How to give German brands an energy boost
Just as there are many contributors to human wellbeing, there are multiple factors that go towards building a brand that’s bursting with vitality.
BRANDZ analysis has identified five key attributes shared by healthy, strong and valuable brands that each reflects the extent to which a brand is delivering Meaningful Difference – a vital contributor to Brand Value.
Brands that score highly on all five aspects are the most successful: they are “healthy” brands. Those that are low on all five aspects are “frail” and the least successful. Brands with a mix of high and low scores are “OK”.
These five key health indicators can be combined into a single score we call a brand’s Vitality Quotient, or its vQ. The average score of all brands is a vQ of 100. Those with a score over 110 – making them at least 10 percent above average – are those we say are healthy overall. A vQ score of 95 or under means it’s time to call emergency services.
Nurturing brand health makes good business sense. A strong vQ score means a brand is meaningfully different, and this can drive growth in brand value. In fact, globally, brands with a vQ score of 110 or more have a brand value almost 70 percent higher than brands with a low vQ score. Some of the best-known and most valuable brands are those with high vQ scores: names like Google and Ikea.
The five key indicators underpinning healthy brands and contributing to vQ are:
1. There’s a strong sense of brand purpose, so the brand makes people’s lives better
2. Brands must be innovative, which means they’re seen as leading the way in their sector and shaking things up.
3. They must also have strong communications, with creative powerful and memorable advertising.
4. They provide a great brand experience that meets consumers’ needs, and is available when and where consumers need it
5. Over time, consumers come to love the brand, and that helps sustain the brand until the next innovation.
Brands can look at how they perform on the five individual health indicators when they are seeking clues to improving their overall brand health. When one or more of the indicators is flagging, overall brand health – and brand value – can suffer.
What’s the prognosis?
The healthiest brands in the Top 50 Most Valuable German Brands ranking are those that score well on all five of the key health indicators: purpose, innovation, communications, experience and love. They generate a Vitality Quotient far higher than the 100 average.
A high vQ score benefits a brand in several ways. Brands with a high vQ have more than double the Brand Power, which is an indicator of their ability to drive sales. They are better positioned to be able to justify a premium or to feel “worth it” to consumers.
Healthy brands tend to develop a personality type that further reflects well on them. Those brands with a high vQ score are more likely to be described as trustworthy, “in control”, desirable, creative and friendly. They under-index on negative brand personality traits, such as being uncaring or arrogant.
Brands with a high vQ are more strongly positioned for future value growth.
The average Potential score for high-vQ brands is an especially important bellwether for the future strength of brands. A Potential score that’s 20 percent higher than the average brand puts these brands at a significant advantage as they look ahead.
The foreign brands in Germany with the highest vQ scores are led by IKEA (which has a vQ score of 147 in Germany), Amazon (134), Google (130), Samsung (128) and McDonald’s (126). They are not eligible for inclusion in the Top 50 as they are not of German origin.
Brand health does not come about by accident, nor is it determined by the category in which a brand operates. It is the result of a concerted focus on investing in the factors that contribute to better brand health, and being meaningfully different in the eyes of consumers.
How German brands measure up
Brands that make the Top 50 ranking in Germany this year are significantly more healthy than average brands in the country. This is to be expected, and underlines the role of brand vitality in driving higher brand value. While 40 percent of brands in the Top 50 are healthy, and only 6 percent are frail, it’s a less positive picture across the German brandscape. Only 10 percent of all German brands (we measured around 250) rank well enough on all five aspects of vitality to count as healthy and the vast majority – 60 percent – are just “OK”, while 30 percent are classed as frail. Among the Top 10 brands in the German BrandZ ranking for 2018, seven are healthy, and none is frail.
Leading German brands compare well against the most valuable global brands when it comes to taking care of their health and welfare. Unlike France and the UK, which had comparatively few healthy brands at the top of their BrandZ ranking, Germany’s brands are only marginally behind the leaders in the BrandZ Most Valuable Global Brands ranking on measures of vQ.
THE ROUTE TO BETTER BRAND VITALITY
Brand purpose is what a brand sets out to achieve, beyond making money. It is the way a brand makes people’s lives better – not just the practical, literal things that a product or service does for someone. Having a strong sense of purpose is increasingly important as consumers seek brands that don’t simply do a good job at a fair price, but also do something positive for the community or the environment. Brands with purpose make consumers feel good. Brands with a strong purpose are significantly more valuable; high-purpose brands in the German Top 50 are worth more than four times those with low purpose (US$9,269 million compared to $2,141 million).
German brands are among the most purposeful in the region and, indeed, the world. They significantly outperform brands in France and the UK.
Purpose in action - HiPP
HiPP baby food has been produced by the Hipp family for nearly 90 years, and while the range has grown and changed, and the business has expanded internationally, the purpose of the brand has remained constant. HiPP focuses on the health benefits of its products, the natural origins of its ingredients, the appeal of its varieties to young consumers, and its track record for innovation. The brand’s support for living in harmony with the natural environment has particular resonance among informed consumers of today.
Innovation is not just the preserve of technology brands. Any brand that is seen as doing something new, or setting trends for their category, will get talked about and tried. When trial goes well, that can lead to a longer-term relationship and, ultimately love, which correlates strongly with innovation. Innovation can mean developing a product that does something different, providing an innovative service, or expanding into a new category. Crucially, any innovation by a brand needs to be recognized as such by consumers, otherwise it doesn’t count as innovation. Innovation creates a strong predisposition for sales. Innovative brands in the German Top 50 are worth, on average, nearly 10 times what low-innovation brands are (US$10,863 million versus $1,296 million.
German brands are seen as more innovative than those in other European markets, but the US and fast-growing Asian markets have the edge.
Innovation in action - Knorr
That a 180-year old name features among Germany’s most innovative brands is a lesson to all brands about where innovation can come from. Knorr made its name with soups and bouillon, but the range is constantly adapting to consumers’ changing tastes and concerns, which means it stays relevant, generation after generation. The expanding “Naturally Tasty” range chimes with evolving dietary preferences, and the “Taste with a good feeling” communications campaign speaks to consumer demand for sustainability.
Strong communication has two key elements to it, and neither one alone will be effective. At its most basic level, brands need to be doing sufficient advertising in the right places to be visible and recognisable to the people they’re trying to reach. But being vocal and announcing a brand’s presence is not enough on its own; brands also need something genuinely engaging to shout about. Brands therefore need to do great things, and then tell people they’re doing them. One without the other means wasted resources, but strong communication and share of voice put a brand at a clear advantage. Brands that perform well for communications are worth more than double the average value of poor communicators (US$8,687 million compared to $3,512 million).
Again, German brands on average outperform their European neighbors for the effectiveness of their communications, though US, Chinese and Indian brands are slightly ahead.
Communication in action – Lufthansa
Like many long-established national airlines, Lufthansa has set itself apart from less premium offerings in recent decades with a focus on safety and service, and an on-board experience that’s a cut above that of budget travel. In its latest incarnation, the Lufthansa brand message is “Nonstop You” and a promise to focus on the individual. What is changing is the way the airline reaches those individuals – with growing use of social media tools like Pinterest, Instagram and Twitter to reach younger fliers – and potential employees – with inspiring stories.
A brand not only has to deliver a great experience at every point of interaction, and help consumers at every step, it also has to remind consumers, through effective communications, that it is focused on doing this well. Experience starts long before a person considers buying a product, and lasts well beyond the moment of purchase and even the moment of consumption. It includes every exposure to an ad, every experience on a brand’s web site, and every minute they spend waiting for help at a counter or on the phone. Providing a great brand experience cements the relationship between consumers and brands. They also tend to be worth more: brands with high experience scores are almost six times more valuable than poor performers in the German Top 50 (worth an average US$10,197 million, compared to $1,773 million).
The most valuable German brands beat their French, Spanish and British rivals when it comes to providing an outstanding brand experience, but they are slightly behind leading US and Asian brands.
Experience in action - adidas
Adidas has transformed the experience of shopping for sports and casual apparel by integrating digital innovation into stores and production. It’s using 3D printing technology to produce its footwear, and is using shelf-mounted tablets in stores to make tailored product recommendations based on individuals’ needs. The brand has also ridden a wave of demand for its retro footwear, and has focused on building excitement in key world cities. Adidas was the fastest-rising brand in the BrandZ Top 100 Most Valuable Global Brands 2017, growing in value by 58 percent in a year.
Some of the most loved brands in the world are also the most innovative – brands like Nike and Apple, for instance. Love in this context is the emotional affinity of a brand, and it’s something that can’t be bought or manufactured. However, the conditions in which love can flourish can be created. If brands take the time and care to invest in promoting a higher purpose, innovating, and delivering a consistently great experience, then love tends to happen naturally. In the times between innovation, love is often what sustains the consumer relationship with a brand.