Global brands: Google pips Apple in popularity

The world's "sexiest" brands in 2014 were high-fashion labels Gucci and Prada, while the most "fun" were Facebook and clothing retailer H&M.

The findings, says Millward Brown Optimor, which compiled this year's BrandZ top 100 brand rankings, reflect the fact that the developed world is recovering from the financial crisis and confidence is returning to consumers in its markets.

The top 10 brands in the US, continental Europe and the UK grew strongly in value over the past 12 months, while brands from many emerging markets suffered. No brands from India and only one from the African continent made the rankings this year, and there were fewer from China than in 2013.

"We are seeing signs of consumer confidence returning and this has been exploited by strong brands," says Peter Walshe, global director of BrandZ. "These brands got a real wake-up call in the recessionary period after 2008. Strong brands have taken on that message and have thought hard about their customers, and how to be relevant to them."

Steve Wilkinson, managing partner of UK and Ireland markets, Ernst & Young, says consumer products companies led the way over the past five years. "But we've had a tectonic shift in the last twelve months. We've been reminded of the natural volatility of emerging markets."

Overall, the combined value of the top 100 brands grew 12 per cent from $2.6tn to $2.9tn, beating the average growth rate of 9 per cent a year since the rankings began in 2006. During the recession, the value of the top 100 brands grew 8 per cent a year on average. Only 18 of the top 100 brands lost value this year, compared with an average of 30 each year since 2006 and 38 a year during the recession.

"The 'power' of brands has grown substantially since the recession, that is, more consumers are purchasing solely based on the brand," says Mr Walshe. "There really is something different about this top 100."

Mr Walshe points out that those joining the list for the first time - such as Twitter and PayPal - have more than two-and-a-half times the 'brand power' of an average company. "Newcomers are really playing the branding game," he says.

"One of the themes is that these brands are becoming part of our lives," says Elspeth Cheung, head of BrandZ valuation at Millward Brown Optimor. "The other big theme is globalisation as western brands are coming back this year."

Despite the new entrants, the names at the top are familiar. Technology companies dominate the top 10, although their order in terms of brand value has shifted.

Google has bounced back as the most valuable global brand, with a brand value of $159bn, up 40 per cent since 2013. Google held the number one slot from 2007 until 2010, but fell to second or third place in the years since 2010.

Apple, in turn, has slipped down to second place. Its brand value of $148bn has fallen by a fifth over the year, while the brand value of the technology sector as a whole has grown by 16 per cent. "Different brands have different strengths," says Ms Cheung. "Google performs particularly highly on being meaningful to consumers."

She argues that the more powerful a brand a company has, the greater a premium it can charge for the same product compared with competitors.

The growing power of social media is demonstrated by the appearance for the first time in the top 100 of Twitter - 71st with a brand value of $13.8bn - and LinkedIn - 78th at $12.4bn. The fastest riser in the top 100 is the Chinese portal Tencent, whose value rose 97 per cent over the year, making it the most valuable Asian and Chinese brand globally. Facebook was the next fastest riser, up 68 per cent.

Overall, just under a fifth of the top 100 brands are in the technology category and - with 18 brands valued at $827bn combined - account for nearly a third of the total value.

The next most valuable sector is finance, which has many more brands but, at $584bn, less than three-quarters of the value.

Brands that have earned consumers' trust score highly in the rankings. Global banks, unsurprisingly, scored particularly badly on this metric, while the three leading logistics businesses UPS, FedEx and DHL - boosted by the rise in internet shopping and thus parcel delivery - scored particularly well.

Consumers also trust Samsung - maker of the popular Galaxy mobile phone - to deliver good products at a reasonable price, even if they are not regarded as truly original.

The brand which has grown most in value since 2006 is Subway, the US sandwich franchise company, albeit from a low base. Subway's brand value has risen more than 7,000 per cent over that period, considerably outperforming the next highest growth brands - AT&T and Amazon - whose value has grown by less than 1,000 per cent each.

BrandZ has identified some themes common to the ranking's most successful brands. One key determinant of success, it says, is how a company creates or maintains "positive differentiation" of its brand.

One example it cites is BT, up from 94th to 64th in the rankings and the UK's top riser this year. It offers a "triple play" to UK consumers which includes televised sports.

Amazon, Mr Walshe says, has "insinuated" its brand into more and more aspects of consumers' lives. It has taken a place in the top 10 for the first time this year, with a brand value estimated at $64.3bn.

Other companies, BrandZ says, have achieved success through careful long-term nurturing of their brand. Visa's brand, for example, is worth more than those of MasterCard and American Express combined.

This year also saw a good performance by Microsoft, which benefited from consumers' perception that the company's aim is not solely the pursuit of profit.

The work of the Bill and Melinda Gates Foundation contributed to the value of the company's brand.

Similarly, Google's "Do No Evil" corporate motto boosted its brand value.

-------------------------------------------

Methodology: How the brands achieved their ranking

BrandZ uses a mixture of financial information and consumer surveys to come up with its rankings for the top 100 most valuable global brands.

The research covers 2m consumers and 10,000 brands in more than 30 countries.

Three characteristics of a brand are subject to measurement.

First, how "meaningful" it is; the brand's appeal, its ability to generate "love" and meet the consumer's expectations and needs.

Second, how "different" it is; its unique features and its ability to "set the trends" for consumers.

Finally, the research measures how "salient" the brand is; that is whether it springs to mind as the consumer's brand of choice.

The financial information used as an input to the valuation is based on what each company earns. If the company owns only one brand, all its earnings are attributed to that brand.

For banks and insurance companies, the earnings metric used is net income, for all other companies it is operating profit. Otherwise, earnings are attributed across the company's portfolio of brands using information from annual reports and other sources.

The next step is to predict "brand earnings" using inputs, including market capitalisation, taken from Bloomberg, to derive a ratio similar to a current price/earnings ratio. Current "brand earnings" are then multiplied by this number to arrive at the brand's "financial value".

BrandZ then uses customer surveys, either online or face-to-face, to assess a brand's ability to stand out from the crowd, generate desire and cultivate loyalty.

The output from this research is then multiplied by the financial value to arrive at the brand value. Brand value is the dollar amount BrandZ estimates a brand contributes to the overall value of a company.

© The Financial Times Limited 2014. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation