First, let’s take a snapshot look at the top ten brands that scored highest on Interbrand’s 100 Best Global Brands survey in 2011:

  1. Coca-Cola
  2. IBM
  3. Microsoft
  4. Google
  5. GE
  6. McDonalds
  7. Intel
  8. Apple
  9. Disney
  10. HP (Hewlett Packard)

The top 10 brands on BrandZ’s Top 100 most Valuable Global Brands 2012 showed a different lineup.

  1. Apple
  2. IBM
  3. Google
  4. McDonalds
  5. Microsoft
  6. Coca-Cola
  7. Marlboro
  8. AT&T
  9. Verizon
  10. China Mobile

Interbrand’s top 10 global brands last year happened to consist of all U.S.-based companies (but many brands on their top 100 list are based in other countries).  Coca-Cola topped their list.  The brand value year-over-year for the top 10 brands all increased from 1% (Disney) to a whopping 58% (Apple) except for GE, which remained flat, and Microsoft, the only brand in the top ten whose year-over-year brand value decreased -3%.

On the other hand, BrandZ’s top 10 brands put Apple at the top of the heap, the same as in 2011, and reflected a 19% increase it its brand value year-over-year.  Despite Steve Jobs’ passing, BrandZ gave Apple a score of 10 on their Brand Momentum Index, which is the highest possible score for that index.  (Only six of their top 100 companies scored a 10 for Brand Momentum.)  China’s major cellular phone company, China Mobile, made BrandZ’s top 10 but reflected an 18% decrease in brand value, indicating that perhaps it may not be among the top 10 by next year’s ranking.

So what factors did Interbrand consider in deciding that Coca-Cola’s brand had greater value than Apple?  How did Interbrand decide that Microsoft’s brand had decreased in value, while GE’s had remained unchanged, and Disney’s had increased in value a mere 1%?  Why did Intel rank 7 and Apple was 8 on Interbrand’s list, but Apple was 1 and Intel ranked 49 on BrandZ’s list?  How can brand value vary so drastically from one ranking to another?

According to Interbrand, their survey looks at the “ongoing investment and management of the brand as a business asset. This method takes into account all the many ways in which a brand touches and benefits its organization — from attracting and retaining talent to delivering on customer expectations.”  On the other hand, BrandZ indicates that their study looks to “combine measures of brand equity with a rigorous analysis of the financial and business performance of each company (using data from Bloomberg and Kantar Worldpanel) to separate the value that brand plays in driving business revenue and market capitalization.”

Ultimately, brand value looks at the financial performance of the branded products or services (the numbers), the role of brand in the purchase decision process (the appeal), and the strength of the brand.  Brand strength is possibly the hardest area to define.  How is the ‘strength’ of a brand determined?  And are the factors the same from industry to industry?   Interbrand, for example, looks at a number of internal and external drivers to evaluate brand strength.

Internal Drivers

To what extent does the company have internal clarity about what the brand stands for in terms of its values, positioning and proposition?  What is the organization’s clarity about its target audiences, customer insights and the drivers that deliver business?  (As so much hinges on internal brand clarity, it is seen as vital for these factors to be articulated internally and shared across the organization.)

To what extent is there an internal commitment to the brand, and an internal belief in the importance of the brand?  To what extent does the brand receive support at all levels of the company in terms of time, influence, and investment?

How secure is the brand across a number of dimensions including: legal protection, propriety ingredients or design, scale and geographic spread?

How well is the brand able to respond to market changes, challenges and opportunities?  Is the brand flexible?  To what extent does the brand have a sense of internal leadership and a desire and ability to constantly evolve and renew itself?  For example, when Yum Brands found their Kentucky Fried Chicken (KFC) franchise languishing in the U.S., they expanded into other global markets including China.  KFC was successful in China where many other fast-food restaurants failed.  Why?  They were flexible to respond to market challenges and opportunities.  They chose to include local talent and local ingredients.  They hired Chinese managers to build partnerships with local companies in their expansion drive and used the managers’ expertise to offer an array of regional dishes and local ingredients that appealed to their customers.  This responsiveness and ability to evolve and renew itself has made KFC one of the most successful restaurant chains in China, and in the world.  In fact, just last week, KFC opened its 300th KFC restaurant in Beijing and has over 3800 restaurants in mainland China and expects to open 400 more per year.  Their internal responsiveness is probably what directly led to it ranking 91 on BrandZ’s Top 100 Most Valuable Global Brands in 2012.

External Drivers

To what extent is the brand based on a sound internal truth and what capability does it have to execute on that truth?  Does the brand have a defined heritage and a well-grounded set of values?  To what extent does the brand meet the (high) expectations customers have of it?

Does the brand fit with customers/consumers’ needs, desires, and decision-making criteria across all relevant demographics and geographic areas?

How well does the brand fit with its customers?  Do consumers perceive the brand to have a differentiated and distinctive positioning from its competitors?

To what degree is the brand experienced — without fail — across all customer touchpoints or opportunities?

To what extent does the brand feel omnipresent? Is the brand spoken of positively by consumers, customers and opinion formers in both traditional and social media?

Is the brand recognized not only by customers, but is there also an in-depth knowledge and understanding of its distinctive qualities and characteristics?  When relevant, does this recognition and knowledge extend to the customer’s understanding of the company that owns the brand?

Ask these questions about your company.  Work on improving in these areas.  These factors impact brand value.  It is not easy but it can be done.  To the extent that a company is able to improve upon these variables, it will be able to leverage its brand value to achieve greater success and dominate market share.

Quote of the Week

“A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.” Jeff Bezos

© 2012, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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