Companies live or die by their brands. Yet while one company may have its entire identity wrapped up in its brand, another might hang back in the shadows and let its brand do all the talking. As a result, if you're not careful, you can miss out on the businesses behind some of the world's strongest brands.
Every year, Business Week publishes an annual ranking of "Best Global Brands." As you'd expect, it includes big names like Coca-Cola (NYSE: KO ) , Microsoft (Nasdaq: MSFT ) , and IBM (NYSE: IBM ) . But because it focuses mostly on corporate brands for which the requisite financials are published, the list leaves out a few true powerhouses.
Corporate power brands
Some global titans, like Microsoft and BMW, rely mostly on their corporate brands, where the company's name is the standard bearer for key products or services, e.g. BMW 7 Series or Microsoft Windows. That helps them rate high in the Business Week report.
Corporate brands provide tremendous marketing leverage, both from efficiency and from the halo effect on brand awareness. Well-known brands are safe bets for people making purchase decisions. Once customers buy those products, they tend to be loyal to that brand. After all, nobody gets fired for buying Microsoft Office, nor does anyone get tired of flaunting a BMW's edgy lines!
However, a company that has a lot riding on its brand runs the very significant risk that one unfavorable issue will affect the entire business. Microsoft, despite recent improvements in Windows XP and Windows Vista, has yet to erase the stigma of earlier versions that were prone to crashes and security problems. And BMW really pushes the envelope on single-brandedness with its across-the-line look, literally betting the company on each major design change.
Standalone power brands
It's only when you dig into the methodology that you understand why many of the best-known brands aren't even included on the list. Nor are their manufacturers, such as consumer products giants Procter & Gamble (NYSE: PG ) and Unilever (NYSE: UL ) .
Consumer marketing powerhouses like Procter and Unilever almost never put their corporate name on their brands. Nor do they publish financials for individual brands, so they don't qualify for inclusion in Business Week's rankings.
But that draws attention away from hugely profitable businesses. P&G, for instance, has annual sales that are triple those of Coca-Cola, and its annual income is almost double that of Coke. P&G has nearly two dozen standalone power brands with sales of $1 billion or more -- including Gillette, Pampers, and Olay -- that are known around the world. Unilever, its global head-to-head competitor, has a dozen, including Lipton and Dove.
This strategy of staying behind the scenes gives these companies the security of not having any one brand's misfortunes affect the rest of the company. For instance, even though P&G voluntarily recalled some of its Iams pet foods recently, there was no noticeable impact on the sales or market share of any of its other brands or on its overall corporate reputation. In fact, Fortune's 2007 ranking of most admired companies just named it No. 3 in the world and No. 1 in Household and Personal Products.
So which is the better tune?
Microsoft, of course, has both its desktop domination and a multibillion-dollar cash hoard to back up its corporate power brand. Unfortunately, beyond its traditional desktop comfort zone, it has yet to prove that it can compete easily against rivals Google (Nasdaq: GOOG ) and Apple (Nasdaq: AAPL ) , and create entirely new revenue streams.
P&G, because of its standalone brand model, has no such comfort zone to rely on. Almost every day, it fends off new competitive moves without the safety net of a monopoly. Judging by its No. 1 global market share in almost all its power brands, it can obviously take on any comers in the consumer-products realm. And with a supporting cast of 18 more brands with at least half a billion dollars in sales, P&G's roster brings sweet music to my ears.