Kantar Millward Brown

Point of View

Brand Building: An Investment in Future Financial Success

Winning a place in the BrandZ™ Top 100 Most Valuable Global Brands is statistically more difficult than winning an Academy Award. It's certainly more difficult than it was 10 years ago, when the ranking was first launched: newcomers have put enormous pressure on established brands, demonstrating their ability to grow their brand equity at an impressive rate.

Brand strength leads to superior shareholder returns. At BrandZ, we've proved this connection: if you'd invested $100 in the stock market (the MSCI world index) in 2006, your return in 2015 would be $30. However, if you'd picked your portfolio from the BrandZ Top 100, the return would be $103 – three times greater. Brand building also brings resilience in challenging times. While the share price of all brands dropped during the economic downturn, it took strong brands just six months to recover versus three years for average brands.

It's getting harder to enter – and remain in – the BrandZ Global Top 100. A total of 58 of the brands ranked in 2006 are still there, while 42 have been replaced. And these newcomers have raised the bar. Between 2006 and 2015 the average score for Brand Power, Millward Brown's measure of a consumer's predisposition to purchase a particular brand has increased from 142 to 170 – and the newcomers to the ranking score 176 on average.

Many of these new brands are from fast-growing markets. The number of Chinese brands in the BrandZ Global Top 100 has risen from just one in 2006 to 14 in 2015, and their total Brand Power has increased 1,004%. Chinese brands have learned from and followed Western brands, then all of a sudden have started to lead. The majority are not yet truly globalized, but they're ambitious and growing in value extremely fast – and they will change the global competitive landscape.

In the past 10 years Millward Brown has researched and valued over 100,000 brands across 50 country markets, to identify the drivers of long-term brand value growth. It is these lessons that will equip brands – both established names and aspiring newcomers – to be the winners over the next 10 years.

Being different makes a difference

In a world of so much product sameness, brands which consumers view as "different" achieve higher value. Those that have remained in the top half of the BrandZ ranking over the last 10 years are scored very highly on "difference" by consumers, and have grown 124% in brand value. In contrast, brands in the bottom half of the ranking score lower and have increased only 24% in value.

Difference can enable a brand to command a higher price and yield a higher profit. It isn't just about the product; differentiation can also be found through purpose, personality, values, and design. Category leaders like Coca-Cola and BMW need to guard leadership and keep refreshing their brand messages to be always unique.

Clear purpose fast-tracks brand equity

It's not enough to be different for the sake of it. To be meaningful, brands must have a strong purpose that goes beyond "making money", and is inspiring and relevant to consumers. This means striving to improve people's lives in some way – making them easier, richer or more interesting – and if it's a "higher purpose" that contributes to making the world a better place, all the better.

In this age of comparable functionality, purpose becomes a true differentiator and accelerates brand equity growth.

Perfect the proposition, then communicate it

The brands that combined a clear, resonant proposition – one that stands for something meaningful in consumers' minds – and delivered compelling and persuasive advertising, achieved value growth of 168% over the last decade. Those with a strong proposition alone grew 76%, while brands with strong advertising alone appreciated only 27%.

The most important factor in a brand's long-term growth is a real reason to exist. If it has this, it can do well even without great advertising.

Innovation drives success

Consumers see brands that set trends as different and as leaders, and these perceptions pay dividends. Over 10 years, the brands that scored highest against the BrandZ "trend-setting" metric increased an average of 161% in brand value, while those that scored lowest increased only 13%. Many of these brands are from the technology sector, but we also see Chipotle, Nike, UPS and PayPal scoring highly.

To be a trendsetter means anticipating the directions consumers will want to go in, identifying the gaps where needs are unmet, and getting there first. This is a risky strategy, which a brand can mitigate by knowing their consumers well.

Love isn't all you need – but it's powerful

Love has a multiplier effect. Over the past decade, the rise in value for brands scoring high in the BrandZ "love" metric was 10 times greater than that of their low-scoring rivals. Love usually follows great performance and a great experience – and it's amplified by social media. Brands from across categories score highly on love, from Visa to KFC. They have one thing in common: they try to understand the world from the customer's point of view.

Innovation and love form a virtuous circle. A true innovation that makes people's lives easier can quickly generate love, but even the most trendsetting brands swing between periods of intensive innovation and iterative progress, when love provides a "cushion" until the next wave of creative development. Microsoft, a trendsetter now, could do with a dose of love to balance this out.

Repairing trust adds Brand Power

A brand's good behavior over time builds trust, and consumers are more likely to recommend it if its current behavior matches its promise. Trust can be lost, but it can also be restored. Brands that have improved their trust most over the past decade – including Apple and Domino's Pizza – have significantly outperformed the trust decliners in brand value growth.

To remain competitive through the next decade, the world's most valuable brands, and those aspiring to join their ranks, should stop seeing brand building as a cost and view it as an investment in future financial success. They need a holistic brand building system that focuses on every aspect – from communications to CRM to creating the whole experience – to make consumers' lives better, build meaningful difference and embrace disruptive technologies. Brands are a fabulous investment, and need to be nurtured and cared for accordingly.

Key Takeaways

  • Increasing investment in brand building is the only guaranteed route to future financial success.
  • Newcomers from fast-growing markets are leading the way – rapidly increasing their brand equity.
  • Differentiation, clear purpose, a strong proposition, innovation and love will sustain brand value growth for the next 10 years.
Doreen Wang
Global Head of BrandZ
Millward Brown