Most companies would agree that having a strong brand is a critical driver of business growth. Indeed, many allocate a hefty budget to their marketing efforts to make this a reality.
But what impact is that investment really having?
Every year, Brand Finance ranks the world’s brands, putting them to the test using a robust methodology and a host of precise metrics.
By ordering these brands according to which is the strongest and most valuable, we are able to home in on the emerging trends that equip companies to make the most of their brand.
Here are five key trends for 2019.
1. It’s individuals that make a brand successful…
…And that individual is increasingly right at the top, the CEO.
For years, marketeers bemoaned the fact that their efforts on branding got little attention from the board. Now, in a connected age, where there is an insatiable appetite for information, that’s changed. Any negative news about a company quickly spreads and can trigger lasting damage.
We’re also living in an age of increased accountability, with companies coming under intense scrutiny – from their sustainability and inclusivity efforts to the management of their financial fundamentals. And many top CEOs have suffered high-profile exits after poor behaviour or governance.
As a result, branding, or more importantly, Brand Guardianship, has become a serious topic. The CEO is increasingly recognized as the biggest driver of the brand and consequently, of the value of the company.
No-one fits this description better than Amazon’s Jeff Bezos. Amazon is ranked the world’s Most Valuable Brand and Bezos is top of our Brand Guardianship Index, the new study we launched at the World Economic Forum Annual Meeting in Davos, which rates CEOs to capture how well they measure up as brand managers and ambassadors.
Over the years, Amazon has stuck to its brand message, produced an outstanding, world-beating service, and a trillion-dollar company that’s synonymous with its celebrity CEO, Jeff Bezos.
2. US-based tech giants dominate the top 10, but for how long?
Six of the top 10 Most Valuable Brands in the world are US tech giants. Apple is in 2nd place, with Google and Microsoft following in 3rd and 4th place respectively. AT&T, Facebook and Verizon are in 6th, 7th and 9th place.
Microsoft’s ranking is particularly interesting because it is the fastest-growing; its brand value has doubled in the last year and is now valued at US$119.6 billion.
By entering the cloud-computing market, Microsoft has managed to reverse its fortunes. Its determination to adapt is a great example of how a brand can use change to its advantage. For the others in the top 10 of the Brand Finance Global 500, Microsoft serves as a reminder that complacency can be detrimental, especially in the face of competition from start-ups and challenger brands.
Nowhere is this challenge more apparent than looking East – to China.
3. China is racing up the rankings
Chinese brands are making their presence felt in the rankings like never before.
Ten years ago, the total value of Chinese brands was $48 million. It’s now $1.3 trillion, and there are an impressive 80 Chinese brands in the top 500. While the companies are heavily skewed towards banking, insurance, real estate and cars, China is increasingly moving into other consumer-based industries.
iQiyi, a Chinese content-streaming service and China’s answer to Netflix, is the world’s fastest-growing brand of 2019, up a whopping 326% year on year, three times the growth of its US counterpart. Based in Beijing, iQiyi hosts over 500 million monthly subscribers and features in the top 500 for the first time. Content provider WeChat is in 20th place, up from 47th and its parent, Chinese tech giant Tencent, ranks 21st.
Meanwhile, two Chinese banks feature in the top 10. ICBC and China Construction Bank could be considered forerunners for Chinese brands moving into foreign markets. Banking is the biggest sector in the world, and these are huge companies, with very powerful brands that are recognized around the world.
And we can expect to see many more. President Xi of China has made it very clear that he wants China to become a powerhouse of innovation and brand building, in order to build the next generation of wealth. Over the next five years, our ranking will reflect the fact that Chinese consumer brands will enter aggressively into Western markets.
4. Hotels come out as the most trusted industry
Interestingly, the hotel sector boasts the best score for reputation. Premium brands are held in especially high regard, but the mass chains also rank well. They also top the index for quality of service and trust.
Auto brands also score highly. In fact, Italian supercar manufacturer, Ferrari is the World’s Strongest Brand, well ahead of McDonald’s, Coca-Cola, Lego, and Disney. Since its inception, Ferrari’s brand has never wavered from being all about style and performance. This has allowed the company to successfully extend into other sectors – from merchandise, such as hats and sunglasses, to theme parks, and even the Maranello Village, a Ferrari-themed hotel – without losing its appeal as a luxury brand.
Unsurprisingly given its ranking in Most Valuable Brands, the tech sector comes out third. The industry is seen as reputable overall, and offering good quality services, despite the knocks to their reputation that Facebook and Google have suffered in the past 18 months. Banking and telecommunications brands lag behind though, as they struggle to shake off the reputational damage of the financial crisis and poor quality of service.
5. Better brand = better stock market performance
The financial value of a better brand is now widely accepted.
In the years since I founded Brand Finance in 1996, the industry has grown from something that was regarded as close to black magic to a professional discipline. The attention we receive is now much greater. Not only are companies looking at our analysis, but we find investors and the media want to know what we have to say as well.
We are getting more and more phone calls from financial analysts because they want to understand what lies behind our valuations, and the reason for that is very clear: strongly branded companies outperform stock markets.
A few years ago, we looked at brands in the S&P500 and how they performed against the index as a whole. Those with triple-A ratings or brand valuation in excess of 30% of their company value outperformed the index by 100%.
We’ve also uncovered a strong correlation between the strength of a brand and the cost of capital. Increasingly, bankers will not only look at the credit ratings of a company, but they will also use brand strength as a measure of whether to invest.
Brand strength has become part of the fundamental analysis made on a company, and it’s actually one of the most interesting indicators of future performance.
That’s why companies have to get it right. Corporate strategy and brand strategy have to be aligned.
You might say that is obvious, but we have seen a number of clients where the brand department and the marketing department are not brought into discussions about the corporate strategy, and yet are still expected to manage the brand.
In the end, to be successful, a brand must win the hearts and minds of everyone, and that conversation has to be driven from the top.