Global brands - how the fickle become faithful

A common complaint from some of the world’s biggest brands these days is that they cannot convince consumers — especially younger ones — to stay loyal. Time was that once hooked, a consumer would keep buying the same familiar brand. No longer. Millennials in particular want to try different things, making them frustratingly “brand-fickle” to those selling them goods and services.

Yet the world’s 100 biggest brands still command a significant premium over others and that value increased by 3 per cent to $3.4tn this year, according to the latest BrandZ rankings compiled by Millward Brown, the research agency.

Over the past 10 years, the value of the top 100 brands has more than doubled — increasing by 133 per cent. That value is calculated in terms of financial measures such as revenues and profitability combined with surveys of how consumers view brands.

What has changed over the decade, however, is the relative fortunes of different categories of brands.

In 2006 — when BrandZ issued its first rankings — the top five were leaders in their respective fields. Each came from a different sector — Microsoft (technology) headed the list, followed by GE (industrial conglomerate), Coca-Cola (soft drinks), China Mobile (telecoms) and Marlboro (tobacco).

As the power of digital communication has grown, technology companies have displaced other sectors at the top of the listing. This year, four of the top five most valuable brands are technology companies: Google, with a brand value of $229bn, Apple ($228bn), Microsoft ($122bn) and Facebook ($103bn). AT&T, valued at $107bn and ranked fourth, is in telecoms.

Elspeth Cheung, head of BrandZ valuation at Millward Brown, says: “The top 10 used to be dominated by consumer goods. This year, it’s technology.”

She says that as consumers have become less brand loyal, so companies are having to change their marketing strategies — through greater use of digital methods, which has enhanced the value of these technology brands.

“Those born in the digital age can access information easily to shift to whatever brand they find interesting. So companies are trying to engage consumers through the use of digital means, through social media,” says Ms Cheung.

Coca-Cola, for the first time, has fallen out of the BrandZ top 10 and is now ranked 13. The 4 per cent drop in its brand value, compared with 2015, reflects the backlash against sugary soft drinks from health officials over the past year.

Nonetheless, Coca-Cola’s brand value has almost doubled over the past decade — from $41bn in 2006 to $80bn in 2016, reflecting primarily the growth in the company’s sales and profits.

However, that value is a fraction of today’s leader — Google’s $229bn. In 2006, when Coca-Cola was ranked third, its brand value was two-thirds of that of Microsoft, then the world’s most valuable brand, with a $62bn valuation.

Other big names have followed a similar pattern, including Marlboro, McDonald’s and Louis Vuitton in luxury, which have all fallen down the rankings over the past decade but still command a substantially higher brand value compared with 10 years ago.

Liz Claydon, partner and UK head of consumer markets at KPMG, the professional services firm which recently released a study of companies delivering the highest organic growth rates, says that agility, innovation and staying close to consumers are key to outperformance.

“You can get superior brand growth almost regardless of size and category, so long as you do not rest on your laurels but are clear about your strategy and execute against it,” she says.

In fact, 54 of the brands in the BrandZ top 100 of a decade ago are still in today’s list, but 46 have been replaced by new entrants.

“This shows how a strong brand can sustain its value over time, but also illustrates the potential . . . for new brands to shake up the status quo,” says Ms Cheung.