Sunday, July 10, 2011

Common Branding and Uncommon Power: The Mystique of Sustainable Innovation

The research company Millward Brown Optimar provides a highly illuminating annual report on the top 100 global brand power list, BRANDZ. In its BRANDZ 2011 listing, the firm reports that Apple has topped the list of the world’s most powerful brands with a whopping USD 153 billion valuation, growing 84 percent with the launch of iPad, and edging out the rival technology company Google. The follower 9 brands and their valuations have been Google (USD 111 bn), IBM (USD 100 bn), McDonald’s (USD 81 bn), Microsoft (USD 78 bn), Coca Cola (USD 73 bn), AT&T (USD 70 bn), Marlboro (USD 67 bn), China Mobile (USD 37 bn) and GE (USD 50 bn). The listing highlights the role information technology and telecommunications firms have been playing in shaping global consumer brand equity (60 percent of the top 10 by number and 66 percent of the aggregate brand value of the top 10) . The trend will continue with the social media networking behemoth, Facebook, also making its debut in the top 100 this year.  In contrast, the profile of the most powerful or valuable brands in India has been weighted in favor of basic industries such as steel, automobiles, oil, and airways. The 1.2 billion plus consumers in India, it appears, are yet to be touched as intensively by technology or fast foods as the advanced countries have been.

The computation of brand value, of course, is a complex subject and could lend itself to varied methodologies. BRANDZ, for example, allocates a company’s intangible earnings to a brand, determines the percentage attributable only to the brand and then determines the brand earnings multiple based on market valuations, brand growth potential and brand dynamics, all using its proprietary and alliance data bases and methodologies. These three factors are multiplied to arrive at the brand valuation. According to BRANDZ, products or companies based in North America still accounted for a disproportionate amount of brand value, however. The brand value of the leaders based in North America totaled about USD 830 billion or roughly 55 percent of the roughly USD 1.5 trillion in value for all brand leaders ranked in the regional charts. Across the five regions as well, technology and telecom providers dominated, with a total of 18 brands in the BRANDZ analysis: seven based in North America, four in Asia, four in Continental Europe, two in the UK and one in Latin America. Reflecting mostly revised valuation methodology, four telecom provider brands were new to the regional rankings this year: AT&T, Verizon (North America), Deutsche Telekom and Movistar (Europe). It would, therefore, be interesting to watch the direction and shape of brand power in India in a global perspective as the country powers its way to the rank of third largest economy on the plank of an increasingly affluent middle class and a shift in demographics towards youth.

Top 100 brands

A summary of the top 100 brands of BRANDZ as listed in Milward Brown’s web site ( informative insights. The brands as listed by the siten the descending order of brand power (value) are: Apple, Google, IBM, McDonald’s, Microsoft, Coca Cola, AT&T, Marlboro, China Mobile, GE, Industrial and Commercial Bank of China, Vodafone, Verizon, Amazon, Walmart, Wells Fargo, UPS, HP, Deutsche Telekom, Visa, Movistar, Oracle, SAP, Blackberry, Louis Vuitton, Toyota, HSBC, Baidu, BMW, TESCO, Gillette, China Life, Pampers, Facebook, Orange, Bank of China, Disney, RBC Royal Bank, American Express, Exxon Mobil, TD Bank, Agricultural Bank of China, Cisco, Budweiser, L’Oreal, Citi, NTT Docomo, Accenture, Mercedes Benz, Shell, Tencent, ICICI Bank, Subway, Colgate- Palmolive, Honda, Nike, Intel, Carrefour, Mastercard, Petrobras, H&M, Pepsi, BP, Target, Porsche, Samsung, Chase, Standard Chartered Bank, Siemens, Hermes, Starbucks, FedEx, O2, Telecom Italia Mobile, Telcel, Santender, PetroChina, Nintendo, MTS, Nokia, ebay, Ping An, US Bank, Sony, Zara, Scotiabank, Nissan, The Home Depot, Banco Itau, China Telecom, Bank of America, Red Bull, Aldi, TIM, Barclays, China Merchants Bank, Bradesco, Sberbank and Goldman Sachs.

The highest and lowest brand values of the listed entities are USD 153.3 and USD 8.4 bn respectively, indicating the huge valuation differential. Even within a homogenous group such as automobiles, Toyota, the largest Japanese automotive company, and the world’s number one in automobiles, has 27th rank at USD 24 bn while the next largest Japanese automobile company, Nissan has 88th rank at USD 10 bn. Only one Indian company, ICICI Bank has figured in the list at 53rd position with a brand value of USD 14.9 bn. As many as 30 companies in the top 100 list are information technology and telecommunication companies, while other customer facing sectors such as FMCG, automobiles, banking and financial services, retail and oil have only 2 to 5 representations per sector. Surprisingly, no pharmaceutical firm has featured in the list. The other insights are that all the brands, save a few, are truly global brands, well trusted for their products and services. It is also instructive that each category in the non-technology space features on average at least two brands. At the same time, non-visibility of some of the very well known consumer brands such as Proctor & Gamble or Unilever in the list should cause some surprise. Overall, the ranking demonstrates how difficult and competitive it could be to enter into the top 100 global brands list.

Corporation versus product

It has always been a matter of debate as to which constitutes the real brand – the corporation or the product. While the debate as yet may not have an answer, it is evident from the listing that  whichever corporation has achieved a complete alignment or integration between the company and product brands has reached the top of the top ranking list. Apple and Google as well as Microsoft and IBM, AT&T and Vodafone, and McDonald’s and Coca Cola are proof enough of this. However, this seems to apply more in technology and fast food space, where there is intense customer contact, than in basic and other infrastructure sectors such as oil. By the same token, banking and financial sectors which tend to have an integration of the corporate and product brand, should have ranked higher; however, their low ranking could be due to the aftermath of the global meltdown and the role of global banks and financial institutions in that. Companies such as GE, Toyota, Samsung and Sony, each of which have a powerful corporate brand as well as several product brands each, seem to have slipped a tad. More powerful integration of corporate and product brands are being attempted by these firms to reassert their overall brand power.

A comparison of the BRANDZ 2011 report with the previous BRANDZ reports brings out the relentless march of technology and Internet behemoths in global brand power. It is instructive that just one product iPad could propel Apple from the third place to the first place, with a massive 84 percent increase in brand value in just one year. Clearly, it is not the product count, brand plurality or the regional diversity that determined the brand power in this case; rather product unification and portfolio minimalism seem to have created the astounding level of brand power in Apple’s case. Whether every company would be in a position to repeat such a feat is a moot point but the emergence of Galaxy as the single largest and most popular family of smart phones and tablets in Samsung’s multi-count product line-up suggests the tenability of such a hypothesis as well. The key perhaps is to achieve a design configuration that meets as broad a spectrum of needs, in as customized manner, as possible. This could be particularly relevant in markets where price points are fewer or well polarized in a few bands. In Fast Moving Consumer Goods (FMCG) industry, the challenge of severe market segmentation could continue to induce product proliferation. Industries such as oil or credit cards, on the other hand, would not be able to distinguish themselves in terms of products due to the monolithic nature of their product or service offerings.

Brand India

Several of the global brands already operate in the Indian markets. As a result, the country brand power would have been computed into the global brand power in a nominal manner. That said, once the Indian economy reaches the super power status it is likely that Indian regional brand power would be a major proportion of the global brand power. That expectation, however, is of little consolation for a country which has built an impressive product range of its own in various sectors. Notably, several FMCG, pharmaceutical, automobile, oil, infrastructure, airways, banking, steel and other basic industry brands have built up a brand momentum of their own and must therefore qualify for global competition. The acquisition of certain Indian brands in the 1970s and more recently by multinational corporations in fields as diverse as beverages and pharmaceuticals points to the importance of building brand equity. India Inc must give a serious thought to enhancing the scale, scope and reach of Indian brands so that they could figure in the global brand listing on their own. It would appear that at least 3 to 5 brands in each of the important sectors of the Indian economy can make it to the global league of top 500 powerful brands by 2035.

The question then is the basis on which a true and sustainable Brand India can be built. A hypothesis is that Brand India would need to be built not be only on the arithmetic of sales and reach but would need to be on something that could be more intrinsic to Indian market. It would appear that from design to delivery there could be ways in which an Indian hue can create a distinctive Indian brand. While Tata Motors Nano car, Titan Xylo watches, Taj and  ITC hotels, Goyal’s Jet Airways and Kingfisher spirits are examples of Indian corporations building globally visible brands, Toyota Innova MUV  and Etios Sedan as well as Etios Liva Hatchback, Nissan Micra and Hyundai Santro are examples of customized Indian designs being generated by multinational corporations with global visibility. Particularly, in areas where India has natural comparative advantage such as basmati rice, jewelry, clothing, herbs, spices, tea and coffee, and more recently market-scale advantage such as steel, automobiles and devices, creation of Brand India would be desirable and feasible. To be able to do this, Indian corporations would need to integrate modern technology with native heritage, and achieve higher levels of product quality and service delivery. Until products come on to their own, the high brand power of the Indian corporate groups needs to be utilized for the purpose.

Unified versus split branding

The strategy of branding has a significant impact on the power a brand will be ultimately able to generate. Empathetic and evocative naming of brands provides great connectivity to the user. Indian truck and bus maker Ashok Leyland named its medium duty truck as Comet and medium duty bus as Viking in the 1950s, a branding which has grown from strength to strength over the decades due to the simplicity and connectivity. So has been its naming of its heavy duty truck range as Hippo and Rhino! Apple’s simple “i” became universally evocative for a range of gadgets. Companies such as Samsung which reveled in name and brand proliferation have started discovering the virtues of polarizing branding of smart phones and tablets around the most successful Galaxy brand lineup. Brands also benefit from supplanting across product divisions to inject energy into tepid product or business lineups. Sony successfully resorted to extension of its successful Walkman and Cybershot brands of music systems and cameras respectively, and the Bravia TV brand to reenergize its cell phone range. On the other hand, Nokia once a market leader in cell phones continues to slip in leadership with unhelpful operating systems and impersonally numbered brands. To qualify as an empathetic and evocative brand, the brand should have an ability to create a physical image, and usher in a virtual experience the moment the brand name is mentioned.  

Companies in India, it appears, follow no unified or calibrated strategy on brand building. The Tata Group which has the highly successful hotel brand “Taj” decided into remove certain lower and mid level hotels from the umbrella brand. As a result, brand segmentation in perceived alignment with customer segmentation, has been effected. This trend contrasts with smart phone makers spreading the high end brands all the way down to lower price and value points to enhance user perception of prestige. The potential to establish umbrella brand is, in fact, huge in a growing economy like India. For example, Zydus Wellness has established and grown a brand of sugar substitute called Sugar Free. Initially, an aspartame based formulation was named Sugar Free Gold. Later, a sucralose based sugar substitute has been branded Sugar Free Natura. Now, a plant (Stevia) based sugar substitute has been introduced under the name Sugar Free Herbiva. It is easy to hypothesize that sooner than later, a strong umbrella brand of Sugar Free would be built up with immense potential not only as a broad spectrum sugar substitute brand but also as a potential umbrella for a large variety of dietetics and wellness options. Clearly, different industries and different products offer multiple options, from unified to split options, to develop a larger brand power.

Uncommon power

Brand power is a strategic hedge against the vagaries and vicissitudes of economic and business environment. A strong brand helps a company coast through lean patches with enough entropy left in the wheels of business. The iconic brand power held by Sony as an electronics super brand helped the corporation manage the near opportunity miss it had on flat panel televisions until it could develop its own panels. Sony’s loyal customer base was disappointed but was willing to return to its fold at the first opportunity of Sony coming up with its own flat panels. Toyota’s iconic quality image has been so strong that despite the unprecedented recalls, the corporation continues to be accepted as a leading marquee. In fact, in the BRANDZ analysis of 2011, Toyota jumped up several notches in brand power, and still remains the leading global car brand. Brand power, once established, provides a surrealistic continuity to businesses. For example, despite lack of progress or even setbacks in drug discovery, a few Indian pharmaceutical firms continue to be branded as innovative discovery driven companies.

The insurance provided by brand power must be utilized in a judicious manner by companies. It cannot be seen either an optical fa├žade or easy reprieve. Those companies which have recognized the responsibility that comes with established brand power and exerted to get back to innovative track with other new product lines as well as the affected core product lines reasserted their positioning. Sony, for example, continued to innovate in gaming devices and a host of other electronics products during the time it grappled with flat panel setback, thus enhancing overall brand equity through supplemental channels. Microsoft fought back on its mobile operating system by leveraging a successful Windows 7 operating system intended for desktops and laptops. Properly strategized and prudently utilized, brand power acts like the flywheel of business smoothing the energy flow for growth. India Inc, it is hoped, would recognize the need to build a massive Brand India for global visibility.

Posted by Dr CB Rao on July 10, 2011       



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