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Five ways to build and maintain value


Five ways to build and maintain value

Just as many factors contribute to human wellbeing, several also go towards building a healthy brand.

BrandZ™ analysis has identified five key attributes shared by healthy, strong, and, consequently, valuable brands. Each helps a brand deliver 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 vQ. By this measure, the average score of all brands is 100. Those with a score over 110—making them at least 10 percent above average—are healthy overall. A vQ score of 95 indicates five percent below average.

Nurturing brand health makes good business sense. A strong vQ score means a brand is meaningfully different, which drives growth in brand value. In fact, brands with a high vQ score of 110 or above grow their brand value significantly more than those with low scores.

The five components of vQ are:

  1. Purpose. The brand is perceived to make people’s lives better.
  2. Innovation. The brand is seen as creative, leading the way in its category and/or shaking things up.
  3. Communications. The brand creates powerful and memorable advertising.
  4. Brand Experience. Consumers feel the brand is uniquely able to anticipate and meet their needs as well as deliver a strong overall experience.
  5. Love. Consumers have a real emotional bond with the brand that helps sustain it until the next innovation.

Healthier brands grow at a faster rate

Brands can look at how they perform on the five individual health indicators to find clues to improving their overall brand health. When one or more of the indicators is flagging, overall brand health can suffer. When healthy, growth can skyrocket.

Brands with a high vQ are more strongly positioned for future value growth

A high vQ score benefits a brand in several ways. Brands with a high vQ have nearly three times the Brand Power, which is an indicator of a brand’s ability to drive sales through deliberate consumer choice. They are also better positioned to be able to justify a premium to feel “worth it” to consumers.

Time for a checkup

While Canada unquestionably has some healthy brands—including several outside the Top 40—this is not an area in which the country should take pride. Currently, BrandZ™ ranks at least 30 brands in 14 markets, and for the last two years Canada has had the least healthy brands of any country. Again, it is worth noting that the ranking is concentrated among categories that typically feature lightly differentiated brands.

The good news is that the Canadian top 30’s score of 105 is an improvement over last year, which is a welcome sign in the ongoing dumpster fire that is 2020. And where some see criticism, others see plenty of room for improvement. At its best, brand health metrics are a great indicator of where to focus a brand’s energy.

A final point is that for this year and last, brand health has not necessarily been a perfect indicator of growth. Some brands ranked “healthy,” like Canada Goose, Petro Canada, and Air Canada have seen their brand values fall precipitously in the last year. Obviously, with all three, macroeconomic factors are having a major effect on their financial well-being, which has impacted their value. Air Canada in particular has had several strong advertising executions recently. So, these will all be brands to watch as the new normal returns. Will they show the same return to growth that we’ve seen for other healthy brands in the past, or has the pandemic changed things forever?

The road to better health

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 these factors which directly contribute to being meaningfully different in the eyes of consumers and, as a result, a healthy, successful brand.

1. Purpose

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, functional, and literal things that a product or service does for someone. Having a strong sense of Purpose is increasingly important as consumers seek brands that not only do a good job at a fair price, but also do something positive for the community or the environment, and, in particular, for themselves. Brands with Purpose make consumers feel that they are getting the best.

Purpose may seem like a nice-to-have, but it is one of the strongest predictors of brand value growth. A 12-year study of the impact of Purpose on brand values showed that brands with strong scores on this metric grew 125 percent, while those low ones grew only 70 percent.

It is no surprise to find Canadian Tire at the top of the rankings for Purpose. With key programs, such as Jump Start, as well as its strong support of amateur and special sports, the brand has long shown a strong commitment to communities. During the pandemic, despite being heavily impacted by the shutdown, it set up a $5 million fund to support organizations like the Red Cross and deliver much-needed personal protective equipment to frontline health workers.

2. Innovation

Innovation may be a mandate for technology brands, but they certainly can’t claim exclusive title to it. Any brand that is seen as doing something new or setting trends for their category will get talked about—and people will try it out. If that initial experience goes well, it can lead to a longer-term relationship.

Canada may have a vibrant technology and innovation sector, particularly around artificial intelligence and gaming, but you have a hard time seeing it from its top brands. Even its most innovative brands would not be considered very innovative in most other country rankings. However, disrupted environments tend to be breeding grounds for invention, and a great many slow-to-adapt brands have sprung into gear to continue to be relevant and get their products in the hands of their consumers.

Even if the scores are not particularly high, the most innovative Canadian brands are a fun lot. In addition, Lululemon recently acquired workout-at-home technology brand Mirror in June of this year. This was too late to be included in the valuation of the brand, but it should increase perceptions of Lululemon as an innovator. The other brands are no surprise on this list, including President’s Choice, which is constantly introducing new products to the market, albeit in a category that is not traditionally seen as an innovator.

3. Communications

Communications has two elements. At a basic level, brands need to advertise sufficiently in the right places to be visible and recognizable to the people they’re trying to reach. But being vocal and announcing a brand’s presence is not enough; brands also need to engage their audience. They need to do great things and then tell people they’re doing them.

Strong communication and share of voice put a brand at a clear advantage. Brands from the global Top 100 that have high communications scores surged in brand value 271 percent over a 12-year study period, while those that performed poorly on this measure grew only 56 percent.

Overall brand value doesn’t seem to matter when it comes to the top communicators in the top 40. While Telus and Tim Hortons are in the top 10 overall for value, Shoppers Drug Mart comes in at #20, and the rest trail behind. This shows that creativity has a huge role in driving connections, as well as serving a positive role in the community.

4. Brand Experience

A brand not only has to deliver a great experience at every point of interaction, it also must remind consumers, through effective communications, that it is focused on doing this as well. Brand Experience starts long before a person considers buying a product and lasts well beyond the point of purchase. It includes every exposure to an ad, every digital interaction, and every minute someone spends waiting for help at a counter or on the phone – as well as actual usage of the item purchased. Providing a great brand experience cements – or destroys – the relationship between consumers and brands.

Those brands in the global Top 100 that deliver the strongest experiences have grown in brand value by 257 percent over 12 years. Those brands with low experience scores have only increased their value by 50 percent in that time.

It’s refreshing to see Air Canada, which is in a heavily impacted category, get recognition for the excellent experience it provides for its customers. The brand has certainly followed a pandemic playbook for the ages. From an increase in digital and social investment and a popular international ad campaign with Sandra Oh to promoting its reacquired Aeroplan loyalty program, it has remained very active during the downturn, and it’s paying off in brand equity.

5. Love

Love in a brand context is the emotional affinity a consumer has for a brand, and it can’t be bought or manufactured. However, brands can create the conditions in which love can flourish. If they invest in innovation, promote a higher purpose, and deliver a consistently great experience, love tends to happen naturally. Love also helps sustains the relationship with a brand during the gaps between innovation.

A 12-year study of brand value growth saw that brands with high scores for love rose an average of 272 percent over 12 years, while those with poor scores were up with just 30 percent.

Love is not just a nice to have. It is the deserved outcome of meeting consumer needs in the best way. Not surprisingly, all these brands have one thing in common: they have friendly staff that interacts with people face-to-face. The added component of great customer service helps contribute to feelings of real affection in consumers. It’s no surprise to see Shoppers Drug Mart topping the list here, as the brand ranks in the top 5 of every health metric except Innovation.