Together with leading brand consultant
Interbrand, we've ranked the leaders around the world
Not long after she started her new job as head of
Boeing Co.'s (BA ) marketing
and public-relations department in 1999, Ford veteran Judith Muhlberg uttered
the "B" word in a meeting of top executives. Immediately, a senior manager
stopped her and said: "Judith, do you know what industry you're in and what
company you've come to? We aren't a consumer-goods company, and we don't have a
brand."
Boeing has come a long way since then. Today, branding matters in
a big way at the aerospace giant. The company's first-ever brand strategy was
formalized last year as part of an overall strategy to extend its reach beyond
the commercial-airplane business. Now, everything from Boeing's logo to its plan
to relocate its corporate headquarters from Seattle to Chicago has been devised
with the Boeing brand in mind.
A belief in the power of brands and brand
management has spread far beyond the traditional consumer-goods marketers who
invented the discipline. For companies in almost every industry, brands are
important in a way they never were before. Why? For one thing, customers for
everything from soda pop to software now have a staggering number of choices.
And the Net can bring the full array to any computer screen with a click of the
mouse. Without trusted brand names as touchstones, shopping for almost anything
would be overwhelming. Meanwhile, in a global economy, corporations must reach
customers in markets far from their home base. A strong brand acts as an
ambassador when companies enter new markets or offer new products. It also
shapes corporate strategy, helping to define which initiatives fit within the
brand concept and which do not.
That's why companies that once measured
their worth strictly in terms of tangibles such as factories, inventory, and
cash have realized that a vibrant brand, with its implicit promise of quality,
is an equally important asset. A brand has the power to command a premium price
among customers and a premium stock price among investors. It can boost earnings
and cushion cyclical downturns--and now, a brand's value can be
measured.
That's exactly what we have done in our first annual report
card of the world's most potent brands. To help assess which companies are
managing their brands with skill and which ones aren't, BusinessWeek has
teamed up with Interbrand
Corp., a pioneering brand consultancy in New York, to offer a ranking of 100
global brands by dollar value. The ranking by Interbrand, a unit of Omnicom
Group Inc. (OMC ), is based
on a rigorous analysis of brand strength.
The basic theory is that strong
brands have the power to increase sales and earnings. Interbrand tries to figure
how much of a boost each brand delivers, how stable that boost is likely to be
in the future, and how much those future earnings are worth today. Many of the
brand names in our table are also the name of the parent company. The assigned
value, however, is strictly for the brand. Coca-Cola's (KO ) value is based on products
carrying the Coke name, not on Sprite or Fanta.
Some big household brands
won't turn up in our ranking at all. Only global brands, generally defined as
selling at least 20% outside of their home country or region, are included. That
eliminates some familiar names such as Gatorade, whose sales are overwhelmingly
in the U.S. In addition, each brand must have enough publicly available data for
Interbrand to make a reliable assessment. That knocks out private companies such
as Mars Inc. and even some publicly traded ones that don't break out enough
data.
In other cases, it's too difficult to separate the strength of the
brand from other factors. That's the case with airlines, where schedules and
hubs often leave travelers with little choice when buying tickets, no matter
what their feeling about a particular airline. Interbrand ranked some
corporations, including Johnson & Johnson (JNJ ) and Procter & Gamble
Co. (PG ), based on their
portfolios of brands. The portfolio ranking follows the table of 100
brands.
DE RIGUEUR. This kind of rigorous assessment of brand
value has been required for more than a decade in Interbrand's original market,
Britain, where measures of brand value often must be included on corporate
balance sheets. Some experts believe that the U.S. and other countries should
also require companies to break out brand valuations for investors. While other
rankings rely on surveys of fleeting consumer perceptions, we believe our
analysis will provide a reliable benchmark for comparison in years to
come.
The ranking reflects the important developments of the past year
and shows just how much they cost in brand value. Fewer than half of the 74
brands for which Interbrand had a 2000 valuation showed a gain in value in 2001.
Mighty Coca-Cola is still the world's most powerful brand, but the name lost 5%
of its value last year, according to Interbrand's calculations, as it struggled
against its longtime rival Pepsi (PEP ), ranked at No. 44. If
No. 2 Microsoft (MSFT )
hadn't been mired in antitrust troubles and an overall technology
slowdown--causing it to shed 7% of its brand value--it would have cruised into
the top spot on the list.
The dot-com meltdown claimed a lot of
casualties. Yahoo! (YHOO
), at No. 59, and Amazon.com (AMZN ), at No. 76, while
still formidable brands, nevertheless lost 31% each of their brand value amid
widespread uncertainty about their ability to deliver earnings in the future.
Still, the news wasn't all bad. No. 88-ranked Starbucks (SBUX ) was the biggest gainer
in percentage terms, adding 32% in value to its fast-growing brand, which now
encompasses 4,435 stores on three continents as well as branded coffee
paraphernalia, music, and candy.
To see just how much--and how fast--a
mismanaged brand can lose value, take a look at No. 8-ranked Ford. Everyone
knows that Ford Motor Co. (F
) has had a tough year. Between the Firestone tire fiasco and a series of
embarrassing quality gaffes, little has gone right for the Detroit carmaker.
Investors certainly have been hurt: First-half earnings from continuing
operations are down 91% from a year ago. But what does the blow to Ford's
reputation really cost? When a brand is tarnished, its power to attract
customers and command top prices diminishes--and so its value drops. That's what
the numbers show for Ford. By Interbrand's calculations, the carmaker's name is
worth $30.1 billion today--$6.3 billion less than last year.
SEA
CHANGE. Numbers such as these make it clear why companies in all industries
are suddenly becoming more vigilant brand stewards. Branding used to be
practiced by companies that sold packaged goods to consumers--and almost no one
else. Developing a brand included advertising, package design, and maybe a few
promotions and was seen as far less central to the corporate mission than
serious stuff such as floating debentures, quickening inventory turns, or
boosting capacity utilization.
That was in a different millennium. As the
new one unfolds, brands have been taking center stage in a sweeping shift that
some compare to the wave of mass marketing that occurred in the years following
World War II. Pharmaceutical companies, which have been liberated to promote
their products directly to consumers, have been spending hundreds of millions to
create entirely new brands such as Viagra and Claritin. Branding efforts in the
financial services sector have taken off as that industry has consolidated and
as federal legislation has knocked down the walls that used to separate banks
from brokerage houses. Professional services companies such as Andersen
Consulting, rebranded as Accenture, have realized that conveying a sense of
trust and shared mission is as important as technical competence in winning
multimillion-dollar contracts. Universities, government agencies, entertainment
properties, and even individuals--Michael Jordan, Martha Stewart, Madonna--have
come to be regarded as brands: Their names stand for an implicit promise of
quality, innovation, or reliability.
ON A MISSION. That's why
executives who earned their stripes at consumer-goods powerhouses such as
Procter & Gamble and PepsiCo Inc. are suddenly turning up in the top ranks
of companies that have nothing to do with detergent or snack foods. Back in
1994, General Motors Corp. (GM ) was one of the first when
it turned to Ronald L. Zarella, former president of Bausch & Lomb Inc. (BOL ), to teach it brand
management. Citigroup (C ),
on the way to building Citibank into the 13th-ranked brand on our list,
recruited a slew of marketing professionals from H.J. Heinz (HNZ ), Philip Morris (MO ), and other
consumer-products companies.
Why do companies that sell to other
businesses, rather than directly to consumers, need to manage their brands? For
the same reason that Coke and P&G do: to give themselves a leg up in the
marketplace. Just look what it did for No. 3-ranked IBM (IBM ). Branding played a huge
role in the computer maker's remarkable reinvention in the 1990s under Chairman
Louis V. Gerstner Jr. One of Gerstner's first moves was to bring in a marketing
czar steeped in branding, Abby Kohnstamm, his longtime associate at American
Express Co. (AXP )
Together, Gerstner and Kohnstamm reasserted the primacy of the brand in an
organization that had degenerated into warring product groups. In a move that
shocked Madison Avenue, Kohnstamm in 1994 consolidated all of Big Blue's
advertising at a single agency, Ogilvy & Mather Worldwide Inc. Her goal was
to give the far-flung company a unified and consistent message across all its
products, services, and geographic markets.
After it took over, Ogilvy
positioned IBM as a wise partner that could guide companies through their
transformation into nimble, Net-savvy players. When Internet mania was in full
swing, IBM's slice-of-life ads lampooned the excesses of Web culture. And when
the dot-coms imploded, IBM was well positioned as "a voice of reason--not about
hype, but about steering a clear course," according to Maureen McGuire, IBM's
vice-president for integrated marketing communications worldwide. Not
surprisingly, in a year in which most technology brands took a bath in terms of
their valuation, IBM held nearly steady, at $53 billion.
For technology
marketers, IBM has become the model. Witness German software giant SAP (SAP ), a brand that came in at
No. 43 in our ranking. A massive but muddled advertising campaign in 1999 had
left employees just as confused as customers about what the company's brand
stood for. SAP hired a marketing veteran from Sony Corp. (SNE ), Martin Homlish, to
orchestrate its next moves. "It became clear to us that technology marketing is
not just talking about your technology," says Hasso Plattner, SAP's co-CEO. "You
need a clear message."
When Homlish arrived at SAP as chief marketing
officer, he and the seasoned marketing executives that he recruited first set
about establishing a coherent message for the company. "The first mission was to
have a mission," says Susan Popper, senior vice-president for global advertising
and an ad-agency veteran. "We had to move from a product-driven to a
brand-driven culture."
Homlish insisted that all the company's product
names, logos, brochures, and Web pages have a consistent look: "speaking
SAPanese," he calls it. To make that easier to accomplish, he borrowed a page
directly out of the IBM playbook and consolidated all global advertising at
Ogilvy & Mather. So far, the marketing pros seem to be succeeding: SAP was
that rare phenomenon--a technology company with a brand that actually increased
in value over the past year, posting a 3% gain.
A strong brand not only
helps customers understand an organization but it also imparts a sense of
mission inside the company. Since employees embody the brand to consumers, it's
vital that they understand and embrace brand values. "If they can't articulate
to the outside world what the brand is all about, then who can?" says Shelly
Lazarus, chairman of Ogilvy & Mather, whose clients, in addition to IBM and
SAP, include American Express and Ford, both in the top 20 in our brand ranking.
"Once an enterprise understands what the brand is all about, it gives direction
to the whole enterprise. You know what products you're supposed to make and not
make. You know how you're supposed to answer your telephone. You know how you're
supposed to package things. It gives a set of principles to an entire
enterprise."
UPWARDLY MOBILE? When managers have a clearly
articulated sense of the brand, it can also help to guide basic strategy. When
Boeing, No. 63 in our ranking, thought about expanding into areas beyond its
core aircraft operations, top executives thought carefully about what, exactly,
the Boeing brand stood for. Once the organization defined itself as a global
aerospace-technology company instead of just an airplane builder, moving into
satellites and aircraft services became easy decisions.
Likewise, a
strong commitment to its brand strategy helped Samsung Electronics Co. (SSNLF ), whose Samsung brand
ranked No. 42 on our list, make the tough decision to ditch Wal-Mart Stores Inc.
(WMT ) as a major retailer
of its products. Samsung, which gained 22% in brand value last year, is trying
to move up the value chain. Selling Samsung products at Wal-Mart made sense back
when the South Korean electronics company aspired to churning out low-end
electronic gadgets. Now, however, the company is attempting to move into more
innovative, higher-margin items, such as voice-activated mobile phones that
double as digital music players and personal digital assistants. Those are
products that many consumers may be trying for the first time, thus giving a new
brand like Samsung a big opportunity. "That transition and our strategy to move
upmarket very aggressively are the main reasons why our brand improved rapidly,"
says Eric Kim, Samsung's marketing chief. Having its products appear in a
mass-market discounter such as Wal-Mart hampered Samsung's attempts to build a
premium image.
Samsung has good reason to worry about protecting and
enhancing its brand integrity. Companies that don't do so run the risk of seeing
their brands degenerate into mere commodities that customers shop for strictly
on the basis of price. That drift can lop off millions in brand value and market
capitalization, sometimes with astonishing speed. Philip Morris Cos. found that
out back in 1993 when it slashed the price of its flagship Marlboro cigarette
brand on what came to be known as Marlboro Friday.
That tacit
acknowledgement that the rise of discount brands was burning into Marlboro's
market share led investors to fear that the big brands were losing their pricing
clout. The result: an immediate plunge in stock prices for consumer-goods
companies across the board. The episode "really raised the bar on
accountability," recalls Jan Lindemann, global director for brand valuation at
Interbrand. "It was the point at which marketing directors and brand managers
realized that what they did had a direct effect on shareholder value. Marketing
departments had to recognize that brands and brand managers were going to be
held more accountable."
Marlboro Friday turned out to be a wake-up call,
not a death knell for big brands. At many companies, the soul-searching that
followed ushered in a period of increased marketing budgets, stepped-up product
innovation, and experiments with more compelling ways to reach consumers.
Companies have learned the importance of the customer experience. They're
scrutinizing every customer contact and every activity, from call centers to the
way the company's trucks are painted to the selection of magazines in the lobby,
to make sure they are in sync with the core values of the
brand.
PERKING MERRILY. Perhaps no brand has done a better job of
that than Starbucks. In 20 years, the Seattle company has grown from 18 coffee
shops to 4,435. Over that entire period, it has spent maybe $20 million on
traditional advertising, a pittance next to the $30 million that Pampers, ranked
below it at No. 92, spent just last year. Instead, Starbucks plowed potential ad
money into employee benefits. It was one of the first companies to offer
part-timers stock options and health benefits. Why? Because for the Starbucks
brand, the experience the consumer has in the store is crucial. A disgruntled
employee or dirty restroom would break the pact Starbucks has with its
customers. "If we want to exceed the trust of our customers, then we first have
to build trust with our people," says Howard Schultz, Starbucks' chairman.
"Brand has to start with the culture and naturally extend to our
customers."
Employee benefits as a marketing tool? Why not, if that's
what the brand requires. Besides, conventional advertising is no sure thing. As
the dot-com bubble proved, massive advertising is not the same as
brand-building. At the height of the boom, startups spent tens of millions of
investor dollars familiarizing Web users with such new brands as outpost.com,
eToys, and Pets.com. In the end, too many of the dot-com ads never got around to
telling consumers what the brands stood for--or even what products or services
the company offered. Now, many of those names are disappearing, along with the
sock puppets and airborne gerbils that were their mascots.
Brand gurus
predict that demands on brands will only increase in the coming decades. The 72
million members of Generation Y, who are now reaching their mid-20s, have
exhibited the most social activism since the baby boomers in the 1960s. They are
likely to base much of their consumption on the values they ascribe to the
companies providing goods and services, predicts brand consultant Marc Gobé,
author of Emotional Branding: The New Paradigm for Connecting Brands to
People. This means that companies will have to make a far greater effort to
ensure that the values communicated to consumers are consistent with its
internal values. If it is not, they will be exposed. "You can fool some of the
people some of the time--until they have a bad experience with your brand,"
warns David F. D'Alessandro, CEO of John Hancock Financial Services Inc. and
author of Brand Warfare: 10 Rules for Building the Killer Brand. Those
that make good on their promises, though, will be rewarded with a more loyal
consumer base--and a brand that steadily grows in value. As managers are
learning, a brand is not just an abstract concept. It's a treasured corporate
asset.
By Gerry Khermouch in New
York, with Stanley Holmes in Seattle and Moon Ihlwan in Seoul
