Five health indicators comprise Vitality Quotient
To rank in the BrandZ™ Top 50 Most Valuable Indian Brands is a significant accomplishment that raises these questions: what distinguishes high-value brands from other brands; and what actions do brands need to take to remain in the India Top 50 or rise to that level?
A new BrandZ™ metric called Vitality Quotient (VQ) supplies some important answers to these questions, along with insights for building and sustaining healthy brands. The VQ score is a composite of these five indicators for monitoring brand health:
Brand Purpose Healthy brands begin with a purpose. It does not need to be a grand purpose about changing the world, but it does need to be a clear purpose that leaves consumers believing that, in some way, the brand is improving their lives.
Innovation Brands become stronger when consumers see them accomplishing their Brand Purpose through innovation. Consumers see innovative brands as Meaningfully Different from the competition, as leading their categories and setting trends.
Communications To benefit from Brand Purpose and Innovation, brands need to amplify these indicators with effective advertising and other relevant communication. Brand Purpose and Innovation produce good stories, and the stories need to be told.
Brand Experience Communicating a brand’s story well helps persuade consumers to try the brand—as opposed to trying a competitive brand. If the Brand Experience delivers the promised Brand Purpose and Innovation, then people decide that the brand is for them.
Love The outcome is Love, which adds resilience and helps brands sustain their relationship with consumers over time, as brands cycle through normal periods of innovation and iteration.
The VQ score is based on an index where 100 is average. Brands that score 105 or more on each of the five VQ indicators are healthy brands. Conversely, brands that score 99 or below on all five indicators are relatively frail.
VQ scores correlate closely with BrandZ™ Meaningfully Different scores. A Meaningful Different brand is healthier. And healthier brands are Meaningfully Different. Brands viewed by consumers as Meaningful (filling rational and emotional needs in relevant ways) achieve greater market share, and brands perceived as Different (distinctive, event trend-setting) can command a higher price premium.
India Top 50
India Top 50 are healthier than other Indian brands
The India Top 50 scored 110 overall—the same score achieved by the Global Top 50.
And half the India Top 50 brands—and half the Global Top 50—scored over 105 on each of the five VQ indicators. In contrast, other Indian brands—not in the India Top 50—achieved only an average VQ score of 100, and only 16 percent of the brands qualified as healthy, and 37 percent are frail.
These findings suggest that India’s most valuable brands compare favorably with some of the world’s highest value brands. While brand health can always be improved, and needs constant attention, VQ results indicate that the India Top 50 brands are in robust health. The VQ scores tell a different story about other Indian brands, which need to improve their health. VQ is both a measurement of brand health at a moment in time, and a diagnostic tool for improving it, based on the scores on the five indicators.
Higher VQ brands have higher value
Among the many arguments for building and sustaining brand health is this: healthier brands are worth more—often substantially more. Among the India Top 50, brands with low VQ scores average $1.9 billion in brand value. In contrast, brands with high VQ scores average $2.4 billion, a difference of over 25 percent.
The correlation between strong brand health and higher brand value is consistent for four of the five VQ indicators—but not for Brand Purpose. For Brand Purpose, the correlation is reversed. Brands with higher Brand Purpose scores have lower brand value.
This anomaly happens frequently in fast-growing markets where smaller, entrepreneurial brands with a clear purpose appear toward the bottom of the BrandZ™2 rankings. These brands are all about Purpose. They exist specifically because they want to introduce new ways to make consumers’ lives better.
The VQ indicators begin with Brand Purpose. And the other four indicators depend on the strength of Brand Purpose. Sometimes Brand Purpose comes more naturally to newer or smaller brands. But it is important that more mature brands also demonstrate Brand Purpose. It can be useful to connect with the original reason that brought a brand into existence, and interpret that reason in ways that are relevant to today’s consumers.
Brand Value Growth
Each VQ indicator drives value growth
Healthy brands grow value faster. And any brand can improve in health. Between 2015 and 2017, brands that raised their VQ score grew 21 percent in value, four times greater than brands that declined in VQ, which notched up only 5 percent in value.
Each of the five VQ indicators—Brand Purpose, Innovation, Communications, Brand Experience, and Love— influences brand value growth. For example, Brands with high Innovation grew 63 percent faster that brands with low innovation.
And the importance of Brand Purpose as a foundation for brand health cannot be overstated. Between 2014 and 2017, brands with high Brand Purpose increased in value 41 percent, almost double the growth rate of brands with low Brand Purpose.
The short-term impact of VQ indicators on brand value growth can be stunning. Between 2016 and 2017, brands with high Brand Purpose grew 16 percent, compared with a value rise of only 1 percent for brands with low Brand Purpose. Similarly, brands with high Innovation increased 18 percent in value, while the value of low Innovation brands remained unchanged. Most revealing, brands with low Communication lost value, while the value of high Communication brands increased 16 percent.
The findings show a direct correlation between brand health—high scores on the five VQ indicators —and brand value appreciation. This correlation is important because high value brands are more likely to grow market share and command a price premium. And, unlike the impact of the economy, competition, or even the weather, brands have control over their health. They can choose to have a clear Brand Purpose—or not. Critically, as brands improve their VQ indicators, they also need to communicate their progress or risk losing value.
VQ helps sustain brands through turbulent times
VQ not only helps drive high brand value growth, it acts like insurance to protect value and the investment made to achieve it. Maggi, the instant noodle brand owned by Nestlé, best illustrates the power of strong brand health and equity.
A couple of years ago, Maggi faced a challenging food safety crisis that disappointed customers who considered Maggi part of their routine eating habits, an iconic heritage brand. Maggi confronted the challenge and reformulated the affected products. But implementation took time.
Brand value dropped 32 percent the first year after the scandal and 24 percent the next year. But strong brand equity and Love, developed over time, sustained the Maggi brand. This year Maggi bounced back, with brand value rising 66 percent, a rate exceeded by only one other India Top 50 brand.
Maggi ranks No. 1 in the VO Top 10, with a score of 135, and it leads in all five VQ indicators—Brand Purpose, Innovation, Communication, Brand Experience, and Love.
Brand health is increasingly critical in India as the market becomes more competitive. Because of the dynamic and disruptive nature of the Indian market, and the impact of social media, change can happen quickly, making brand health—a high VQ score—a critical priority.