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Published: May 26, 2009

 
 

The Trouble with Brands

What can consumer companies do to make sure that their brands aren’t among the losers? Our research revealed that the most successful brands today — including Adidas and iPhone and Pixar and Wikipedia — resonate with consumers in a special way: They communicate excitement, dynamism, and creativity in ways that the vast majority of brands do not. We call this quality “energized differentiation,” and we have identified, out of dozens of brand attributes in our consumer-research database, the metrics that capture this quality. By focusing on these attributes, marketers can keep their brands constantly moving and gaining value. In a world of excess capacity and diminishing trust, creating these kinds of energy-infused brands can help companies reinvigorate their brand management practices.

The Plunge in Brand Perceptions
As we set out in 2004 to compare consumers’ and Wall Street’s valuations of brands, we were acting much like meteorologists analyzing the various forces of nature to assess which combination causes hurricanes. To measure how brands affect the current and future financial performance of their enterprises, we merged our brand database with 15 years’ worth of financial data from Standard & Poor’s Compustat database and the University of Chicago’s Center for Research in Security Prices, studying a specific universe of 900 multinational “mono-brands.” These companies stake their entire name on a single powerful brand and derive more than 80 percent of their annual revenue from that brand. They include firms such as Intel, McDonald’s, and Microsoft. Along with marketing professors Robert Jacobson (Foster School of Business, University of Washington) and Natalie Mizik (Columbia Business School), we began analyzing many consumer variables to see if we could tell which group of brand attributes came closest to explaining unanticipated changes in stock price, especially upward valuations. Our emphasis was on unanticipated stock price changes because market values already anticipate a wide range of corporate financial and performance factors. We didn’t doubt that brand values were rising, and we were not trying to prove they shouldn’t. We were believers in brand value as a driver of intangible value — and we still are. But while doing that research, we discovered the enormous anomaly we have alluded to. While Wall Street had been bidding up the aggregate value of brands for the consumer sector, consumers’ overall perceptions of brands were substantially eroding. To our astonishment, because we were not even looking for it, we found that the consumer ratings on four key classical attitudes toward brands — trust, awareness, regard, and esteem — were tumbling.

Generations of marketing professionals have long accepted these four attributes as the defining measures of brand health, which they refer to as brand equity. These are the classical metrics that drive current brand performance and sales. High scores in trust, awareness, regard, and esteem indicate that consumers are likely to continue purchasing the brand and remain loyal to it.

The data showed consumer attitudes toward brands had fallen into steep decline. Despite the fact that the stock market’s valuation of brands had been rising since we had begun collecting our data in 1993, brand trustworthiness rankings had dropped more than 50 percent, perceptions of quality had fallen 24 percent, awareness of brands was down 20 percent, and esteem and regard for brands had fallen 12 percent. We saw thousands of well-respected brands that had, on average, lower scores on these metrics — results low enough that marketers would consider them indicative of “commoditized attitudinal patterns.” For these brands — including such household names as Century 21, Alpo, and Prudential — the numbers basically said that consumers knew them well but were not inspired to buy them.

 
 
 
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Resources

  1. Gregor Harter, Edward Landry, and Andrew Tipping, “The New Complete Marketer,” s+b, Autumn 2007: Organizations with strategically focused, broadly responsible CMOs may produce better results than their traditionalist peers.
  2. Leslie H. Moeller and Edward C. Landry, “Measuring Your Way to Market Insight,” s+b, Spring 2009: Marketers can develop their analytical prowess to better understand their customers.
  3. Nick Wreden, “Marketing: By the Numbers,” s+b, Winter 2006: A review of books about marketing’s new accountability.
  4. For more business thought leadership, sign up for s+b’s RSS feed.
 
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