Branding Strategy Insider

Why Are The World's Top Brands American?

Branding Strategy Insider welcomes and answers marketing questions of all types. Today's question comes from Petra, a third-year marketing student in Copenhagen, Denmark. She asks:

“For a key assignment I must uncover why many of the top brands in the world are American. Please tell me, is there something within the American culture that gives brands an edge? Are the market conditions different? How come American brands are so successful?”

Petra, thanks for asking, this is a very interesting question. I will give you several hypotheses to explore as you write your paper. Distribution is a key contributor to strong brands because it drives awareness and accessibility (two of the five brand insistence drivers per our BrandInsistence^SM brand equity measurement model). It also leads to economies of scale. The first brands to have aggressively gone global will have several advantages in the marketplace. And, having a large domestic market makes it easier to successfully take a brand global.

Consumer understanding through marketing research is another area to explore. A brand that can anticipate consumer needs and appeal to consumers emotionally, experientially, self-expressively and regarding the alignment of core values will do better than brands that have not uncovered and exploited these consumer insights. Generally, I believe US brands do a good job of leveraging these types of consumer insights, which gives them an advantage.

Brand Leadership Equals Business Leadership

The successful creation and management of brands will be the hallmark of business leadership in the 21^st century. Does that sound bold? Perhaps, but the world today is far different from what it was only a couple of decades ago and these structural changes have placed brands at the forefront of business success. A review of stocks in the S&P index shows that businesses that own stronger brands perform significantly better than businesses that own weaker brands. 

Business leadership and brand leadership have become inextricably linked.

According to Millward Brown Optimor’s analysis, in 1980 virtually the entire value of an average S&P 500 company was comprised of tangible assets (chairs, factories, inventory, etetera). In 2010, tangible assets account for only 30 to 40 percent of a company’s value. The rest is intangible value, and about half of that intangible portion, close to 30 percent of total business value, is attributed to brands. Therefore it is not a stretch to say that for many companies, brand is their single biggest asset. What has led to this change in what matters to business success?

Why is brand driving business leadership – the Post-Information Era

The technological advances of the 20^th century generated more prosperity than ever existed before. Consumers in developed markets came to have almost limitless choices in almost every category. What is more, as companies innovated into new spaces, there are now many new categories to choose from.

Abundance and prosperity have allowed companies to redefine what consumers “need.” Yet wealth hasn’t necessarily made us much happier. As Daniel Pink writes in A Whole New Mind, “The paradox of prosperity is that while living standards have risen steadily decade after decade, personal, family and life satisfaction haven’t budged. That’s why more people – liberated by prosperity but not fulfilled by it – are resolving the paradox by searching for meaning.” This quest for meaning has huge implications for brands. As people find their basic consumption needs satisfied, brands are uniquely positioned to help add a higher order of meaning and fulfillment to purchase decisions, and consumers’ lives. 

Ranking The Top Global Brands

Brand rankings remind me of college rankings. (I worked as a college admissions volunteer leader for years.) Each ranking entity establishes its own ranking based on its own criteria weighted in its own way. Some focus on overall rankings, while others focus on rankings within certain categories. The rating entities jockey for brand position just as the brands they rate do.

US News and World Report ranks Harvard, Princeton, Yale, Columbia and Stanford as the top five national universities. In its separate national liberal arts college ranking, Williams, Amherst, Swarthmore, Middlebury and Wellesley make the top five.

Forbes ranks the following as the top five among America’s top 50 colleges: Williams, Princeton, Amherst, United States Military Academy and MIT.

Newsweek lists the 25 Hottest Universities in a variety of categories. For instance, it lists Cornell as the Hottest Ivy, Eastman School of Music as the Hottest Music School, Harvard as the Hottest for Rejecting You, Johns Hopkins as the Hottest for Pre-Meds and Georgetown as the Hottest Big-City School.

Princeton Review also ranks top colleges in different categories. For instance, it names Georgia Top Party School, Brown Happiest Students, Bowdoin Best College Food and Sewanee Most Beautiful Campus.

The Fiske Guide rates private school best buys and public school best buys (many colleges listed in each category).

The Emotional Connection Workshop

The Blake Project offers a unique workshop that is designed to dial up your customers’ emotional connection to your brand.  Here’s how it works. First, we talk with your customers to understand what emotional connection currently exists and to what degree and then we gain your consensus on what types of emotional connection you would like to increase. Next, we lead you in a series of ideation sessions in which we design sources of increased emotional connection against your objectives. Finally, we prioritize the ideas generated in the ideation sessions and pull it all together in a written report of recommended actions.

In the research, we seek to understand how your brand connects with its customers and with which customer attitudes and values it is best aligned. We will conduct this exploration by customer segment if required. In our consensus building session with you, we also probe to understand by what values your organization strives to live and with what personality attributes. The ideation sessions are highly facilitated. They include a broad array of creativity exercises and ideation techniques and are always energizing for its participants.

We will often organize the sessions by customer touch point and will explore how different behaviors, processes and senses could affect your customers’ emotional connection to your brand. We apply a specific set of evaluation criteria to the ideas generated at the ideation sessions to insure that the ones you choose have the highest impact and ROI possible.

Lessons from the Top 100 Global Brands

The economy may be in freefall and advertising forecasts bleak, but this year's Millward Brown Optimor BrandZ survey reveals the world's first $100bn brand - Google.

While this news may be of little surprise and will provide cold comfort to struggling broadcasters (famously, the brand has never advertised on TV), the research does, however, underline the enduring power of strong brands. It also serves as a timely reminder that pulling back marketing support may well provide a quick fix to a company's bottom line, but is often to the long-term detriment of the business.

Despite the turbulence in the global economy, the value of the top 100 brands has risen by 2% in the past year to $1.95tn. A total of 85 of the top 100 brands remain in the table from last year. By category, the biggest faller was insurance (-48%) followed by cars (-22%) and financial institutions (-11%). On the flip side, mobile operators experienced the biggest growth in brand value (+28%), followed by soft drinks (+24%) and coffee (+18%).

There are also reasons to be cheerful -in the UK-, which is outperforming the broader market. The value of the top 10 UK brands has grown by 11% over the past year, compared with a 2% rise for all global brands. UK brands also account for half the growth in the global mobile category - the strongest brand category in the world. Vodafone and O2 together account for more than a quarter of that category-wide growth.

The recession is clearly not having a negative impact across all brands and categories; one of the big positive trends is the growth in popularity of activities undertaken at home that traditionally would have been done elsewhere. The ease and convenience of online shopping, for example, has been the driving force behind brands such as Amazon (+85%) and eBay (+16%).

Top 100 Brands Wield Power Over S&P 500

In the managerial pecking order within most firms, finance occupies a more central role than the flimsy business of marketing. Financial people use complex terms like ‘derivatives' and ‘collateralised debt obligations', and deal with multibillion-dollar/pound sums on a daily basis. Marketers are a simpler mob, occupying their time with more basic duties, such as brand building and customer satisfaction.

However, when you think about it, shouldn't it be the other way round? Shouldn't the marketer, who builds the brand and works with the consumers who pay for everything, have a more exalted position than the manager who simply accounts for and invests the resulting income? Given the corporate shenanigans in the financial sector that have emerged in the past 12 months, doesn't it make more sense to trust the marketers who generate value, rather than the incomprehensible financial markets that just seem to lose it?

This week's publication of the annual BrandZ Top 100 Global Brands provides empirical evidence that marketing does indeed beat finance. As you probably know, every year Millward Brown Optimor surveys more than 1m consumers across 30 countries to measure the equity of most of the major brands in the world. It uses this data to create the Top 100, detailed further on in this blog post.

Since 2006, it has also used its data to buy a portfolio of shares in the firms that own the best-performing brands. Each April, Millward Brown Optimor reinvests the money based on that year's survey results, rather than using complex financial data or expert assessments of company potential.

For the past three years, the BrandZ Top 100 portfolio has beaten the market. As you can see from the graph below, it has been enjoying a significant lead over the S&P 500 - the value weighted index of the 500 biggest companies listed on the US stock markets. During the good years, between April 2006 and April 2008, a $100,000 investment in the BrandZ portfolio would have generated almost $20,000 more in returns compared with the average.

The Reality in Ranking the Top Global Brands

Twenty plus years ago a widening disparity began to appear between the tangible net assets of a company and the actual price that would be paid to buy that company. This created a maelstrom of merger, acquisition and defence as companies scrambled to value their most precious assets - their brands.

Interbrand emerged from this era as the industry leader in brand valuation and, since 1999, its joint publication with BusinessWeek of the top 100 global brands has solidified that position. Each Summer Interbrand tells us what the world's most valuable brands are and, unlike other marketing surveys, the managerial world listens.

How does it do it? To cut a long story very short, Interbrand uses three sources of data to value a brand. First, the expected earnings the brand will generate for the next six years. Second, the percentage of earnings that can be attributed to the brand, as opposed to other decision-making factors such as location. Third, the relative strength of the brand. The higher the brand strength, the less risky the six-year earnings predictions and the more likely they are to materialise.

Combining these figures produces remarkably precise calculations. Last year, for example, Interbrand informed us that Intel's brand was worth $30.9 bn, down 4% from 2006. As marketers, we are typically afraid of numbers, especially big ones that are derived using super-complex financial calculations.

The reality, however, is that despite the apparent precision and current dominance of Interbrand's top 100, I would argue that much of it is actually a load of old tosh.

Top Brands Illustrate Marketing Power

It is time to stop speculating about brand equity and turn, instead, to the ice-cold empiricism of financial brand values. Monday saw the annual publication of the BrandZ Top 100 brands from Millward Brown Optimor and, as usual, there were a host of winners and losers.

The first slice of good news was domestic (FYI - I'm based in London). Although only six British brands made the Top 100 list, they grew their value at an average rate of 33% - significantly higher than the 21% average of the Top 100 as a whole. Vodafone led the British contingent growing in brand value by a whopping 75% to $37bn (£18.7bn). But the BrandZ data that drives the Top 100 also recorded a slowing in Vodafone's brand momentum, suggesting that the good times may not continue.

Another big winner this year was McDonald's. The world's eighth-biggest brand recorded a 49% rise in value to $49.5bn. Impressively, it also recorded a brand momentum score of seven, suggesting its gamble to divest the other brands in its portfolio and focus on its main cash cow appears to be paying off. I must now eat humble pie and accept that you can revitalise burgers and fries in the 21st century.

I did get one prediction right this year, though. Robert Polet, who took over as chief executive of Gucci Group after two decades working for Unilever, is just as good as I told you he was. His main brand, Gucci, increased in value by 43%, and with a brand momentum score of 10, it seems Polet's revolution will continue to deliver results.

Brand values can go down as well as up.