AUGUST 6, 2001
COVER STORY
The Best Global
Brands
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Together with leading brand
consultant Interbrand, we've ranked the leaders around the
world
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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
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