Big brands under fire
Blue chips' brand power loss may not be a one-time phenomenon

The ghost of Emperor Nero playing the violin, while Rome burned, haunted a presentation by branding expert Joe Marconi, to an industry conference held last week at the Dorval Hilton.

Marconi, a consultant and author of eight books, addressed hundreds of marketing executives at a combined meeting of the Montreal Marketing Association and the Pharmaceutical Marketing Club of Quebec on the role of brand marketing. But the presentation was given in the midst of troubling time for blue-chip brands, which have seen values erode, and their company stock prices plunge.

"The importance of building a brand identity, to companies and products, not just getting publicity, is finally being recognized among marketers," said Marconi.

The author makes a distinction between brands and products. "A product is something that is made in factory; a brand is something that is bought by the customer. A product can be copied by a competitor; a brand is unique"

During the last ten years, the financial value of brands -- intangible, and therefore often not reflected on companies' financial statements -- has changed the way companies assess their marketing expenditures.

Brands are often worth more than the rest of the organization's assets put together. The insurance company Lloyds of London for example, recently estimated Coca-Cola's brand value at US $83.8 billion, compared to US $19.1 billion for its other physical assets.

However there is evidence that brand power may have reached its apogee, in the wake of changes wrought by the Internet economy.

According to a recent survey, America's strongest, best-known brands were subjected to an unprecedented drop in power -- as measured by how familiar to U.S. executives they are, and favorably they are perceived.

The survey was conducted by Corporate Branding, LLC. It marks the first time in 10 years the firm has been studying brands that the average score of the most powerful ones has declined significantly.

The Stamford Connecticut consulting firm, last year surveyed 8,000 executives at large U.S. companies who graded 575 brands on familiarity, overall reputation, management strength and investment potential. Each respondent rated 40 companies, with scores ranging from one to 100.

The average brand power score fell 7.7 per cent to 50.9 per cent in 1999 among the 115 companies with the highest ratings. Second quintile companies -- numbers 116 to 230 -- dropped almost 11 per cent to 28.9. Scores for bottom quintile companies actually rose 41.5 per cent to 10.9. It is not unusual to see weaker brands experience great gains.

"We've never seen the most powerful brands weaken year-over year the way they did from 1998 to 1999," said James Gregory, Corporate Branding's CEO. "We're talking about a group that includes the world's best-known corporate brands, including Coca-Cola, Walt Disney, FedEx, Microsoft and Johnson & Johnson. More importantly we don't believe this shift is a one-time phenomenon."

Corporate Branding executives attribute the decline in brand power, to the push for consumer and investor attention by hundreds of "new economy" brands that are drowning out their old economy cousins. More significantly, the execs believe there may be a limit to the public's "brandwidth" -- its ability to accept brands.

If the public is indeed saturated, the implications are that for a new brand to be recognized in the hearts and minds of consumers, another must be pushed aside.

"Coke, Disney and other powerhouse brands need to work harder at defending their turf, and adapting to new brand dynamics," said a Corporate Branding spokesman. "Clearly the rules are changing, and now not is the time to become comfortable with a brand's historic position."

The stock market has also been making its voice know on brand power. Coca-Cola Co., Procter & Gamble and Gillette Co. -- the traditionally recognized role models of the importance of brand power -- have seen their stock prices tank, by more than 40 per cent from their 52-week highs. They have plenty of company.

And it's not just a case of Internet brands hurting their old economy cousins. The medium itself is causing problems, as increasingly fragmented audiences are making it harder and harder for marketers to reach broad sections of the population. Ironically this phenomena will likely help smaller brands, which can now increasingly target their message.

The switch shift in customer loyalty from manufacturer to retail brands as evidenced by the popularity of store brands such as President's Choice is also likely reflected in the Corporate Branding survey.

But Marconi does not seem overly concerned. "Brand proliferation has been talked about for a long time," said the marketing guru. "There was a study done by a New York university a couple of years ago that tracked brands over the course of several decades. Shortly after companies started to realize the importance of product positioning, to make brands stand out from their competitors."

Marconi did not mention whether he plays the fiddle.

 

 

Chart caption: All of the top ten brands showed a decline in their "brand power" except Hershey Foods.

 

Diekmeyer can be reached at peter@peterdiekemeyer.com

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