The Financial Times’ web site has a section dedicated reviewing/discussing top brands and how the companies behind them are faring in the current economic downturn. You can also read a report discussing the top 100 brands here. Personally I’ve always taken rankings of top brands with large grains grain of salt, because they seem to rank brands based on consumer awareness rather than true brand equity or strength. From my perspective, being a top brand isn’t really about being ubiquitous (or having strong brand awareness) as it is about being recognized as “The Best”, so much so that if a consumer purchases a competitor’s product they’re more or less accepting that they’re walking away with an inferior product or service. It’s also about competitors viewing that company’s product(s) as a benchmark they need to aspire to, even if they sell their own product in higher volumes.
In short, a top brand should have consumers who behave more like fans than consumers, and competitors that tend to try and emulate it rather than selling their own unique approach to a particular type of product or service. When looking at the top brands on the list you should ask yourself: Do these brands have a strong loyal fan base? Do these brands' competitors acknowledge them as the best by using their products as the benchmark they aspire to? I.e. are these truly strong brands, or are they just well known ones?
For example I think BMW has one of the top brands on the planet (let alone the automotive industry), due to their near fanatical customer base and the fact that their competitors are always trying to build a “BMW Beater”.
From a consumer’s standpoint many BMW owners (admittedly myself included) would rather drive a used BMW than a new car from another make. Even when BMW owners defect to other brands many of them feel as if they had to make a compromise related to cost or utility, as opposed to having truly purchased a better product. Perhaps the greatest example of BMW’s loyal fan base is that it has what is perhaps the largest club dedicated to single automotive nameplate, especially since most large car clubs are dedicated to a specific model. After all despite outselling BMW by a large margin thousands of Toyota owners don’t go to “Camry-fest” every year the way BMW owners attend Bimmerfest, especially when you consider how many more Toyota owners they are than BMW owners.
While my perspective may be a bit skewed I still think the BMW “Consumer/Fan Communities” capture the essence of a strong brand from a consumer’s perspective, affinity groups that are fans of your products as opposed to being mere customers.
Taking a look at the competitor’s perspective it can be summed up rather easily: in instances where BMW and a competitor are pursuing the same group of customers, BMW’s competitors try and build a better BMW as opposed to doing their own thing. If you want to steal customers away from the BMW 3-Series, the only way to do it is to build a car that out performs the 3-series. By using BMW as the benchmark in certain product categories, the company’s competitors are effectively saying that they’re the #1 brand.
While there are a couple of exceptions the list seems to be measuring “awareness” as opposed to true strength. McDonalds (MCD) may rank higher than Wendy’s (WEN) and Burger King (BKC) on the list, but is McDonalds the “BMW of the Fast Food Industry?” Does McDonalds truly rate as a brand that people have a strong loyalty towards, or is it just familiar and easy to find when you want fast food?
When evaluating the brand equity component of a potential investment avoid the “brand awareness trap” and choose the brands that have true brand equity, as these will be the brands that consumers will be loathe to abandon even in an economic downturn. Once the economy recovers these will also be the brands that should see a nice surge from returning customers, and/or customers increasing their spending once the economy recovers.
Disclosure: At the time of publishing the author didn’t own a position in any of the companies listed in this article.
