CROSS CATEGORY TRENDS
Going asset-light pays off heavily
In the United States today, technology and services are transforming a traditionally product-first society into one where many brands are going “asset-light.” They no longer own their full value chain, and sometimes not any part of it. Instead, they focus on brokering the final product, offering supplementary services, or adding value in other ways to improve the customer experience and relationship. Rather than operating a factory, they create content or services. Rather than opening stores, they provide a digital platform for others who do.
Among the BrandZ Top 100 Most Valuable US Brands 2018, those with asset-light strategies typically have both higher growth in brand value and higher brand contribution scores. Instead of investing time, resources, and capital in hard assets, they focus on brand building and elevating the consumer experience. That not only drives tangible value for the business, it also makes the brand more meaningful and important to consumers. Such a strategy is less about increasing book value and more about doing things that make and solidify strong consumer relationships.
We can see this in a number of different brands. For example, Google outsources the manufacture of its own phones, while HPE makes its own servers. The one is free to concentrate on innovating for its customers, while the other has to spend time and resources managing a long supply chain. Payment companies are relatively asset free—and all of the ones in the BrandZ Top 100 rank highly for brand contribution.
Asset-free living also allows brands to explore product development and other types of diversification—which may even result in the acquisition of heavy assets. For example, the once asset-light Disney successfully expanded into theme parks, cruise ships, and products. Microsoft has diversified into devices and passed its learnings on to its third-party manufacturers. While companies like these may not have core expertise in new areas, their efforts to build their brands serve as a strong foundation and provide a reliable customer base that is then willing to give them permission to play. In this way, brand becomes a passport to new categories.
Premium is the new mainstream
Over time, the number of premium brands in the Top 100—or those with the ability to deliver and charge something more than average—has risen across a broad spectrum of categories. These brands are reaching consumers who increasingly expect a higher standard of products and services.
While traditional, middle class brands in America are often under pressure, that is not to say that consumers are going for luxury brands instead. In fact, the opposite seems to be the case. Fewer brands are succeeding at the top of the premium spectrum. Instead, as brands become more premium, the majority are converging around a level that is still accessible to a large number of Americans. Their goal isn’t to become the most expensive of all, but to reach a happy and higher medium.
Pampers and Huggies provide an excellent example of this. They are both premium but not luxury brands—and both rank highly in brand love. We can also see this across a wide range of healthy and organic food brands that are charging more than traditional members of their category—but not so much that they could be considered luxuries.
Strong brands create halo effects
BrandZ has long demonstrated the positive financial effects of a strong brand, but the BrandZ Top 100 Most Valuable US Brands 2018 shows us an additional benefit: a great brand generates halo effects. For example, it can provide insurance when taking risks. Amazon, for example, floundered in its initial attempts to crack the devices market. But its flat launch of its Fire phone did little to blunt consumer enthusiasm for its Echo devices, as people were willing to give the brand the benefit of the doubt.
Another halo effect is magnetism. Strong brands tend to attract both consumers and employees. They have a more positive public image, a reputation for fairness, and greater trust among consumers. Such brands easily recruit and retain talent. They enjoy a more diverse workforce and a positive culture—and are more likely to show up in “best places to work” rankings. They also tend to have teams that galvanize around a common purpose, resulting in a better overall employment experience.
All of this makes it much easier for the strong to get stronger. A magnetic brand insulated against failure can take the big risks and make the big bets that enable it to become a central part of their customers’ lives.
The future is a tale of two tactics
Does a brand have future potential? If so, it needs consumers willing to follow it into new territory—whether that’s new products, services, or even categories. This year’s data on the most valuable United States brands shows that they can secure a better future in two notable ways: innovation and relationships.
Starting with the first, innovation largely a rich-get-richer game, where the most innovative brands manage to crack the code first and win early on. They then keep up the momentum, while others either struggle to catch up or flounder in their attempts.
The Fearsome Five technology brands—Google, Apple, Amazon, Microsoft, and Facebook—are all longtime innovators and often started out by inventing or greatly improving a category. With Microsoft, it was the PC operating system, twice. With Google, it was a greatly improved search technology. Apple revolutionized itself and the world with the iPod and iPhone; while Amazon transformed the shopping experience. Each of them has since moved on to innovate in many other areas.
The second way is through relationships. Great relationships are built on trust and loyalty, which are strongly correlated with future potential. Tide, FedEx, Starbucks, Pampers, and The Home Depot all enjoy a great combination of necessity, consumer loyalty, and confidence in the brand. As a result, they have a close personal connection with their customers. So even if brands have fewer opportunities to innovate than Facebook, every brand can still build relationships that lead to a bright future.
Leaders walk the talk
The top 50 most valuable brands in the United States show very strong leadership. They are typically known for setting the agenda in their category, and having a strong point of view. Consumers see them as brave and assertive. They are undeniably in control, and trustworthy in the eyes of consumers, who know what they stand for and what they offer. This eliminates the confusion that lower-performing and newly-emerging brands often struggle to overcome.
However, strong leadership cuts both ways. Top brands are more likely to be considered arrogant, especially those in the telecommunications, banking, and oil and gas categories. They can even be perceived as uncaring at times.
In contrast, brands in the lower half of the ranking (between 51 and 100) tend to be seen as kinder, friendlier, more playful, and more caring. On the one hand, they tend to be more guarded with their personas, but they can also capitalize on their room to play, explore, and have fun. Without a strong commitment to a point of view, brands have the ability to less rigid in their approach.
The takeaway is that in order to improve, brands should, of course, manage negative perceptions whenever they arise. However, the real opportunity lies in staking out a strong, clear position and purpose.
Excellence comes from brand experience
The United States’ most valuable brands don’t merely make products or deliver services. They focus on providing a fulfilling experience to their customers. In addition to converting new customers, they emphasize improving the totality of a customer’s interaction with them.
Such efforts pay dividends because there is a strong correlation between customers who feel fulfilled by a brand, and those who are loyal to one. And loyalty is a long-established pillar of brand growth and financial success, because it’s always better to have repeat customers than to spend heavily to acquire new ones.
Fast-rising restaurant brands, like Domino’s Pizza, are often leaders in using technology to improve customer service. The highest performing airline, Delta, has gone to great lengths to identify the pain points in the flying process, even placing heart monitors on passengers to learn more about the stressful moments in the flying experience. In other words, extra effort around improving the experience pays off in the long run.