Cross Category Trends

Disruptions and opportunities shape brands in a pivotal year

Disruption

Changing societal trends touch every category

Competitive, societal and geopolitical forces caused disruption across every category. Oil and gas brands cut capital investment to weather a perfect storm of plummeting oil prices and sanctions that prevented partnering with Russian companies to explore the Arctic. Consumer health concerns impacted sales in the soft drinks and fast food categories.

Millennials were less inclined than their parents to own a car or drink a beer. They bank online and once they become interested in insurance, they're likely to make that purchase through an online aggregator. Google, already an aggregator in insurance, entered the telecom providers category with a Google-branded service. Alibaba's Alipay banking, Tencent, Baidu and Apple Pay are only some of the examples of how non-traditional players are nibbling at the perimeter of the banking category, as banks, not known for innovation, are becoming even more risk averse because of compliance concerns.

Differentiation

More important, harder to achieve

With more choice available and a rise in consumer desire for personalization, it was more important than ever for a brand to be seen as different. But it wasn't easy. In fact, the scores for being Different and Meaningful declined during the past year for the BrandZ™ Top 100 Most Valuable Global Brands. Different and Meaningful, along with Salience, are components of Brand Power, the BrandZ™ measurement of brand equity. Salience continued to rise. But not being seen as sufficiently different weakens a brand's competitive strength and potential for commanding a premium.

In some categories, as brand leaders have done an excellent job building global scale and creating products and services of reliable quality, functionality has flattened as a point of difference. Carmakers produced the highest performing and safest models ever, but the increased global production, which gained economies of scale, also limited local style and communication distinctions. The beer category faced a similar dilemma.

Brand Experience

Increasingly important way to communicate difference

Brand experience rose in importance as functionality achieved fairly uniform quality levels and flattened as a differentiator. Safety and driving comfort technology no longer defined luxury in the car category because it was installed in cars at all price points. Instead, brand experience defined luxury in cars. Luxury brands reduced their practice of creating logo trinkets to provide a low price access point to the brand. Instead, luxury brands protected their exclusivity by limiting entry-level price points and using brand experience to introduce the brand to a wider audience. The brands webcast catwalk shows, for example.

At the other end of the category spectrum, telecom providers promoted brand experience as their antidote to commoditization. The bundling of entertainment content accelerated. For retailers seeking to repurpose a legacy of physical locations, stores became the showroom for tactile interaction with the brand. As Internet access to car information educated consumers and changed how people shop for cars, some car dealerships turned locations into places to experience the brand, sometimes combining the physical and virtual, as in city locations developed by Audi.

Higher Meaning or Purpose

Brands relate to consumers on a deeper sustainable level

Beyond promoting the functional benefits of their products, brands associated with a higher purpose beyond functional product benefits. Many developed initiatives connecting the brand with relevant social initiatives. Driving factors included: changing customer values, often connected to a generational shift; the power of social media to help or hurt reputation; and the need to engage and differentiate in categories crowded with competitors. An enticing social mission also facilitated brand entrance and expansion in developing markets.

Some of the more explicit connections to meaning happened in fast food, where Chipotle and Panera specifically positioned their brands as healthier than the competition and aligned with consumer concerns about healthy eating and environmental sustainability. In retail, CVS promoted its core brand mission as a healthcare retailer and services provider. Personal care brand L'Oréal Paris introduced its “Sharing Beauty with All” project, promoting sustainable production and consumption. Estée Lauder added a corporate responsibility function. Dove extended its inclusive vision of beauty to its men's care products, as part of Unilever's corporate mandate to connect brands to higher meaning.

Privacy

Balance is more delicate as brands delve deeper

Conditioned to exchange some personal information for a perceived value, consumers have accepted this quid pro quo transaction in which personal data is used as currency. But it's changing. Telecom providers are positioned to become indispensable providers of data and devices to the connected home. Insurance brands installed telemetric gadgets in cars to collect the data needed to design insurance premiums based on actual driving habits.

And all brands collected and analyzed data to personalize offerings. As home and car connectivity intrudes deeper into personal lives, the transaction – what I give for what I get – is less discrete and obvious. Brands will need to carefully negotiate the tension between providing the personalization that data collection allows and transgressing beyond the individual consumer's privacy boundary.

Health and Ingredients

Consumer concerns drive new product introductions

Brands responded to rising consumer concern about what they put on their bodies (personal care) and in their bodies (soft drinks and fast food). Consumption of diet cola declined as consumers rejected artificial sweeteners. Coke and Pepsi bet that the combination of cane sugar and the stevia leaf would produce a more natural solution with the right blend of sweetness to appeal to consumers seeking cola flavor but a mid-calorie impact. McDonald's announced US plans to phase out menu items made from chickens treated with antibiotics. It also offered the option of milk from cows not treated with growth hormones. Personal care consumers looked for scientific reassurance that ingredients were safe, natural and effective. To build trust, haircare brands used more scientific language to describe products.

Craft

Relatively small volume but a powerful indicator

Craft, as in craft beer, appeared across many (sometimes unlikely) categories, including soft drinks (craft colas), banking (small operations with friendly names), telecom providers (Cricket in the US), insurance (Oscar's Health Care in the US) and personal care (Harry's or Dollar Shave Club). Craft impacted luxury, which by definition is about craft, with the popularity of small brands that protect exclusivity with limited reach rather than proclaiming it with a logo.

Craft brands may not always drive a lot of volume, at least not yet. But like the canary in the coalmine they're an early warning that something is in the air. It's the consumer reaction to a world of mass produced merchandise, a desire for products that feel more authentic made by hand rather than by machine. It's classic disruption – small players doing little things.

Collaboration

Competing to win sometimes requires collaborative effort

Brands at all levels entered into mutually beneficial relationships to extend their businesses and influence, and potentially increase revenue and profit with less capital investment. In a collaborative venture between Apple and IBM, Apple gained easy access to enterprise business and IBM enjoyed the opportunity to create its business applications for Apple devices. Microsoft, under new leadership, assumed a more collaborative approach.

BrandZ Top 100 2015

BrandZ Global 2014 Report Top 100 Report

Top 100 Chart

Top 100 Infographic


Methodology and valuation by Kantar Millward Brown


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