BrandZ ‘X factor’ boosts position in ranking
BrandZ valuations are unique because they take into account not just the financial might of a business, and the physical presence of a brand on our screens and in our streets. Our valuations also quantify the role that a brand occupies in consumers’ minds. This “power in the mind” is what we call “brand contribution”, and this is what enables financially smaller brands to punch above their weight in the Top 50 ranking.
Two brands with similar financial scale can therefore find themselves in quite different positions in the ranking. This is because there is a difference in the proportion of their intangible value that is brand driven, rather than market driven. That is, they each have a different “power in the mind” of consumers, and this can propel them up or down the Top 50.
In the German Top 50, the power in the mind is very different for different brands. Deutsche Post, for example, which ranks 19th this year, has a brand contribution score of five out of five. This means a high proportion of its intangible value is driven by the brand, and it supercharges the brand, so it achieves a brand value of almost $3.8 billion.
E.ON, meanwhile, has a brand value only marginally higher, and is in 18th position in the 2019 rankings. But E.ON has a lower brand contribution score – one out of five – because it is more dependent on operational aspects and the presence of its real estate for its prominence in the market, whereas for Deutsche Post, the brand is the biggest source of value.
Brand value is hugely important for both brands, because it isn’t just a way to supercharge a brand’s performance in the BrandZ rankings. A high valuation reflects how well a brand differentiates itself from its competitors, generates desire, and cultivates loyalty.
Brand strength also helps insulate a brand against decline when times are tough. In challenging times, strong brands tend to be more resistant to a downturn and, when market conditions pick up, they recover faster than the competition.
Five of the Top 10 brands in the 2019 German ranking have high brand contribution scores, that is a score of four or five out of five.
But many of the other top scorers – those that have the greatest proportion of their value driven by their “power in the mind” are from lower down the ranking. These include Krombacher (50th) and Beck’s (39th) beers, along with Lenor (44th) and the retailers Edeka and REWE – brands that have made themselves part of consumers’ everyday lives.
Zalando has burst into the German Top 50 this year, with a value of over $3 billion putting it in 21st position. The brand has created for itself a unique point of difference in a crowded e-commerce market. Its focus on the opportunities to return unwanted items for up to 100 days is unheard of in the retail sector, and its “Scream for Happiness” campaign highlighted in a very vocal way the joy of receiving an online order. Zalando is seen as 46 percent more different than the average brand, and provides an online experience 33 percent better than most brands. It also does great advertising, often in conjunction with online influencers, and these all combine to drive not just volume sales but also to give Zalando the power to command a price premium.