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The Trouble with Brands

Most consumer brands are not creating value. The exceptions share a set of “energized”attributes that companies can identify and exploit.



Many companies that produce goods and services for consumers face a seriousdilemma — quite apart from the effects of the current global economic downturn. For at least the past five years, the tried-and-true formulas to boost the sales and marketshares of brands have been becoming increasingly irrelevant and have been losingtraction with consumers. Globally, the aggregate value of brands to consumers hasbeen falling steadily, and this decline began well before the recent slump in stock prices.



We know this through extensive research we have conducted on brands. Since 1993, we have been tracking the way consumers perceive and value products andservices around the world to explain how brands grow, decline, and recover. Eachyear, we interview almost 500,000 consumers around the world, and each quarter,15,000 consumers in the United States. We have studied 40,000 brands across 44countries on more than 70 brand metrics, which include everything from theawareness consumers have of a brand to the particular ways it makes them feel.

Beginning in mid-2004, we discovered several curious and sobering trends in thedata. Consumer attitudes about all sizes and segments of brands were in seriousdecline. Across the board, we saw significant drops in the key measures of brandvalue, such as consumer “top-of-mind” awareness, trust, regard, and admiration.This was true not just for a few brands, but for thousands, encompassing the entire range of consumer goods andservices, from airlines and automobiles and beverages to insurance companies and hoteliers and retailers. We found thatmost brands were not adding to the intangible value of their enterprises the way they used to. Instead, the majority of brands seemed to be stalled in the consumer marketplace.

But at the same time, separate research we did on the financial performance of consumer companies revealed that brandswere indeed creating more and more value for companies and shareholders. This was evident in increasing share prices,driven higher by the intangible value that the markets were implicitly attributing to brands. This pattern held as equity pricesrose through 2007, but even after the recent collapse of prices, our models show that brand value continues to account for roughly a third of the total stock market value of corporations. In other words, there was — and is — a mismatch betweenthe value that consumers saw in brands and the aggregate value that the markets were ascribing to them. Thiscontradiction comes about because the perceptions influencing the dollar votes of consumers on Main Street are verydifferent from the financial and mechanical analysis used by traders and analysts on Wall Street.

When all the facts were put together, we discovered that, yes, there was an increasing expansion of the value that financialmarkets are attributing to brands, but this value growth is actually attributable to fewer and fewer brands. Sure, for financial juggernauts like Google, Apple, and Nike, brand value continues to increase powerfully, but the number of these kinds of high-performance, value-creating brands is diminishing across the board, while the actual value created by the vast...

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Featured Article
The Trouble with Brands

Many companies that produce goods and services for consumers face a seriousdilemma — quite apart from the effects of the current global economic downturn. For at least the past five years, the tried-and-true formulas to boost the sales and marketshares of brands have been becoming increasingly irrelevant and have been losingtraction with consumers. Globally, the aggregate value of brands to consumers hasbeen falling steadily, and this decline began well before the recent slump in stock prices.

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