SPOTLIGHT ON INNOVATION AND LOVE
Innovation is the standout value driver in the BrandZ™ Japan Top 50, with highly innovative brands exhibiting an average valuation that’s 70 percent higher than low Innovation brands. Love, meanwhile, appears to have a slightly negative effect, which is the opposite of what’s typically found worldwide. To translate these headlines into actionable insights for brands, it’s worth looking closer at both of these vital contributors to brand health.
The Innovation advantage
“Innovation” is a broad term that is often applied vaguely and lazily throughout the business world. What does it really mean, and how should we define it?
BrandZ’s Innovation Index is comprised of three separate and equally important components:
- Disruption – quite literally, “Which of these brands is shaking things up?”
- Creativity – “Which of these brands is creative?”
- Leadership – “Which of these brands are leading the way?”
In general, the brands in the BrandZ™ Japan Top 50 are seen as a fairly Disruptive bunch, with an average “shaking things up” score of 107 (compared to the global average of 100). Brands including Nintendo, Toyota, and 7-Eleven stand out as especially disruptive in the minds of Japanese consumers.
Leadership, too, is an area where many top Japanese brands excel; the average Leadership score for the BrandZ™ Japan Top 50 is 114. It’s worth noting, though, that other countries’ top brands have even higher average Leadership scores – with American, Chinese, and Indonesian brands leading the pack on this measure. This suggests that there is room for Japanese to boost their perceptions of “leading the way.”
It’s in the realm of Creativity that Japan sees the greatest opportunity for growth. The average Creativity score for a brand in the Japan Top 50 is 101, just one point above the global average of 100. This isn’t to say that many Japanese brands aren’t already creative; what’s measured here are consumers’ perceptions of creativity. As such, Japanese brands have two avenues of attack going forward. First, they can examine strategies to nurture the practice of creativity across their organizations. Second, and just as importantly, they can examine ways to emphasize their existing creativity in their marketing communications and brand touchpoints.
The Love paradox
What’s wrong with Love? Or, to put a finer point on it – why are Japanese brands with higher Love scores worth slightly less in brand value (to the tune of 5 percent) than brands with low Love scores?
Before examining this question fully, some caveats: that 5 percent figure represents an average impact, and trends are not destiny. There are plenty of brands within the Japan Top 50 that have high Love scores as well as higher valuations, just as there plenty with low Love scores and lower valuations.
Additionally, Japan is unique in that it has many more brands with high Love scores than is typical (these “high Love” brands comprise fully half of its Top 50). The more more typical scenario seen in other countries is one in which top brands are evenly distributed along high, low, and medium Love scores. France, for instance, also has a negative relationship between Love and brand valuation, to a much more significant degree – high Love brands are worth an average of 22 percent less. But it also has proportionally fewer high Love brands, suggesting that a different dynamic is at play in the Gallic context.
Rather than come up with a unified theory why Love isn’t performing well in both Japan and France, it makes more sense to ask if there might be a uniquely Japanese reason for this statistical outcome. One possible explanation lies in Japan’s much-vaunted service culture. In Japan – much more so than in other countries – the customer is “God.” Brands go above and beyond with their service to customers, and while this succeeds in building perceptions of Love, at some point there may be diminishing returns. It may be that there’s a point where excess “Love” above a certain threshold no longer leads to higher brand value.
In other words: in a country like Japan where strong, “lovable” service is found nearly everywhere, Love may begin to lose its power as a value differentiator compared to drivers like Innovation and Trust.
It’s also true that Japanese brands with lower Love scores tend to come from categories like banks, telecom, and cars. These are big business sectors that can rely on high overall earnings to boost their brand valuations, even in the face of certain deficits in brand health. (Remember that BrandZ™ valuations take into account both financial performance as well as brand contribution). This might explain why brands with low love can still show high valuations – within the Japan Top 50, low Love scores might de facto identify a business as belonging to an otherwise high-value brand category.
Given all this, should Japanese brands abandon efforts to boost brand love? That would be an extreme reaction, especially given that many Japanese brands have designs on expanding their presence overseas.
For while high Love scores may not have correlated with higher brand valuations in this year’s BrandZ™ Japan rankings, recall that these particular Love scores represent the attitudes of Japanese consumers toward Japanese brands.
Meanwhile in almost every other country measured by BrandZ™ – markets like the U.S., China, Germany, Italy, Indonesia and beyond – brand Love does lead to higher brand value. That’s because consumers worldwide continue to reward the brands that they love with repeat business, price premiums, and higher brand valuations.