Top Brands Staying Strong in Downturn

According to Millward Brown’s Top 100 Most Valuable Global Brands of 2009 Report, the top 100 global brands have increased in value by 2% to $2 Trillion over the past year. Despite the global financial downturn, the top brands seem to be immune to the economic turmoil, if you trust Millward Brown’s analysis. Some top brands seem to be excelling in the downturn like Apple and Amazon, while others have tumbled like Disney and Starbucks.

One of the biggest surprises is Apple’s success despite the economic environment. Despite smaller wallets, consumers are still managing to pay for relatively expensive iPods and iPhones which sometimes require expensive AT&T data plans. This supports Millward Brown’s analysis that the top brands are striving. This may be because consumers are looking for the most value for their money. They may sacrifice going to Starbucks for a month and make their coffee at home so that they can afford a new iPhone.

According to the report:

“Customers are not holding their breath during this economic volatility. They are adjusting their coping strategies, while remaining determined to purchase brands that contribute to the pleasure, quality, purpose, and security of their lives.”

One of the biggest questions companies want to know, is whether the recession will cause a lasting change in the way consumers buy. One noticable change is the avoidance of conspicuous consumption as people try not to appear insensitive or greedy. Luxury brands still grew 10% in value, although this can be largely accounted for by growth in demand in China.

“Consumers are not in the mood for greed. And greed is not required for success. Once we are on the other side of the economic slowdown, consumer spending will pick up. But perhaps slowly, as people internalize the lessons of our recent boom and bust history. They will want quality, intelligently created, well-designed products. But they may not want one in every color.”

The study suggests that even when money is tight, consumers will still spend on the strongest brands. Consumers know what they can expect from strong brands and are still willing to pay premiums for this assurance. The exception are brands that are perceived as unnecessary luxuries like a trip to Disneyland or a 4 dollar coffee.

Are Brands Becoming Less Relevant?

Over on the Customer Experience Matters blog, Bruce Temkin explains why he has declared the death of brands.

“It’s simple: Companies have let profits replace purpose. As firms optimize left-brain management techniques for squeezing out additional profits, they’ve lost something very important — their raison d’être. True brands are more than just marketing slogans, they’re the fabric that aligns all employees with customers in the pursuit of a common cause.”

While I think it’s a far stretch to say brands are going to die, I do think that brands have become less relevant in the current environment. The DVR and the internet have changed the way people are consuming television media which has traditionally been the main brand builder for large cap companies. According to MediaPost: “In 2008, Nielsen estimated penetration of DVRs at 25% of U.S. households. This percentage is expected to climb to 41% of homes by 2012, according to research conducted by MAGNA Global Research.” The internet has also changed how people find information on products. Consumer’s don’t have to rely as much on brands to estimate value before they buy.  They can read comprehensive reviews online or find out the aggregate customer ratings of a product.

In addition the emergence of social media like Facebook, blogs, and Twitter, has accelerated the spread of word of mouth. A brand’s reputation is much more volatile, as bad PR or rave reviews can spread through online communities like wildfire.

One of the most successful brands of late is Zappos which has been able to grow to a billion dollars in sales with no television advertising. Instead they have used social media like Twitter to help spread of the word of their world class service. Like Seth Godin likes to say, the TV Industrial Complex, in which companies like P&G would rely on television ads to build a brand, is no longer a viable strategy. Companies that are best able to adapt to the new media landscape will have the best chance of sustaining their brands and stay relevant with consumers.