Brand services consultancy Interbrand released its list of top-ranked brands this week. Unsurprisingly, high-tech or "new economy" brands are being valued increasingly higher. But what's the big deal about brands anyway? They're what make us Nokia carriers and Starbucks sippers, Gap wearers and Amex flashers, Yahoo! users and Toyota riders, Coke chuggers, and Apple lovers. In short, brands are the hooks that let us hang onto products in our minds.
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For the second year in a row, Coke and Microsoft held the number one and two spots, their respective brand values weighing in as of June at $72.5 billion and $70.2 billion. Interbrand notes that both companies faced "exceptional challenges" in recent months -- Microsoft's antitrust trial and the negative media attention on Bill Gates; Coke's slowing sales and contamination problems in Europe -- and that their ability to maintain their positions testifies to how a well-managed brand can be a company's "most stable business asset."
High-tech brands on the rise
But there's more to this story than a brand's rank and stability. Despite Coke and Microsoft having maintained their rankings, the gap between the two has narrowed to a mere $2.3 billion. Coke's brand value went flat by 13% in the previous 12 months, while Microsoft's fizzed-up 24% over the same period. Indeed, Microsoft's increase in brand value represents a trend of increasingly globalized branding among technology and "New Economy" companies. As strong as Microsoft's showing was against the 100-plus year old Coke, it was hardly the only high-tech brand in the bunch.
Brand Value Brand Value Pct
Rank Brand 2000($m) 1999($m) chg.
1 Coca Cola 72,537 83,845 -13%
2 Microsoft 70,197 56,654 24%
3 IBM 53,184 43,781 21%
4 Intel 39,049 30,021 30%
5 Nokia 38,528 20,694 86%
6 GE 38,128 33,502 14%
7 Ford 36,368 33,197 10%
8 Disney 33,553 32,275 4%
9 McDonald's 27,859 26,231 6%
10 AT&T 25,548 24,181 6%
Source: Interbrand
Technology companies (an inexact but useful catch-all) not only showed the greatest increase in brand value over the last year, but IBM (Nasdaq: IBM), Intel (Nasdaq: INTC), and Nokia (NYSE: NOK) rounded out the top five. Most of the tech companies in the top 75 saw double digit growth. Focusing even more narrowly, the two biggest gainers, by far, were Yahoo! (Nasdaq: YHOO), which ranked #38, with on a 258% gain; and Amazon.com (Nasdaq: AMZN), at #48, with a 233% increase since June 1999.
Over half of the 75 top brands -- 42 in all -- are U.S. companies. A closer look, however, shows globalization at work. Though Ford (NYSE: F) placed at #7, it was the only U.S.-identified automobile brand in the list, while Mercedes (NYSE: DCX), Toyota (NYSE: TM), Honda (NYSE: HMC), and BMW all showed among the top 25.
The economic value of branding
Interbrand measures brand value as a percentage of market capitalization, revenues, and other performance indicators of companies that generate "significant earnings in the main global markets." But beyond hard numbers, brand value is based on the role played by the brand in generating a company's earnings. The ultimate goal is to help companies and investors isolate, quantify, and track the portion of the underlying business that can be attributed to its brand.
This emphasis on the economic value of the brand will be familiar to Fools. Strong brand value and brand power are key criteria for conferring Rule Breaker or Rule Maker status on a company. In fact, of the 12 companies in the Rule Maker Portfolio, fully nine are represented among the 75 global brands in the Interbrand survey.
In addition to Coke, Microsoft, Intel, and Nokia dominating the top five (and Yahoo!, already mentioned) Rule Makers Cisco (Nasdaq: CSCO), #14; American Express (NYSE: AXP), #19; Gap (NYSE: GPS), #29 also fly the Fool flag high. And Amazon.com keeps company with its Rule Breaker Portfolio mates America Online (NYSE: AOL), #47, and Starbucks (Nasdaq: SBUX), #72.
The brand's the thing
OK. But what's the big deal about the brand? Brands are the hooks that let us hang on to products in our minds, even when -- especially when -- those products aren't handy. The brand is what makes us Nokia carriers and Starbucks sippers, Gap wearers and Amex flashers, Yahoo! users and Toyota riders, Coke guzzlers, Apple lovers, and Microsoft admirers, able to answer Yes when asked, "Are you ready?" to join the Cisco-empowered Internet Generation.
The brand is the idea and the image of a product that burrows into our brains. Often built on "nothing" but semi-random associations, by teams of artists, writers, and psycho-demographers, the most powerful brands produce loyalties not between us and our products, but between us and our preferred selves. What's the big deal about the brand? The brand's the thing.
Have a Microsoft and a smile!
Your turn:
Are brands really that important? Can too much be made of brand value and brand power? Check out the World's Most Valuable Brands 2000 survey, then share your thoughts on our Rule Maker Companies discussion board.
Related links:
Yahoo! Brands Itself a Winner, Rule Maker Portfolio, 5/8/00
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