In a global economy subject to changing market dynamics and heightened competition, the role of brands has never been greater. They serve as a route map for purchasing behaviour and, when managed properly, accrue significant value for their owners. But how do you evaluate a brand and what makes it special?
First, it is helpful to review valuation and evaluation approaches. For years, most brand owners relied on marketing-oriented measures such as awareness and esteem. Today they use more innovative and financially-driven techniques to better quantify the value that brands represent.
These techniques draw from a mix of traditional business valuation models and economic tools that measure brand performance in terms of monetary quantification, historical benchmarking, competitive assessment and return on investment . This allow companies to evaluate their brands more rigorously and establish criteria with which to govern their development in the future.
So what is the right answer for evaluating brand performance? Some argue that financial models in isolation are unreliable, given fluctuations in corporate profitability. Some contend that marketing measures alone are unsuited to the realities of today's management needs. Others would argue that no single methodology is credible enough to encompass all the dimensions and complexities of a full evaluation of a brand.
These points of view mean there is a proliferation of measurement approaches that attempt to bridge the traditionally separate considerations of finance and marketing needed to provide a holistic view of brand performance.
For the purposes of this article, 23 models that assessed the value of brands were examined, some more financially driven, others employing traditional marketing techniques. Many offered brand rankings based on their methodologies.
From those rankings, 18 brands that repeatedly appear at the top of the lists were identified (see pictures right) to determine why they come out on top regardless of the criteria used.
That they do is perhaps no surprise, as they are widely recognised as being leaders in best practice in brand investment and management. They perform consistently well against a broad range of factors, including tangible equity, customer purchasing habits and market stature because they share certain characteristics and approaches that contribute to their success as a brand and as a business.
These five notable qualities break down into three principal attributes and two characteristics. The first principal attribute is a compelling idea.There is one behind every brand, and it captures customers' attention and loyalty by filling an unmet or unsatisfied need.
Second is a resolute core purpose and supporting values. These remain in place even though the business strategy and tactics must be regularly revised to address and take advantage of change.
From the 7 Series to the Mini, for example, the BMW brand stands for 'the ultimate driving machine'. The target audience for each model differs and communications project different expectations, but the core purpose remains the same.
The third principal attribute is a central organisational principle.
The brand position, purpose and values are employed as management levers to guide decision-making.
The two shared characteristics are that most leading brands are American and commodities. Indeed, of the 18 leading brands, 15 are from the US.
Does this mean that although a leading brand can originate from anywhere, the US is better at the practice of branding than other countries?
Certainly, its dominance may be attributed to the entrepreneurial nature of American society. US companies recognised early on that to succeed in business they needed to differentiate themselves in ways that could not be copied by other companies. If differentiation is the goal, branding is the process. And if a brand is a major source of value, it requires investment and management.
This leads to the fifth notable quality - that most leading brands are commodities. Coca-Cola, Pepsi and Starbucks products and services are easily substituted; BMW, Toyota and Harley-Davidson face plenty of competition; and there are many mobile phone alternatives to Nokia.
Brands are about choice, and these brands have to compete in a crowded and noisy space. They must therefore continually work out what makes them special to so many people and discover how they can continue to innovate and meet their needs.
In addition to these five qualities, there is another set of distinctive traits that make brands great. First is consistency in delivering on their promise. Leading brands communicate their promise to the market, encouraging customers to purchase the product or service. At the time of customer decision, they must do everything within their power to deliver on the promise. Everything the customer experiences in the process of evaluation, trial, purchase and adoption is a verification of the original promise.
Second is superior products and processes. Brand leaders are well aware of the sources of brand value. To attract customers and maintain their loyalty, brand leaders must offer them products or services that are superior to others, thereby reducing the risk that the customer will not be satisfied.
Nokia has taken the view that it cannot rely solely on suppliers to deliver the components that comprise the products, so it is buying up its suppliers in order to have control of the whole process.
Third is distinctive positioning and customer experience. Brand leaders capture what is special about their offering, convey it to the desired audience and allow customers to experience it. IKEA has opened up the furniture showroom to touch like no other retailer. Chairs are pounded with machinery to demonstrate durability, displays are elaborate and constantly changing, and customers are invited to stay by means of a restaurant and product-knowledge sessions.
Fourth is alignment of internal and external commitment to the brand.
Marketers and brand managers focus their strategies on the customer. In general, employees have been the last to know about the latest marketing campaign, or have not been appropriately trained in the brand values.
Leading brands understand that an internal culture supportive of the brand strategy has a far better chance of delivering a consistent yet differentiated experience. The internal values are aligned with brand values to shape the organisation's culture and embed the core purpose.
The true test of a leading brand is whether employees' commitment to the brand is high, because that will help keep customer commitment high. Those who live the brand will deliver the brand.
Finally, there is the ability to stay relevant. Leading brands constantly maintain their relevance, ensuring ownership of points of difference.
They sustain their credibility by increasing customers' trust and loyalty to them.
For every great brand there are scores of failures. Even once-successful brands lose their way, and in most cases the causes are obvious, but are recognised too late.
Brands most commonly lose their way when they are taken for granted.
This can happen when brand owners treat them as a cash cow. This causes erosion of the original brand idea, as it marginalises the customer experience.
There is a popular story told in business schools. For many years a man ran a successful roadside restaurant. Word-of-mouth recommendations from regular customers were so effective that the restaurant itself became the destination, rather than a passing stop, for its good value, high-quality home cooking and its smart, well-trained and well-paid staff.
It was not a showy place but standards were high. It was a profitable business.
The owner was proud when his son got a place at a good business school and he gladly paid for the education he had never received. Following his studies, the son joined his father in the business, perhaps with the goal of franchising the concept.
Following a detailed analysis of the restaurant, he recommended reducing the number of staff, bringing in more junior people who could be paid less, and buying lower-grade food, which would be cheaper.
The father was wary of the changes and concerned for his staff, but went along with them. Food, service and cleanliness all declined in quality and staff turnover became a problem. Regulars deserted the restaurant and word-of-mouth recommendations stopped.
The son decided to advertise on billboards in the city and along the road to the restaurant and to run special promotional offers. This provided a small boost, but new customers were quick to decide that their expectations were not met.
The restaurant limped along until it was forced to close.
This story is used to encourage students not to be rigid in their approach and to be sure to include employees and customers in any changes.
But the tale also has brand lessons. The son saw a cash cow that could be manipulated for greater profit. He did not recognise that if he disturbed what made the brand great in the first place, he ran the risk of breaking its promise.
It also shows that a good product is only as good as the accompanying service. This issue is being faced today by McDonald's. Last year, The Economist pointed out that the chain has been ranked the worst company for customer satisfaction in the US for nearly a decade.
There is no magic formula for creating a successful brand. However, brands that lose their shine should compare their past with their present and look to the future with regard to three areas: relevance, differentiation and credibility.
Once a brand loses touch with its customer or ignores a potential audience, it loses relevance. Successful brands understand the wants of their stakeholders and tailor their offering to maintain its relevance. Differentiation is a critical component of the branding process. And because brands are based on promises and trust, they must be credible. Customers grant companies the right to provide them with what they need.
Jim Collins, author of Good to Great, says that to build a great company, "you have to have a strong set of core values" that you never compromise. "If you are not willing to sacrifice your profits, if you're not willing to endure the pain for those values, then you will not build a great company," he writes.
Brands that lose direction often do so because they depart from their core values. Thus it follows that they can recover by returning to them and by answering such questions as: what is our lasting influence, and what void will exist if we were to disappear? A frank appraisal of what made the brand great in the first place, coupled with its innovative reinvention, can make it as great as it once was.
Anyone with responsibility for building a brand needs to be creative, intelligent, innovative, venturesome, nurturing, disciplined and service-focused. They must master three primary tasks: to embody the brand itself, to understand the underlying sources of brand value and protect and build on them, and to continually search out what makes the brand unique.
'What makes brands great?' is an extract from Brands and Branding. The book is co-authored by Rita Clifton and John Simmons in conjunction with 17 branding experts. It is published by The Economist and Profile Books at £20. Readers of Marketing can buy copies for £18 with free UK postage and packing by calling 020 7421 6182.