Strong Names Beat The Market

Great article from the Financial Times about the powers and importance of Branding, especially in light of the worry over an impending market slowdown

Market Trends: Strong Names Beat The Market (via FT.com)

The question, though, is whether companies will have the courage, commitment and discipline to stick to their brand strategies – or will they just slash the communications budgets as they used to when things get tough?

Some choice quotes:

  • “Some of the world’s most successful companies are successful because they built their brand along with the business,” she (Joanna Sedon, chief executive of Millward Brown Optimor) adds. “Orange is a good example of that. They invested in the brand before they even had a business.”
  • The Millward Brown study showed that products and companies with strong brand value enjoyed markedly stronger returns in good times and also during the recent market downturn.
    Hayes Roth, chief marketing officer of Landor Associates, the consultancy, says: “There is remarkable consistency between strong brand value and stock performance.”
    “Brand power can be significantly linked to stock market strength, adding on average – and depending on category – more than 25 per cent market value to an organisation.”
  • Ms Seddon believes that the drivers behind this outperformance include the fact that strong brands can more readily increase their revenues and market share. This is because people are more attracted to the products and are more likely to be loyal to them.
  • “You also may have the possibility of achieving a price premium,” adds Mr Nuhn. “Apple’s products sell for roughly 20 per cent more than equivalents from rivals, which will affect margins.”
  • Studies have shown that a strong brand affects not only demand but also the supply chain. For example, if you have a strong brand such as Goldman Sachs (NYSE:GS) or Microsoft it is easier to attract top graduates from business schools. “You can pay them less and they will stay longer, you can get better terms with suppliers. If you have a strong brand and invest in new products or markets you can get somebody else to take your investment risk,” says Ms Seddon.
  • “…strong brands will see you through and leave you in a far better place.”

Also on the importance of maintaining your core brand identity (and not overextending your brand)

    “Look at Starbucks. You can do a world class job of building brands and do every­thing right but when you rapidly expand your global footprint it is hard to maintain what made the brand great in the first place. They over-extended themselves,” says Mr Roth.

    “McDonald’s suffered with the Americanisation of the world but they went back and reinvented themselves and they have moved up the list,” he adds.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s