Niche brands seldom get the chance to reach the lofty heights of big-name rivals when it comes to ranking their performance. Overshadowed by the likes of Coca-Cola and Microsoft, they can be left to prop up brand valuation tables that are top-heavy with global products.
Now Marketing Week has been given exclusive access to new research from Millward Brown that ranks the top 100 UK brands by a new measurement called Voltage. Combining a complex mixture of market value data and its own consumer research database, the company has been able to list the brands that are in prime position to grow their share of the UK market whether they are perceived as big or small. Companies will be able to project short- and long-term earnings, and consider with greater insight than ever before how to spend their marketing money, according to the research group.
The study also pits Millward Brown owner WPP Group directly against rival Omnicom, which publishes an annual ranking of brands by global value. According to one industry insider, WPP, led by Sir Martin Sorrell, has been desperate to stick the knife into Interbrand, owned by its key competitor Omnicom, which is headed by president and chief executive John Wren.
A glance at the top ten brands (left) reveals some entrants that industry experts might reasonably have predicted would be present. Google, which has grown exponentially since its launch in 1998, still appears to have plenty of room for manoeuvre, while rival Yahoo!, along with fast-food giant McDonalds, both exhibit good growth potential.
But the table of the top 100 brands includes only one Virgin brand Virgin Mobile while Tesco appears in 57th position. The retailers ranking highlights observers concerns that brands with existing high market share might have a hard task pursuing further growth. Tescos position also fits in with the Citys theory that the supermarket is reaching out to the US because it has little room for UK expansion due to its dominance in this country, potential Competition Commission restrictions, and ongoing criticism from some sections of the media and public.
A BIGGER BITE COULD SPOIL THE APPETITE
Perhaps surprisingly, some less trumpeted brands crop up among UK consumers favourites. Sandwich and coffee chain Pret A Manger had the second highest Voltage ranking, with an eye-opening third spot going to Caf?irect. Monsoon and Tresemm?ere also among the top ten.
Yet here is a note of caution for the smaller brands. Referred to as Little Tigers by Millward Brown and categorised by comparative market share, they may be rubbing their hands in glee to see consumers rate them highly against goliaths such as McDonalds, but experts say there are pitfalls to expansion. Peter Walshe, global brand director at Millward Brown, asks: Can niche, growing brands extend to more people, or do they want to stay specialist? Its a big choice they could destroy the unique strength of the brand.
Sylvie Barr, head of marketing at Caf?irect, believes the trick can be pulled off. We have an alternative business model, she says. From day one, 100% fair trade has been at our core. We are a plc with a difference, in that the way we are set up ensures we remain true to our core values. This is achieved through growers owning a part of the company and being represented on the board.
UNUSUAL BONDING WITH CUSTOMERS
Meanwhile, a spokesman for First Direct, ranked fifth, thinks consideration of its customers will be key to the brands ongoing success. We have a very unusual bond with our customers, he says. We reinvented banking when we launched in 1989 as the first bank with no branches, and we have never closed, taking calls 24/7.
The bank has just announced a raft of mobile phone services. The spokesman adds: Were beyond adolescence as a business and need to continue to develop. Our customers are very savvy and quick to adapt to new technology. We need to stay one step ahead as a business and as a brand.
Conversely, bigger brands are in danger of having reached their peak and may struggle to grow. Walshe says: The Olympics brands have to maintain their leadership. Its about confidence and consistency. He cites BMW as having done amazingly well at adapting its range to suit a wider audience than just premium customers, adding: Consumers dont get tired of things that are good, or an expression of that, in the way marketers do. BMW can maintain kudos and speciality, as it has with Mini, when extending into the mass market. It has been more successful at doing that than Mercedes, by being more rigorous about quality.
Richard Hudson, general manager of marketing communications at BMW UK, seizes on this point. We have expanded into areas weve not previously been in, such as with the X3 and X5, he says. But when choosing a new segment, we go in with core brand values and beliefs, still offering a premium driving experience. We dont pick segments because there is obvious volume or because the superficial brand name can be exploited. The key is to not dilute the brand.
It will be interesting to see if the Little Tigers can stay true to their values as they grow. Pret, for example, is 33%-owned by McDonalds. How many respondents realised this, and would it have had an effect on the chains ranking if they had?
MAP OUT THE RELATIONSHIP
Consumer perceptions are a key input into the Voltage ranking. Walshe explains that a brands relationship with its market can be mapped out as a pyramid. The bottom layer is awareness, or the proportion of consumers with an active knowledge of the brand. The second layer is relevance does the product meet a customers specific needs?
Performance comes next: does it meet or exceed category standards, as well as delivering the brandowners promised experience? The next level is reached by brands that have some advantage over others in the category, for example pricing or innovation. Those brands in the top layer demonstrate a unique advantage for individual customers they have formed the best relationships, and therefore attain the best voltage ranking.
Walshe says: Voltage represents a real competitive advantage. A brand can have lots of bonding, but be quite weak and shed a lot of people when measured against higher levels of the pyramid.
Millward Brown claims this is the only study of such breadth to take into account individual brands, rather than just brand-owning companies. Voltage feeds into the global BrandZ Top 100 Brand Ranking, also published for the first time this year.
Walshe says: People have already begun to quote BrandZ and say its better [than Interbrands survey] because its more rigorous and consistent. Consumers are so important to market-facing brands. If you dont factor in their thoughts on strengths and weaknesses, you miss quite a chunk.
Value alone is not of much interest what can you do with it? This shows how metrics relate to the brand and demonstrates return on investment. It helps illuminate the actions you need to take to defend or grow value in the short or long term.
SOUND BUSINESS SENSE?
Needless to say, Interbrand is vehement in response. Jan Lindemann, global managing director, says: Millward Brown has tried to dress up a conventional brand equity study such as BrandZ as a comprehensive brand valuation model.
The result is a statistical black box that mixes market research results with historical financial data, claiming to represent the value of the future earnings of the brands. This is financially unsound. Meaningful brand valuations are much more than a brand equity model with lots of data. They require an in-depth understanding of the interaction between the brand and the underlying business.
Millward Brown has put a lot of effort into emulating the Interbrand method. While we prepare comprehensive, brand-specific forecasts, Millward Brown merely locks in an historic profit margin that is then forecast according to industry and share trends. It has assumed that operating margin will remain constant forever. Our methodology is in line with valuation approaches from the financial and business community.
Yet Lauren Henderson, European director of brand analysis and strategy at Interpublic Groupowned FutureBrand, argues that all such studies are much of a muchness: BrandZ brings another voice to the market by trying to quantify brands. But although the inputs and robustness may be different, the surveys are actually very similar.
If companies were to commission a study using only internal data, things may be different, but I dont think thats going to happen. I would warn any company against using this type of value for merger and acquisition activity or deals. The surveys are based on publicly available information, which can vary a lot.
Libby Child, managing partner of business relationship consultancy Aprais, and a former FutureBrand European director, concurs: Brand valuation and related tools have limitations, and seem to be more geared to publicising the company behind the tables than genuinely helping the individual brand companies. It can only ever be used as a broad guide as methodology is partially subjective.
But Child does add that studies like BrandZ can remind the City, shareholders and chief executives that brands have an intrinsic financial value, helping marketing directors build their case for long-term brand investment.
As for the money men, David Forster, a director of IBIS Capital, believes the benefit of the Millward Brown study is that it is forward-facing. Interbrand seeks to tell us where brands rank currently, whereas the Millward Brown survey ranks brands that have the best potential for growth, he says.
As an investor, the latter is more interesting, as making money in the stock market is all about not knowing where a company is today, but where it might be in two to three years or more. Being able to identify the key brands of tomorrow early will be of significant value if the methodology stacks up over time.
BrandZ has caused a ripple of interest in the marketing community because it is the first fresh, wide-ranging ranking system for several years. It remains to be seen if the intrigue will last beyond this great unveiling, or if this will become just another wad of statistics cluttering the desks of analysts and chief executives.
Commentary by Peter Walshe, global brands director, Millward Brown
Consumers are the lifeblood of many brands. Those brands they relate to are the ones they will buy. BrandZ measures those relationships. If a brand converts more people than its competitors from just knowing about the brand up to a level of bonding where they understand why the brand is different, what it stands for, and why it is better, then it will have growth potential. This is called Brand Voltage.
The Top 100 UK brands measured by us here have the most potential to grow. Voltage is a measure of how effectively a brand converts consumers from knowing a brand, to bonding with the brand where they understand what it stands for, and why it is different and better. These brands have better growth potential.
Bonding % is the share of consumers that bond with the brand from the total sample size. The BrandZ study, conducted annually by Millward Brown, measures the brand equity of more than 30,000 global consumer-facing brands, and interviews 650,000 consumers globally. Consumer perception of a brand is a key input in determining brand value because brands are a combination of business performance, product delivery, clarity of positioning and leadership.