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FT SPECIAL REPORT

Global Brandswww.ft.com/reports | @ftreportsWednesday May 27 2015

Inside

Technology on topApple’s clarity ofpurpose andcommunication skillskeep it at number onePage 3

Large US retailers fallvictim to shift in trendsChina’s Alibababecomesthe mostvaluable retailbrand intheworldPage 2

T he world’s top technologybrands, headed by Apple,extended their influenceyet more deeply into con-sumers’ lives as their domi-

nance increased in the past year. Timeswere more difficult, though, for compa-nies in sectors such as luxury goods,fashion,retailandglobalbanking.

Global brand values continued toaccelerate after their slowdown duringthe financial crisis, according to the lat-est annual BrandZ top 100 brand rank-ings compiled by Millward Brown, aresearchagencyownedbyWPP.

Successful companies not only pro-vided goods and services that were dis-tinct from those of competitors, but alsofound new ways to connect with cus-tomers and navigate the swirling watersofsocialmedia.

Peter Walshe, strategic director ofBrandZ, says: “Branding is becomingmore important. People are taking itmore seriously and it is becoming moreofa factor indrivingvalueandsuccess.”

But, he adds: “If you are going to growa brand these days, you have to havesomething meaningfully different. Youhave to have something that fits intowhat consumers want, and you havethen got to communicate and drivethat.”

Steve Wilkinson, managing partner,UK and Ireland markets at EY, the

professional services company, says: “Intechnology, there is still a lot of space tobuild brands. In the world of productsand services, it’s probably more difficultthan it has been for some time to build agloballyconsistentbrand.”

Theyears2007-12werea“goldenage”for branded consumer products, asemerging markets expanded, says MrWilkinson. Since then, a cooling inmany economies has made it harder tomaintain profitable growth. Nonethe-

less, the combined value of the top 100brands in 2015 grew 14 per cent from$2.9tn to $3.3tn compared with the pre-viousyear, thefastestrate for fouryears,beating the average growth of 9 per centayearsincetherankingsbeganin2006.

During the recession, their combinedvalue grew 8 per cent a year on average.The ranking combines financialmeasures with surveys of how consum-ersviewbrands.

US brands achieved 19.1 per cent

overall growth and accounted for theentire top 10, whereas growth in conti-nental Europe was just 1.5 per cent,reflecting sluggishness in cars and lux-ury goods. The UK was down 4.2 percent. Asian brands recovered by 24.7per cent, despite the emerging marketslowdown. This was driven in partby the entry of Alibaba, the Chineseecommerce company, at number 13 inthe top 100, after its initial public offer-ing. There were rises for Chinese portal

Apple’s core business adds valueTimesmay be difficultfor some companies,but big technologygroups are booming,writesBrian Groom

Tencent, search engine Baidu and ChinaMobile. In 2006 there was just one Chi-nese brand (China Mobile) in the top100;nowthereare14.

Technology continued to dominatethe top 10 global brands. Apple recov-ered its number one slot with a 67 percent rise in brand value to $247bn,having previously held it from 2011 to2013. Its growth was powered by theiPhone 6. Google slipped to second,although its brand value rose 9 per centto $174bn. Facebook was the fastestriser, up 99 per cent, followed by Appleand Intel. Microsoft, which is making iteasier for developers to adapt apps toWindows,wasup28percent.

Elspeth Cheung, global head of valua-tion for BrandZ, says technology com-panies are not only opening up theirplatforms, “they are trying to acquire abigger slice of everyone’s life”. Apple isdoing so through developments such asApple Watch and the Apple Pay mobile

payments venture. Google is lookingbeyond internet search to driverlesscars, devices for the “smart home” andtreatmentsassociatedwithageing.

The technology category accountedfor just under a fifth of the top 100brands and nearly a third of the totalvalue. There was 17 per cent growth intelecoms, 9 per cent in beer, 8 per centin soft drinks, 4 per cent in fast food and3 per cent in cars, but zero in apparel.Luxury goods, affected by the emerging

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nConsumer ruleGreasy burgers and fizzydrinks take a poundingft.com/reports

Financial servicesshake-upSalvaging thereputations of banks hasbeen a long time comingPage 4

On FT.com‘Branding is becomingmore of a factor in drivingvalue and success’

2 ★ FINANCIAL TIMES Wednesday 27 May 2015

Global Brands

Rank2015

Rank2014 Change Brand

76,572 71,121 66,375 62,292 59,895 59,310 59,272 51,798 42,962 40,188 40,041 38,808 38,461 38,225 38,093

TencentFacebookAlibabaAmazonChina MobileWells FargoGEUPSDisneyMastercardBaiduICBCVodafoneSAPAmerican Express

Brand value2015 ($m)

53,615

35,740

n.a.

64,255

49,899

54,262

56,685

47,738

34,538

39,497

29,768

42,101

36,277

36,390

34,430


Value change2015 vs 14

43%

99%

n.a.

-3%

20%

9%

5%

9%

24%

2%

35%

-8%

6%

5%

11%

111213141516171819202122232425

14

21

New

10

15

13

12

16

23

18

25

17

20

19

24

3

9

n.a.

-4

0

-3

-5

-2

4

-2

4

-5

-3

-5

-1

Rank2015


35,245 33,834 29,717 29,313 28,913 27,705 27,445 26,657 26,349 24,029 23,989 23,757 23,376 23,039 22,561

WalmartDeutsche TelekomNikeStarbucksToyotaThe Home DepotLouis VuittonBudweiserBMWHSBCRBCPampersL’Oréal ParisHPSubway


35,325

28,756

24,579

25,779

29,598

22,165

25,873

24,414

25,730

27,051

22,620

22,598

23,356

19,469

21,020



0%

18%

21%

14%

-2%

25%

6%

9%

2%

-11%

6%

5%

0%

18%

7%

262728293031323334353637383940

22

27

34

31

26

40

30

35

32

28

38

39

36

49

43

-4

0

6

2

-4

9

-2

2

-2

-7

2

2

-2

10

3

Rank2015


22,065 22,036 21,786 21,680 21,602 21,215 20,638 20,599 20,412 20,189 20,183 19,737 19,566 18,943 18,938

China Construction BankZaraMercedes-Benz OracleSamsungMovistarTDCo’wealth Bank of AustraliaExxonMobilAgricultural Bank of ChinaAccentureGilletteFedExShellHermès


25,008

23,140

21,535

20,913

25,892

20,809

19,950

21,001

19,745

18,235

18,105

19,025

17,002

19,005

21,844



-12%

-5%

1%

4%

-17%

2%

3%

-2%

3%

11%

11%

4%

15%

0%

-13%

414243444546474849505152535455

33

37

42

45

29

46

47

44

48

54

55

52

58

53

41

-8

-5

-1

1

-16

0

0

-4

-1

4

4

0

5

-1

-14

Source: Millward Brown Optimor (including data from BrandZ, Kantar Retail and Bloomberg)

Global brands Top 100

-1 -13%

Brand value ($m)

2014

4

3 201593,987 107,541

1 28%

Brand value ($m)

2014

3

4 2015115,500 90,185

-1 9%

Brand value ($m)

2014

2

1

Apple

2015173,652 158,843

Rank 2015

Rank2014

Change 1 67%

Brand value ($m)

2014

Value change 2015 vs 2014

1

2 2015246,992 147,880

2 16%

Brand value ($m)

2014

5

7 201591,962 79,197

Microsoft

A libaba has become the mostvaluable retail brand in theworld, overtaking globalbehemoths Amazon andWalmart, according to the

2015 BrandZ ranking of the world's 100mostvaluablebrands.

The entrance of Alibaba at 13 pro-pelled the value of the retail categoryupwards by 24 per cent, tying it withtechnology as the fastest-rising categoryintheBrandZtop100.

Alibaba became eligible to enter theranking after its record $25bn initialpublicoffering inNewYorklastSeptem-ber. But David Roth, chief executive ofThe Store, WPP’s global retail practice,says it is emblematic of broader trends,including the growth of electronic com-merce in China, now the largest ecom-mercemarket intheworld.

Alibaba has also developed a strongbond with consumers, he says, by beinga market linking buyers and sellers, andfacilitating payment through its Alipaysystem.

According to Mintel market research,Alibaba’s online retail platforms,Taobao and Tmall, accounted for more

than 70 per cent of Chinese online retailsales in2013.“Alibabahas themostphe-nomenal bond with consumers,” saysMr Roth. “It fulfils an amazing need. It’sseen as very entrepreneurial. Alibabaitself, as a brand, has enabled probablymillions of Chinese consumers not onlyto be consumers, but [to] be entrepre-neursandstart theirownbusinesses.”

He adds: “It is almost an indispensa-ble part of daily life. That is a tremen-dousplace forabrandtobe.”

Alibaba is not the only Chinese elec-tronic commerce business to enter theranking. JD.com, the largest Amazon-like direct sales ecommerce seller inChina, boasting its own distribution andlogistics network, has also entered theretail rankingatnumber16.

Mintel says Alibaba acts as more of afacilitator for online vendors, whereasJD.com is the largest actual onlineretailer, with a 6 per cent share of thetotal Chinese online market in 2013.JD.com recently threw down the gaunt-let to Alibaba, with the launch of a cross-border platform designed to bring for-eignbrandstotheChinesemiddleclass.

But it is not just electronic commercein China that is influencing the rankingsofretailers.

Globally, the way consumers shop ischanging. The march of online retailingshows no sign of abating. Meanwhile, indeveloped markets, consumers aremoving away from doing a big weeklygrocery shop, towards shopping locally,and more frequently. They are alsoexperimenting with different formats,

such as shopping in the no frills Germansupermarketchains,AldiandLidl.

The company that represents thesetrends the most is Tesco, Britain’s big-gest retailer. The value of its brand hasfallen 37 per cent, the biggest fall in theretail ranking, as it has sunk from sixthplace in2014, to12th in2015.

Tesco has suffered a disastrous 12months, ousting its chief executive andrevealing that its first-half profit hadbeen overstated by £250m. In April, thecompany made a £6.4bn pre-tax loss,one of the biggest in British corporatehistory, after £7bn worth of writedownsandcharges.

In contrast, the value of Lidl’s brandrose by 27 per cent, while Aldi’s brandvalue is up by 22 per cent. Aldi is nowthe eighth most valuable retail brand inthe world. Lidl and Aldi are muscularretail groups with huge economies ofscaleandinternationalreach.

“What is dangerous for the big playersis that Aldi and Lidl are able to actlocally and small . . . but they have gotjust as much, if not more muscle thanthe majors,” says Richard Hyman, anindependent analyst who runs the Rich-ardTalksRetailwebsite.

Some “big-box” retailers have alsoseen the value of their brands fall,includingIkea,TargetandCarrefour.

In contrast, reflecting the trendtowards convenience shopping, the7-Eleven group has entered the top 20forthefirst timeatnumber17.

Meanwhile, some big retailers haveseen the value of their brands remain

stable or rise. Amazon, which like Ali-baba and JD.com, has no physical storepresence, remains the second most val-uable retail brand in the world, trailingonlyAlibaba.

Costco, thewarehouseclub,whichhasbeen performing strongly, also saw thevalue of its brand rise 19 per cent, whileMacy’s, which has been transformingitself from a tired department storebrand to one focused on technology andteen and millennial shoppers — thoseborn in the early 1980s to late 1990s —has entered the top 20 for the first timeat 18, showing it is possible for a bricksand mortar retailer to reinvent itself forthedigitalage.

By contrast, Whole Foods, whichshould capture many of the trendstowards more local shopping, and instores whose foods have more clarity onwhere products are sourced from — aparticular concern of millennial shop-pers — saw the value of its brand fall 24percent.

Another enclave of the retail sector toenjoy a rise in its brand value is homeimprovement, with Home Depot andLowe’s enjoying 25 per cent and 23 percent rises respectively in their brandvalues. Home Depot is now the world’sfourthmostvaluableretailbrand.

According to Mr Roth, this reflects arecovery in the US property market,and the fact that individuals increas-ingly want to express themselvesthrough their homes. “[There are] lotsof green shoots in the retail arena, but indifferentpartsof thegarden,”hesays.

Big US groups fall victim to shifting trendsRetail China’s boomingelectronic commercemarket helps Alibabatake the top spot,writesAndrea Felsted

BrandZ uses a mixture of financialinformation and customer surveysto arrive at its ranking of the 100most valuable global brands, writesBrian Groom.

The research covers 3mconsumers and 10,000 brands inmore than 50 markets. It assessesthree aspects to evaluate thecontribution that brands make tocorporate value:

First, how “meaningful” theyare — a measure of their appeal.

Second, how “different” theyfeel to consumers — their uniquequalities and ability to set trends.

Third, how “salient” they are —whether they come spontaneouslyto mind when people makepurchases.

The financial information used asan input to the valuation is basedon what each company earns. Forbanks and insurance companies,the earnings metric used is netincome. For all other companies it isearnings before interest and tax.

The next step is to predict “brandearnings” as a multiple of currentearnings.

This involves creating a “brandmultiple”, which is similar to aprice/earnings ratio used byfinancial analysts to determine themarket value of stocks.

Current brand earnings are thenmultiplied by this number to arriveat a brand’s “financial value”.

BrandZ then uses customersurveys, either online or face-to-face, to assess how meaningful,different and salient a brand is —including the qualities that make itstand out from competing brands.

The results from this research aremultiplied by the financial value toarrive at the brand value. Brandvalue is the dollar amount BrandZestimates a brand contributes tothe overall value of a company.

Method How theywere ranked

Stellar growth appears to have gone outof fashion in the luxury goods industry.Aftera five-yearrunofsoaringrevenuesand profits despite the financial crisis, asales slowdown reflecting patchy Asianconsumer enthusiasm, volatileexchange rates and geopolitical instabil-ity has taken its toll on some of thebiggest names in this once unstoppablesector.

Accordingto theBrandZtop100mostvaluable global brands ranking, com-piled by Millward Brown, the value ofluxury brands has slipped 6 per centover the past year, outpaced byless glamorous sectors, including insur-ance, mass-market retail, telecoms andtechnology.

The category as a whole has been hitby anti-corruption laws in China thathave weighed heavily on sales related togift-giving. Student protests in HongKong, where 15 per cent of annual globalluxury sales are made, have also takentheir toll, as has Russia’s lurch intorecession, triggered by the conflict inUkraine.

But the leading factor in the fading

fortunes of some of the industry’s mosthigh-profile names has proven to becurrency headwinds. Following thehigh-profile departure of both its chiefexecutive and creative directorannounced in December, Guccireported an 8 per cent first quarter salesfall last month, and signalled it wouldrebalance some prices as a weakeningeuro widens the differential betweenregions.

The onset of “logo fatigue” and a loweuro have weighed heavily on revenuesat the Italian fashion and accessorieshouse,whichslipped16places to76.

Last month, Richemont, the world’ssecond-largest luxury goods companyby market capitalisation, issued anunexpected profit warning, which ana-lysts said was in part linked to the Swissfranc’s sharp rise in January, after theSwiss National Bank abandoned the caponthefranc’svalueagainst theeuro.

Exchange rate movements have led tosignificant regional price differences atmany labels beyond Gucci, with thesame luxury item now sometimes cost-ing more than 50 per cent less in Euro-pean capitals than in major Chinesecities.

Chanel, for instance, cut prices on itsiconic handbags by more than 20 percent in China and raised them by thesame margin in the eurozone in March.By contrast Hermès said it had no plansto harmonise prices during its latestquarterlyresults inMarch.

“We have a very strong French andEuropean customer base,” chief execu-tiveAxelDumastoldanalysts.

“If we significantly increased ourprices at this juncture, that would meangiving up on local customers and that issomethingwedonotwanttodo.”

Hermès, which makes high-endleather goods such as the Birkin bag, haswithstood the slowdown in the luxurymarket better than its competitors, andhas said it expects sales this year to grow8percent inconstant-currencyterms.

Yet, according to Millward Brown, ithas lost 13 per cent of its brand valuein the past 12 months. The research

company has mooted that this may bedue to the fact that, in the digital era, ascommunication becomes more instantand mobility more widespread, luxurybrands must work harder to find thebalance between ubiquity and exclusiv-ity inthemindof theconsumer.

The conservative Hermès is hardlyrenowned for its online prowess, unlikeaccessible US luxury brands such asTory Burch and Michael Kors. The latterhas a fan base of millions on socialmedia platforms such as Instagram andhas ramped up ecommerce and mobile-commerceofferings,offsettingconcernsover its aggressive retail expansion

strategy and its subsequent risk of over-exposure.

As Exane BNP Paribas analyst LucaSolca notes, many luxury megabrands,including Louis Vuitton, Gucci andPrada, have all now said they have theright number of stores, in part to protectthe value of their brand across lan-guages and geographies, especially inChina which continues to be a powerfulforce for sales growth. Many of theselabels have endured what Mr Solcadescribes as a “locust field effect”: thetendency of Chinese buyers to devour anew brand disproportionately, beforequicklyseekinganother.

Glamour loses itsgloss as consumerenthusiasmbegins to waneLuxury

Radical rethink sees storenumbers fall and ecommercetake their place, reportsElizabeth Paton

While the inscription ‘Made in China’has long been found on productsworldwide, it has usually been overlaidby foreign brands. Ecommerce groupAlibaba is changing this trend.

“Alibaba shows that you can makeproducts in China and use a Chinesebrand,” says Andre Spicer, professor oforganisational behaviour at CityUniversity’s Cass Business School inthe UK, emphasising its appeal inChina. “It’s become one of thosenational, iconic brands just like Cokedid in mid-20th century US.”

Prof Spicer says this success hasbeen achieved primarily through trust.“By using an online platform, Alibabawas able to create trust betweenconsumers and businesses,” he says.“It represents Chinese onlinecapitalism in some ways, whichestablishes an emotionalconnection.”

Alibaba’s impressiveentry to the rankings thisyear at number 13 echoesthe success of its initialpublic offering last September,which hit a record $25bn onthe New York StockExchange. The

boom in business-to-businesstransactions and interest from foreigncompanies who want to work withChinese companies have served thecompany well.

However, even Chinese dominancehas its limits. Group founder andchairman Jack Ma recently announceda hiring freeze. In a speech postedonline he said: “The purpose is simple:we need to get into formation. I think30,000 people is efficient.” This cameafter the share price dropped from$119 in November to $85 in April.

For some, Mr Ma is the reasonAlibaba is successful, embodying thebrand in the same way Steve Jobs didfor Apple and Richard Branson forVirgin. Mr Ma himself and hisemployees cite Alibaba’s female

workforce as a key asset.“The six female foundingpartners have risen throughthe ranks, 40 per cent ofemployees are female, asare 35 per cent of

management,” says JenniferKuperman, vice-president ofinternational corporate affairs.

“It’s a huge part of ourbusiness and helps

us think aboutcustomers first.”Charlotte Clarke

Ecommerce Alibaba: icon of Chinese capitalism

Online prowess: Michael Kors (right) has used social media to build a fan base of millions for his brand — Larry Busacca/Getty

Founder:Jack Ma

Wednesday 27 May 2015 ★ FINANCIAL TIMES 3

Global Brands

markets slowdown, were down 6 percent, with falls at Gucci and Hermès.Retail, excluding the Alibaba effect, wasup2percent.

In financial services, there was growthfor insurance companies such as ChinaLife and Ping An, and payments compa-nies including PayPal and Visa. But glo-bal banks, down 2 per cent, continued tosuffer the hangover from the financialcrisisandmultiplescandals.

Since the BrandZ rankings began,only 58 companies have stayed in thetop 100. Some analysts think volatilitywill increase as technology exerts its dis-ruptive influence. This year, there areseven newcomers, more than the long-termaverageof four.

These are: Alibaba, expanding inareas from taxi hailing to financial serv-ices; Huawei, the Chinese telecomsequipment maker challenging Appleand Samsung in premium smartphones;HDFC, the Indian bank; Telstra, theAustralian telecoms company; Costco,the US retail warehouse; SoftBank, theJapanese telecoms company; and ChinaTelecom.

Millward Brown says the share priceof its BrandZ strong brands portfolio —up 102 per cent since 2006 — has out-performed the S&P 500 at 63 per centand the MSCI World Index at 30 percent. It attributes the difference to the“powerofbrands”.

Brand managers face a more complextask, however, at a time when consum-ers judge products and services fromwhat others say on social media ratherthan taking their cue from marketeers.They are also grappling with changingdemographics, such as trying to tap intothe power of older customers andunderstand the millennial generation’sshoppinghabits.

“You’ve got to be thinking aboutchange, about innovating and improv-ingwhatyouhave,”saysMrWalshe.

“It isaboutrefiningyourbrandpropo-sition and making sure it is the best. It’sabout paying attention to how consum-ers are using your product and the fasterfeedback that you get now. It’s aboutdealing with complaints honestly andquicklyandnot ignoringthem.”

Ms Cheung says leaders need courageto act quickly, citing Chanel’s bold deci-sion to cut its retail prices in Hong Kongand China and raise them in Europe toharmonise the regional price differencewhichallowsunauthorisedcross-bordertrading. Mr Wilkinson says, although in

theory social media widen the scope forbrands that offer a consistent globalexperience, consumers may think morelocally,as intheexampleofcraftbeer.

“You widen your net, but your advo-cacygroup[ofengagedconsumers]maybe recommending a certain real ale orcraft lager from Bavaria rather thandrinking Heineken,” he says. “There isan argument that social media will bedamagingforglobalbrands.”

Headdsthatconsumerproductscom-panies are having to make tougherchoices about where to invest, becauseprofits are not good enough to do every-thing.“You’vegot tomakechoicesaboutwhether to acquire or to innovate inter-nally. You can’t invest everywhere, sowhere are the key markets? Are yougoing to do it with a global brand orsomethingmore locallyrelevant?”

Continued frompage1

Apple’s corebusinessensuresfortunes rise

1/3Total value of thetechnologycategory in thetop 100 brands

$3.3tnThe combinedvalue of thetop 100 brandsin 2015

Rank2015


18,385 17,977 17,953 17,702 17,486 17,384 17,365 17,267 17,025 16,438 16,301 16,060 15,959 15,496 15,335

IntelColgateBTANZCitiOrangeChina LifeSinopecIKEABank of ChinaDHLCiscoPing AnSiemensHuawei


11,667

17,668

15,367

19,072

17,341

15,580

12,026

14,269

19,367

14,177

13,687

13,710

12,409

16,800

n.a.



58%

2%

17%

-7%

1%

12%

44%

21%

-12%

16%

19%

17%

29%

-8%

n.a.

565758596061626364656667686970

86

56

64

51

57

62

81

67

50

68

73

72

77

59

New

30

-1

6

-8

-3

1

19

4

-14

3

7

5

9

-10

n.a.

Rank2015


15,022 14,786 14,171 14,027 13,827 13,800 13,522 13,332 13,134 13,106 12,938 12,701 12,649 12,420 12,200

PetrochinaUS BankEbayHDFCH&MGucciJ.P. MorganHondaPepsiFordBPTelstraKFCWestpacLinkedIn


12,413

14,926

15,587

n.a.

15,557

16,131

12,356

14,085

11,476

11,812

12,871

n.a.

11,910

11,743

12,407



21%

-1%

-9%

n.a.

-11%

-14%

9%

-5%

14%

11%

1%

n.a.

6%

6%

-2%

717273747576777879808182838485

76

65

61

New

63

60

79

70

88

84

74

New

83

85

78

5

-7

-12

n.a.

-12

-16

2

-8

9

4

-7

n.a.

0

1

-7

Rank2015


12,181 11,818 11,806 11,661 11,660 11,560 11,447 11,411 11,375 11,335 11,223 11,214 11,131 11,075 11,044

SantanderWoolworthsPayPalChaseALDIING BankTwitterNissanRed BullBank of AmericaNTT DoCoMoCostcoSoftBankChina TelecomScotiabank


11,060

11,953

9,833

11,663

9,584

9,771

13,837

11,104

10,873

10,149

10,041

9,454

n.a.

n.a.

11,351



10%

-1%

20%

0%

22%

18%

-17%

3%

5%

12%

12%

19%

n.a.

n.a.

-3%

8687888990919293949596979899

100

91

82

97

87

100

98

71

90

92

94

95

New

New

New

89

5

-5

9

-2

10

7

-21

-3

-2

-1

-1

n.a.

n.a.

n.a.

-11

Global brands Top 100 (continued)

-4 -5%

Brand value ($m)

2014

9

5 201581,162 85,706

-2 4%

Brand value ($m)

2014

8

6 201583,841 80,683

4 36%

Brand value ($m)

2014

7

11 201586,009 63,460

Rank 2015

Rank2014

Change 2 15%

Brand value ($m)

2014

Value change 2015 vs 2014

6

8 201589,492 77,883

-1 19%

Brand value ($m)

2014

10

9 201580,352 67,341

Coca-Cola brand value includes Lights, Diets and Zero. Budweiser brand value includes Bud Light. Pepsi brand value includes Diets. Red Bull brand value includes sugar-free and Cola

McDonald’s

When Canadian musician Dave Carrollwatched ground crew at O’Hare airporttoss his beloved guitar around the tar-mac back in 2009, YouTube, TwitterandFacebookwere intheir infancy.

Customers were still mostly lockedinto traditional, often fruitless com-plaint mechanisms, and companies’service lapses were not instant fodderfor themasses.

But a little creativity, inspired byUnited’s abysmal response to Carroll’sbroken guitar, changed everything. Hisquirky song, “United breaks guitars”,went viral, causing considerable dam-age to the airline’s reputation and link-ing corporate social media strategy toreputationandbrandmanagement.

“Carroll became the personificationof the vigilante, the customer avenger,”says Yany Grégoire, associate professorat HEC Montreal who specialises in cus-tomerrevenge.

Today, anyone with a presence onTwitter, Instagram or Facebook canexact revenge for poor service or prod-ucts. “Social media can represent a big

threat, but also a very big opportunity ifit’s done right, with humour,” says ProfGrégoire.

When the UK-based travel companyThomas Cook was asked for a free holi-day by an enterprising 20-somethingwho shared the company’s name, it senthimacolourlessstockrefusal.

Rival company lowcostholidays.comsawachance foracheappublic relations

boost, and swooped in with an offer of afreeweekinParis.

“Social media for existing customersadds transparency and accountabilityin a truly magnificent way,” saysFrances Frei, a professor at HarvardBusiness School who focuses oncustomer service. “But if jokey conver-sations are your sole customer acquisi-tion strategy, then you’re in trouble.”

The corporate world’s new agility inresponding to customer revenge scenar-iosonsocialmedia is theresultofarevo-lution in talent acquisition for socialmediamanagement, saysProfGrégoire.

If companies are going to have thecapacity to respond to “customerrevenge” situations quickly and crea-tively, they need to employ highlyskilled staff with a level of autonomy.This carries its own risks, but as ProfGrégoire adds: “If a company comes onto social media and tries to controleverything, it will not work. You haveto roll with the punches, go with theflow.”

Internal experts, gifted communica-tors and data analysts are prized hires,as companies seek to not only protecttheir brand and find new customers butalso to create significant value from theflowof information.

“In the past few years, companieshave learnt that if they want to do socialmedia in a world-class way they needhigh-class analytics talent,” saysH James Wilson, managing director atthe Accenture Institute for High Per-formance, the professional servicesgroup. Social media strategy is no longer“owned and operated” solely by mar-keting or public relations executives incompanies,heargues—analystsneedtobe crunching social media data and reg-ularly talking with the top executives to

identify business opportunities. Inindustries where a lot of transactionaldata can be mapped, such as banking,retail and insurance, the benefits ofassigning skilled data analysts to socialmedia informationflowsareclear.

The interface between social mediaand the “Internet of Things”, how every-thing is connected, is also ripe forexploitation, saysMrWilson.

“This is where we increase the valueof digital platforms for users and forcompanies, particularly in the energysector and automotive and health.There’s going to be a lot more creativeexploration — for example, home ther-mostats interfacing with social plat-forms to build a picture of neighbour-hoodenvironmental impacts.”

Wearable fitness technology andsmart cars were also creating opportu-nities for companies to harness socialmedia to motivate behaviours in cus-tomersormicro-targetgroups.

“Companies are becoming more ana-lytical,”saysMrWilson.

“They’ve got more data at their fin-gertips. Ways to use those data, toimprove engagement with customersand even improve operational deci-sions. Information is coming not justfrom online, personal computers, socialmedia; it’s coming from wearable tech,from cars, from the interface betweensocialmediaandtech.”

Companies ignore ‘customer avengers’ at their peril

It was no accident that Apple putprivacy and security features at theheart of its pitch when it launchedApple Pay late last year.

The mobile payment service was adirect challenge to providers such asPaypal, one of the world’s biggestinternet payment companies, andprivacy is consistently among the topconcerns of social media users.

PayPal moved swiftly to buy theIsrael-based malware detectionspecialist, CyActive, and mobile walletcompany Paydiant to enhance itssecurity capabilities.

H James Wilson, managing directorat the Accenture Institute for HighPerformance, the professional servicesgroup, expects companies increasingly

to compete for customers with appealsbased on privacy features. As the linesbetween business, social media andthe internet of things blur, demand fortransparency and privacy will becomeever greater, he says.

Already, social media users have farmore contact with robots andautomated communications than theyrealise, says Mr Wilson.

He adds: “Concerning the meaningof the word ‘social’ itself, there’s agrowing inconsistency, ambiguity.Social media is not humans connectingwith humans in an emotionallyengaging way. We’re seeing anincreasing amount of automation inthe social space.”NM

Privacy and security Demand for transparency

I n 2010, Apple was confronted witha thorny problem. The redesign ofits iPhone 4 had left some userscomplaining the device was drop-ping calls. Many blamed the rede-

signed antenna, a sliver of metal thatwrappedroundtherectangulardevice.

But Steve Jobs, Apple’s late co-founder and chief executive, refused toaccept that the product was inferior. Hesaid the issue was largely the result ofusersholdingthephoneimproperly.

This month, Apple hit the headlinesagain when reports suggested its Watchdidnotworkproperlyontattooedarms.

Yet Apple has not suffered any linger-ing reputational fallout from a big prod-uct launch that did not go according toplan. According to Millward Brown’sTop 100 Most Valuable Brands ranking,2015, the iPhone maker is the world’smostvaluablebrand.

Strikingly, it is not the only technol-ogy company with a winning reputa-tion. Google, Microsoft and IBM roundout the top four, while Tencent, the Chi-nese internet portal, Facebook and Ali-baba, the ecommerce group, sit just out-side the top 10. So, why are so many techbrandsat thetopof thetable?

To answer that, it is useful to separatethe companies into two camps: groupsthat have been around for a long timeand are built on hardware and devicessuch as Apple, Microsoft and IBM; and

newer internet businesses, such asGoogle, Facebook, Tencent and Alibaba.The enduring success of the former willinform how long the latter group areable tostayat thetop.

For technology companies, says RitaClifton, chairman of consultancyBrandCap, the “challenge has alwaysbeen to stay up there, generating sus-tainable value in the long term, beyondtoday’s technology”.

Tosurvive inasectormarkedbyrapidchange and constant disruption, it isessential to adapt and evolve before cus-tomers become dissatisfied. She pointsto companies that have failed to do this— “think of Palm, BlackBerry andNokia” — which quickly went from mar-ket leaders toalso-rans.

“You need to build a brand that willthrive, stretch and be versatile,” says MsClifton. “The important distinction iswhether they continue to behave like acategory-bound tech company — in thecase of Nokia, a handset company — or awell-functioning brand, that is focusedaround customers and how their livesarechanging.”

Apple, Microsoft and IBM have allexperienced highs and lows in reputa-tion, only to recover again. But, as thesurvey suggests, the iPhone maker hasbeen most successful in reestablishingitselfat thetopof thetree.

Ms Clifton suggests that the

company’s clarity about its purpose andability to communicate it to customershavemarkeditout.

“Applehasreflectedall thequalitiesofwhat makes a great brand, irrespectiveof sector: clarity for what it stands for,coherence about how that shows upthrough everything it does, from dis-tinctive products and services, to thestores and online experience, to its peo-plewhoaregreat todealwith.”

For the internet-based technologycompanies, success has relied onbecoming an essential part of custom-ers’ everyday lives and figuring out howto monetise that relationship. Theirbusiness model is built on the so-callednetwork effect, where a company looksto pull in as many users as possible byoffering free access or content and sell-ingadvertising.

These are “winner take all” busi-nesses, says Patrick Barwise, professor

of management and marketing at Lon-don Business School, which makes ithardforcustomersto leave.

“If you are part of that customer’s lifeand you’re meeting a need in such a waythat they don’t have to think aboutchoosingyou, thenumberonething is tomake sure they have no reason to go tosomebodyelse,”hesays.

If a service becomes a utility, it ismuch harder for a user to quit, Prof Bar-wise adds. That makes a company morepervasive, but it also means it is under aparticular pressure to ensure it does nottake that relationship for granted whenit comes to sensitive issues such ashandlingofdataandprivacy.

It is easy for companies to focuson what delights customers, says ProfBarwise, but it is just as important tomake sure one eye is kept on what theydo not like before they choose to jumpship.

Apple’s clarity ofpurpose andcommunicationskills keep it topTechnology Tencent, Facebook andAlibaba arefighting hard to close the gap, writesRaviMattu

Wrist bound: the company’s most recent product, the Apple Watch — Eric Risberg/AP

Twitter is at the vanguard of newmedia, yet is not afraid to tap intomore established methods to boostits brand profile.

Take its approach to television.Twitter has created a vast team ofexecutives whose job is to assistbroadcasters from MTV in the USto the BBC in the UK.

The San Francisco-basedcompany provides these TV groupswith vital feedback — who istweeting and what they are saying— as people watch a given show.

Simon Cowell from The X FactorUSA says he has changed liveshows week-to-week, based oninformation provided by Twitter.

In return, broadcasters provideTwitter with free publicity. Manyprogrammes will display a Twitterhashtag, inviting viewers to tweetabout what they are seeing.

Twitter says viewers get to be apart of a “global conversation”,making sure they are moreengaged in what they are watching,as well as giving them a reason toupdate their Twitter feed.

Twitter also taps up pop stars,sportspeople and politicians.Company executiveswill meet celebrities personally,help set up their account, givingthem a crash course in using theservice and provide a direct line toTwitter HQ should they stumble.

Critics of this strategy say it canbe baffling for non-Twitter users.

This is a problem, becauseTwitter is desperate to broaden itsappeal beyond its 288m monthlyusers. Business analysts worry thatit is not doing enough to increaseits user growth rate, which Twitterreported in February was just 1.4per cent quarter on quarter.

One of the reasons Twitter issuffering is the rise of internet trollswho use the service to direct abuseat public figures and privateindividuals.

In response, Twitter says it israpidly expanding the team it hasin place to respond to complaints.Murad Ahmed

Microblogger Twitter

Social media

When a complaint goes viral,it can cause considerabledamage, says Naomi Mapstone

4 ★ FINANCIAL TIMES Wednesday 27 May 2015

Global Brands

ContributorsBrian GroomFormer FT assistant editorRavi MattuTechnology, media and telecomsnews editorAndrea FelstedSenior retail correspondentEmma DunkleyRetail banking correspondentMurad AhmedEuropean technology correspondentElizabeth PatonHousebuilding and constructioncorrespondent

Andy SharmanMotor industry correspondentCharlotte ClarkeBusiness education communities editorNeil MunshiUS writer, FT aggregationNaomi MapstoneFreelance writerJ Walker SmithExecutive chairman,the Futures Company

Aban ContractorCommissioning editor

Steven BirdDesignerAndy MearsPicture editorChris CampbellGraphic artistFor advertising details, contactIan Edwards on +44 (0)20 7873 3272 [email protected], or your usual FTrepresentative.All editorial content in this report isproduced by the FT. Our advertisers haveno influence over or prior sight of thearticles.

In the early 1970s, when a young Ferdi-nand Piëch joined Audi, the Germanmarque had lower revenues per carthan Opel and was considered theweakerof thetwobrands.

Today, while Opel — General Motors’European arm — tries to break even,Audi is highly profitable and slugging itout with BMW and Mercedes-Benz, thecarmaking unit of Daimler, for thecrown of the world’s top-selling pre-miumcarmaker.

That transformation is largely thanksto the work of Mr Piëch, an automotivetrailblazer with a relentless focus onengineering and innovation whostepped down last month as chairmanofVolkswagen,Audi’sparent.

But the shift upmarket has helped setup one of the most fascinating battles inmodern carmaking, as Germany’s bigthree premium auto brands chase eachother round the globe into new marketsand push into ever more diverse prod-uctcategories.

The dominance of German premiumcarmakers is reflected in the MillwardBrown brand survey this year. BMWand Mercedes-Benz lie second and thirdamong the auto brands, behind Toyota,theworld’sbiggestcarmakerbysales.

Though further down the rankings,Audi’s ascent continues. Its brand value

has risen 43 per cent in the past 12months, part of a near 180 per cent risein five years. That is thanks to impres-sive financial returns, with Audi’s€5.2bn operating profit last yearaccounting for about 40 per cent of VWgroupearnings.

“In the premium sector, there is fiercecompetition,” says Rupert Stadler, chiefexecutive of Audi. “We are sitting closetogether[inGermany], sowesmelleachother, we love each other . . . but wefight.”

Audi, BMW and Daimler’s Mercedes-Benz marque account for about four-fifths of global premium sales, withMunich-based BMW taking top spot inglobal premium sales in 2014 with 1.8mdeliveries.

Withthespacebetweenthethreeevertighter, each is looking to differentiateitself and establish a lead in the growthareas of the industry: low-emissionvehicles, smartphone-era connectivityandautonomousdriving.

At the same time, the three mustcounter the threat of entrants fromSiliconValley.

“There are some new players on theblocknow, includingTesla—Itakethemall seriously,” says Ian Robertson, BMWboard member for sales and marketing,referring to the Californian electric car-maker run by Elon Musk. “The compe-tition element is what makes it such anenergeticandevolving industry.”

Audi has continued to move awayfrom the likes of Renault and Ford sincethe 1970s and now includes some Italianbrands, including supercar maker Lam-borghini, motorbike brand Ducati, andengineer ItaldesignGiugiaro.

The transformation, spearheaded byMr Piëch, is often summed up by theAudi sloganVorsprung durch Technik, or“Leadingthroughtechnology”.

“It’s a 30 or 40-year story of continu-ous improvement,” says Felix Stoeckle,a Berlin-based partner at brand consul-tancy Prophet, who has worked withBMWandMercedes-Benz.

AudidevelopedQuattro—introducedin 1980 as the first series productionfour-wheel drive system — as well asnew lightweight technologies, such asthe groundbreaking (but lossmaking)aluminiumA2.

Nowthecompanyisat theforefrontofwhat it calls piloted driving, with an A7conceptcardriving itself fromSanFran-cisco to this year’s Consumer Electron-icsShowinLasVegas.

But for all its gains, Audi still lagsbehind BMW and Mercedes-Benz interms of operating profit, and all threeface the challenge of what Mr Stadlercalls the“newnormal” inChina.

There are also signs that the furiousrate of change in the industry, and theintense capital spending that it requires,iseroding profitability.Audi is investingheavily in new models, technology andexpansion overseas — all of which took atoll on the operating margin in its latestquarterlyresults.

“The most important thing is youreally feel the technologies . . . Then youhave to execute it in a proper way,” saysMrStadler.

“Thenyouhavetomoveon.”

German trio feels the heat, asSilicon Valley enters the arenaAutomotive

Audi vies with BMW andMercedes to be the top-selling premium carmaker,but outsiders are poised tocompete, says Andy Sharman

F ew industries were leftunscathed by the global finan-cial crisis, but the banking sec-tor was among the worst hitand is still nursing the wounds

nearlysevenyearson.In the eyes of many, global invest-

ment banks conducting risky mortgage-backed trades were largely responsibleforcreatingthecrisis.

As a consequence, consumer trust inthe sector plunged. The past seven yearshave seen extensive regulation designedto clamp down on opaque investmentbanking practices, hitting profits andcausing a number of lenders to retreatfromthesector.

While some banks have managed tosalvage their brand, others have beenpermanentlytainted.

Royal Bank of Scotland, once theworld’s biggest bank with assets of£2.4tn, has been forced to undertake asweeping restructuring after seven suc-cessiveyearsofnetannual losses.

The lender, bailed out by the UK gov-ernment and still 80 per cent owned bytaxpayers, recently unveiled plans towithdraw from global markets, cut itsbalance sheet by £65bn and radicallyshrinkits investmentbankingarm.

“One of the biggest losers is the RBSbrand,” says James Daley, of consumersite Fairer Finance. “It has sunk to thebottom of [our] customer satisfactiontables over the past few years. It hasgone from bad to worse, punctuated byan IT failure a few years ago, whenpeoplecouldn’tgetaccess totheircash.”

Conversely, Santander has risen upthe customer satisfaction tables. Thebank benefited from the financial crisisin that it was able to acquire strugglinglenders — such as Alliance & Leicester —cheaply. “The bank is now gaining cus-tomers for its current accounts and itscustomer rating is up from the bottomof thetablewhere it languishedsixyearsago,”saysMrDaley.

Regional banks are also faring betterthan global “universal” banks thatattempt to combine investment andretailbanking.

Millward Brown, the WPP researchfirm responsible for compiling the top100 global brands list, believes regionalbanks are less subject to regulations andhave forged better connections withconsumers. HSBC’s brand value, forexample, has slipped 11 per cent com-paredwith lastyear,whileWellsFargo,aUSretailbank, isup9percent.

But all banks face the threat of beingdisrupted by technology groups such asApple and Google, which are movinginto payments and making banking eas-ier for consumers ever more reliant onmobile devices. Visa, for example, hasseen its brand value soar 16 per centover the past year, making it the mostvaluable financial services brand glo-bally. However, experts believe the cardprovider must evolve to survive in anincreasinglydigitally focusedworld.

John Lunn, a partner at business con-sultancy firm Moorhouse, believes themove to digital is tough for cardproviders, because “they are so heavily

dependent on plastic”, such as creditand debit cards, as the core of theirbusiness.

Christophe Duthoit, a senior partnerat Boston Consulting Group says: “Thereal question is: how do you transformanexistingbanktomakeitmoredigital?The kind of customer experienceoffered by technology groups such asGoogle and Amazon is unparalleled bybanks. They need to adapt and trans-form to offer a similar digital customerexperience.”

Insurance firms have had less of a tor-rid time, by comparison. “In the UKmarket, the insurance sector has been‘steady as she goes’, especially in thegeneral insurance market, where a lot ofit is driven by price and scale,” says MrDaley.

Henotes thatAdmiralandDirectLinecontinuetobetwoof themostprofitablegeneral insurers. “Aviva and Prudentialare a bit more complex. They were

steady until this year, when [UK]Budget reforms have thrown things intothe air. But in terms of the financial cri-sis, theyemergedrelativelyunscathed.”

However, the insurance market expe-rienced turmoil in 2008 when the USgovernment was forced to bail out AIGina$182bnrescuedeal.

After years of clamping down onbanks, regulatory scrutiny is starting toshift towards the insurance sector. TheFinancial Conduct Authority earlier thismonth revealed shortcomings in theinsurance market following a wide-rangingreview.

The watchdog said insurers are “notalways providing customers with clearinformation about different paymentoptions” when they buy general insur-anceproducts.

“We have not scratched the surface ofthe insurance market yet because newregulations are about to bite,” says Rich-ardGoold,apartneratMoorhouse.

Salvaging ofreputations hasbeen a longtime comingFinancial services After the banks, attention isnow shifting to insurers, reports EmmaDunkley

‘Customerexperienceoffered bytechnologygroupssuch asGoogle andAmazonis notparalleledby banks’

As one of the oldest privatesector banks in India, HDFC iswell known in the country.

Its domestic focus and lackof international presencehelped the bank emerge fromthe financial crisis unscathed,as India proved more resilientthan other countries amid theglobal economic turmoil.

The bank was launched in1994 by its parent company,the Housing DevelopmentFinance Corporation, whenthe Indian governmentopened the market for privatesector bank licences.

With more than 3,600branches in India and abalance sheet of about$100bn, it is one of the largestprivate sector banks in thecountry. The parent companyretains a 20 per cent stake inthe bank, while the remainderis owned by institutionalinvestors.

Aditya Narain, head ofresearch for India at Citigroup,says it has “had a strong run”over the past 20 years,offering both corporate andretail loans in equal measures.“It is a high-quality bank interms of quality assets.”

The bank provides regulardeposits, money transfers andbusiness financing. This “plainvanilla business” is one of thereasons the bank was largelyunaffected by the financialcrisis, says Mr Narain. Indeed,its brand has entered theBrandZ top 100 global brandsindex for the first time,ranking 74 in terms of value.

Regional banks havegenerally fared better in termsof brand value than globallenders, as they were moresusceptible to the economicdownturn. Part of the reasonwhy the Indian bankingsystem has weathered thestorm is its strong regulatoryframework, requiring banks tohold substantial cash andgovernment bond buffers.

Analysts at Barclays believe

that HDFC in particular is“very well positioned”, withincreased investmentspending by the bank ongrowing its infrastructure, astrong balance sheet anddeposit franchise.

HDFC Bank is expanding itsbranch network, with 355added in the fourth quarter oflast year alone, which analystsbelieve “bodes well for futuregrowth”. It is also noted forbeing the first in India to enternew geographical marketsand sectors, such as digitalbanking.

It claims to have been thefirst bank in India to launchinternational debit cards, aswell as mobile banking andretail silver bars. Developing astrong domestic customerbase is central to brand value.

The bank has focused onexpanding its reach acrossIndia, forging a partnershipwith the country’s PostalDepartment in 2008 to pushinto more rural locations. Thisis in stark contrast to UKbanks, which are retrenchingto save on costs.

Barclays says HDFC ispoised to benefit from amarket recovery due to itsrobust financial position,especially as it continues toexpand its presence andbrand into semiurban areas.Emma Dunkley

HDFC Domestic focus pays off

People power: HDFC hasmore than 3,600 branches

Blues: RBS slipsdown thesatisfactionstakesJohnny Green/PA

Ferdinand Piëch:an automotivetrailblazer with anunswerving focuson engineering andinnovation

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