Why is it that some brands can endure years of bad reviews without losing substantial sales? And how is it that, at the same time, some other brands transform into industry leaders, often seemingly overnight? In many cases, it’s the result of careful management of brand equity and corporate reputation.
According to data and measurement firm Nielsen, generally speaking, corporate reputation is the perception of a company based on its agenda – investments, employment, corporate citizenship, business practices, etc.
A strong reputation often allows companies that implement their brand efforts smoothly. On the other hand, a brand is the promise a product or service makes to consumers that is supported by distinctive associations and experiences. And brand management is about implementing a company’s business strategy by using two-way communication to connect products with the consumers who are interested in them.
Brand and reputation
The terms brand equity and corporate reputation may seem interchangeable. Often, when talking about consumer marketing, the line between them is blurred, especially when a company and its products share a brand identity.
According to an analysis of Nielsen’s Harris Poll EquiTrend (EQ) and Reputation Quotient (RQ), the alignment between brand equity and corporate reputation is quite close; further, the alignment between them reflects industry differences. Retail brands, both physical and virtual, are typically highly accessible and transactional with consumers (see chart). Financial brands are far more vulnerable to consumers’ perceptions about how an institution conducts business versus a familiarity with its services. Similar to financial services, the reputation of the automotive industry among consumers has been shaped by high levels of news coverage, both good and bad.
Consumer technology represents the new wave of indispensable brands. Technology brands are building corporate reputation and brand equity at an accelerated rate, the Nielsen report says.
A brand is one of the company’s most valuable intangible assets. A McKinsey research has indicated that companies with strong brands provide up to five per cent higher total return to shareholders than their industry counterparts.
The worth of a brand
However, at a time of stagnating markets, technological disruption and rapid changes in consumer behaviour, where can big brands find growth? What’s the worth of a brand?
Defining a brand involves emphasising its key benefits and attributes for consumers. To do so, marketers must recognise that a brand consists of more than a bundle of tangible, functional attributes; its intangible, emotional benefits, along with its “identity,” frequently serve as the basis for long-term competitive differentiation and sustained loyalty, says a McKinsey report titled Better Branding. Coca-Cola, for example, is a powerful global brand not just because the beverage comes in a familiar red can and customers like the taste, but also because it conveys the image of an optimistic, American product.
According to brand consultancy Interbrand, in today’s global market, growth is increasingly multidimensional and holistic. It’s about getting creative and strategic, and using brands to drive the development of products, services and experiences with the customer at the core. And that requires understanding the true nature of a brand and its relationship to business growth.
Brands are the way people interact with and experience businesses. But brands are complex, because they are created by complex organisations, where it requires everyone and everything to work together in order to create – and live up to – people’s expectations.
When a brand leads the creation of an organisation-wide experience, it can be used as a strategic and driving force that brings business strategy to life, says Interbrand’s Best Global Brands 2016 report.
“Interbrand’s Best Global Brands is the only report and ranking that positions brands according to their brand value, with a unique methodology, recognised by ISO 10668,” says Interbrand Madrid’s managing director, Nancy Villanueva.
Follow the money
So what’s a brand worth in the GCC and Middle East region? Is the methodology of brand valuation anyway different from the one applied elsewhere? “Interbrand’s brand valuation methodology is the first brand valuation method to become ISO certified and it is applicable to all brands globally which comply with the given requirements. It is the valuation methodology we use for Interbrand’s annual report Best Global Brands, which analyses how brands help grow businesses – from delivering on customer expectations to driving economic value,” Villanueva says.
A brand’s valuation is based on three key components that contribute to its cumulative value: the financial performance of the branded products and services; the role the brand plays in influencing customer choice; and the strength the brand has to command a premium price or secure earnings for the company.
MENAP Leader at Millward Brown and MD for Kantar Insights (KSA & Pakistan), Prashant Kolleri, adds: “Brands are increasingly becoming more important in the GCC world. While sheer scale, size and reach would have lent equity to the big brands in the past, that alone is not enough in our fast-changing region. We have rapid digitisation happening, a growing younger-age consumer – a sort of generation shift – and the current economic pressures that force stronger competition and innovation.
He adds: “It will become increasingly important to stand for unique differentiation that can’t be copied by competition so easily in terms of the tangible product and the brand experience. Some of the GCC brands already have regional and global presence. Strong branding is important for this ambitious trend to continue.”
What’s a good brand, anyway?
A brand is an asset. We all accept this. But is there a set of attributes that make a good brand what it is?
“We would first need to define what we consider a good brand. In this year’s Best Global Brands, we analyse the ‘hallmarks’, common characteristics of the best brands globally, which we might also consider traits of good brands in the GCC/Middle East. These are: defining a clear strategy for growth, the blurring of traditional sectors, continuing to borrow from the best and having cohesiveness for customer-
centricity,” Villanueva says.
“Understanding the value of brands is important as brands help protect the company’s future business and financials. We have seen from our own valuation work globally that the value of the top 100 global brands has grown by 132 per cent over the past ten years. The strong brands in our database outperform the stock market (S&P Index) by 72 per cent over a ten-year period,” maintains Kolleri. He adds that the characteristics of a strong brand are not different in GCC vs the rest of the world.
He adds: “Strong brands have a recognisable point of difference that should be meaningful. What is defined as meaningful may change by market and culture. I would say this aspect is still work in progress for a majority of the ‘locally created’ brands in the consumer packaged goods sector in the GCC.”
In today’s complex, customer-centric market, it takes a focused plan and decisive action to maintain and grow a brand’s value. A clear business strategy plus exceptional customer experience is the winning formula for brand value growth.
A detailed version of this article appeared in the Feb 2017 issue of Gulf Marketing Review. To subscribe please call: +971 4 369 7573