Interbrand IQ - What's in Store for 2013 by Interbrand

Whatâ&#x20AC;&#x2122;s in Store for

Some said 2012 would be the end of the world, but here we are, with another year before us—and another opportunity to do better and be better. From climate change and economic uncertainty to big data information overload and the security challenges of the digital world, the problems we face today are unique and unprecedented. At the same time, the success of the London Olympics and the Curiosity rover’s exploration of Mars remind us that we have never had such vast potential to transcend our previous limits. Whatever this year may bring, we know that the brands best positioned for success in 2013 are those that take seriously the significant role they play in people’s lives and work to remain relevant and authentic in our rapidly changing world. To help you respond quickly and effectively to the challenges that will arise in the coming months, we offer you a look ahead—a glimpse into 2013’s emerging themes and trends. But predicting and spotting trends is never enough, so we have also compiled new commentary and advice from 16 of our global sector experts on how to navigate 2013. Take a look and let us know what you think and how you plan to tackle the year ahead. Wishing you a prosperous year,

Jez Frampton Global CEO, Interbrand

AIRLINES

APPAREL

AUTOMOTIVE

BUSINESS SERVICES

DIGITAL 12

ENERGY 18 FAST DEVELOPING MARKETS

FAST MOVING CONSUMER GOODS/CONSUMER PACKAGED GOODS 27

FINANCIAL SERVICES

FOOD & BEVERAGE

HEALTHCARE

LUXURY 30

RETAIL

MEDIA

TECHNOLOGY

TELECOMMUNICATIONS 46

WHAT’S IN STORE FOR 2013

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AIRLINES By Stuart Green

DRIVING ENGAGEMENT On a macro level, the perennial foe of the airline industry, oil prices, continues to negatively impact profitability. Expected fuel increases have led the International Air Transport Association (IATA) to downgrade the global profit outlook for 2013 to $3 billion, with a 0.5% profit margin. Europe remains the biggest drag on global profits while the US, Asia Pacific, and the Middle East are all in the black. Although higher fuel costs will more than halve profits this year in Asia, the region’s relatively strong economies and changing demographics will continue to generate more rapid growth in travel and cargo.

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Despite this mixed economic picture, airlines continue to embrace a blend of traditional and digital platforms to “get bums on seats” and enhance the experience for their customers. THE EXPERIENCE Airline customers are increasingly experienced flyers and growing ever more discriminating and demanding. As a result of ongoing industry deregulation, improved technologies, and the emergence of new business models, consumers have more choices than ever. Interested in shopping around for the best deal and the most attractive package of services, consumers routinely ignore more traditional marketing channels, pushing airline brands to

WHAT’S IN STORE FOR 2013

find new ways to reach and engage them. Virgin America recently established a dedicated, interactive website to bring its brand experience to life. Branded by the airline as an “immersive digital portal,” the site offers an interactive, virtual tour through a Virgin America cabin. At the site, customers can submit Instagram images of their Virgin America experience and post messages and Tweets with the hashtag #myVXexperience. The brand has also set up a #myVXexperience pinboard on Pinterest to share customer submissions to that platform’s audience. Delta has a new sponsorship deal with the UK’s Chelsea Football Club,

“CONSUMERS ROUTINELY IGNORE MORE TRADITIONAL MARKETING CHANNELS, PUSHING AIRLINE BRANDS TO FIND NEW WAYS TO REACH AND ENGAGE THEM” following similar partnerships with the Atlanta Braves and the Minnesota Twins in the US. As part of this new partnership, the first Sky360 lounge outside the US will open at Chelsea’s home stadium in London. The Stamford Bridge lounge will host VIP guests of official Delta partners on match days providing a Delta-branded experience through features such as airline-style tickets inviting attendees to “check-in” for matches, and an LED-lit runway leading guests to a dedicated entrance to watch football games. China’s outbound tourism is growing at 20% per annum. As a result, airlines, airports, and tourism destinations around the world are rolling out the red

carpet to make Chinese travelers feel special. Frankfurt airport now offers a personal shopping service where attendants speak fluent Mandarin and are familiar with the culture and preferences of the passenger. Services include helping passengers make purchasing decisions through translation of products, getting refunds on VAT, and escorting them through security checks and onward to departure. Additionally, Frankfurt airport launched a Chinese version of its mobile app and is looking into introducing personal shoppers for Russian passengers.

are being rolled out around the world. Apple’s new Passbook is a digital wallet that can store boarding passes, movie tickets, and membership cards. Passengers of United, Delta, Malaysia Airlines, Lufthansa, and Virgin, upon arrival at the airport, get an image of their boarding pass on-screen, which can include information such as gate changes or seat assignments. Uses will include proactive management and dissemination of timely information to flyers, such as rebooking options, updated baggage tracking, reimbursement vouchers, and storing coupons for ancillary services like premium lounge access. SOCIALLY ACCEPTABLE Digital platforms are now the norm with airlines around the world using mobile phone applications and social media networks to advertise, engage, build customer databases, and sell travel deals/fares. The more savvy airlines are using social media to drive real results for their business through mobile marketing campaigns, managing customer service management and crisis management, as well as experimenting with new social media platforms to attract new customers and widen their communities. However, building brand value will require a genuine integration between the online and offline experience. As well as meeting short-term sales goals through social marketing, there must be a holistic vision for each airline brand that not only drives all experiences, but is also grounded in deep consumer insights around how people choose and why they remain loyal.

Mobile boarding passes, compatible with Apple’s new Passbook functionality,

WHAT’S IN STORE FOR 2013

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APPAREL By Bertrand Chovet

The dynamism of consumer needs and desires is defying business as usual in the apparel market. From collection design to seamless services, from social media to brand attractiveness, from sales activation to store development; responding to emerging needs and implementing solutions fast is more important than ever. However, the opportunities in emerging retail markets, such as BRIC (Brazil, Russia, India, China) or CIVETS (Columbia, Indonesia, Vietnam, Egypt, Turkey, South Aftrica), mirrored the fragile recovery of many Western economies. Recent research from Vente-privee.com found that when 100 fashion apparel purchases were made offline in Europe, 109 were online. This trend will continue

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as people are planning to buy more online. But let’s keep in mind that e-shoppers don’t give the cold shoulder to in-store shopping. The distinction between online and offline preference is affected not only by the customer’s gender, taste, or lifestyle, but also by the maturity of retail models and their ability to deliver a business conversation with consumers. The performance of brands such as Gap, H&M, Lululemon, Nordstrom, Uniqlo, Urban Outfitters, Undiz, Vans, and Zara illustrate this point in many geographies and many ways.

ANTI-COMPLEXITY

Whatever the channel, in the eyes of shoppers, the speed of change is highly visible due to the plethora of challenges and opportunities the apparel and fashion category is facing.

Agile and mobile shoppers are expecting less complexity and more transparency than ever. Clarity of the brand is crucial. They expect a clear and definite point of view from

WHAT’S IN STORE FOR 2013

Competitiveness is increasing, while fragmentation of players is high. It results in a complex market with different organization types (brands and retailers) representing alternative business models and capabilities, and extremely reactive wide offers. For all, brand is playing a key role both in contribution and in risk adversity. Attention to brand proposition and brand management will continue to grow and deliver better business results.

a brand, whether it’s a merchant or a branded retailer. Trendsetting, fashion interpretation, lifestyle incarnation, instore experience, digital connectivity and activation, collaborative branding, direct interaction, exclusive platforms, and offers, will all be key elements to build differentiation and loyalty in 2013. It will also be about building relevance and consistency: understanding of the purchase funnel, anticipation of customer needs, rationalization of bestselling items, and simplification of the range will provide drivers for growth. Beyond logistics, we can predict that RFID (Radio-frequency identification) will play a key role, bringing visibility and accuracy to merchandise, but also re-engaging consumers all along the value chain and helping apparel brands enter into full digital retailing. THE IMPORTANCE OF AUTHENTICITY AND RELEVANCE In the digital era, consumers have the power. Seeking best opportunities, shoppers are trading up or down across categories and channels. On one hand, after a good experience, shoppers are more committed to buying products and services. But after a bad experience, they will tell their community, who will then transform a destination store into a store to avoid through word of mouth and their social graphs, whether that store is physical or online. Beyond all digital interaction, it will be about delivering a unique and differentiated experience in a consistent manner. That is where brand will have a robust proposition to express and to deliver, while staying relevant to customer needs. Because what we wear reflects who we are, the apparel and fashion category has the opportunity to reach the hearts and souls of consumers by helping them find numerous ways to express their individuality. In 2013, the conversation

and the connection that apparel brands will be able to build will strengthen their business model as well as their performance. By bringing the authentic core of their brands to life and offering merchandise that is relevant to the specific preferences of their target markets, apparel brands will inspire a desire to shop, a desire to wear and, above all, they will provide an opportunity for consumers to become their best, most beautiful selves. THE OMNI-CHANNEL ERA Despite a tough 2012, the virtuous cycle of online shopping driving store traffic has given many apparel brands a boost. In Europe and the Middle East, 40% of major retailers are looking to expand

their online coverage next year (versus 28% last year). Despite expansion of online offerings, however, brick-and mortar stores still matter and the battle for space in the best locations is still on. The flip side, of course, is more showrooming: customers checking out items in-store and then heading online or to their smartphones to seek a lowerpriced item elsewhere. Revenue generated by web/mobile continues to grow rapidly, which means that digital is no longer a nice “extra”— it’s mandatory. It will be a critical platform to stay connected and maintain a conversation with consumers. Overall, the omni-channel era provides apparel brands with promising new opportunities to create stronger loyalty.

“BECAUSE WHAT WE WEAR REFLECTS WHO WE ARE, THE APPAREL AND FASHION CATEGORY HAS THE OPPORTUNITY TO REACH THE HEARTS AND SOULS OF CONSUMERS BY HELPING THEM FIND NUMEROUS WAYS TO EXPRESS THEIR INDIVIDUALITY” WHAT’S IN STORE FOR 2013

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In 2013, turning customers into advocates will be an absolute necessity for apparel and fashion brands. In order to accomplish this, ease of shopping, creating enjoyable in-store or online experiences (built on the key attributes and personality of the brand), and seamless service between “the brick and click” must be top priorities.

Whether the issue is authenticity, relevance, transparency, or sustainability, if there is anything apparel brands can do to elevate brand loyalty in 2013, it is this: be what you are, do what you say, and say what you do.

From garments to mobile, brand presence in the hands of shoppers will weave greater loyalty. TODAY, ETHICS MATTER American Apparel has faced an advertising ban by various countries’ advertising authorities. H&M has been under pressure over forced labor cotton. Two-thirds of high street garments tested by Greenpeace contained potentially harmful chemicals. In response, environmental activists have pressured numerous apparel brands to commit to “Zero Discharge” of all hazardous chemicals by 2020. Uniqlo has signed on to Greenpeace’s campaign, joining other top high street fashion brands that have taken its Detox pledge, including Adidas, C&A, H&M, Levi’s, Nike, Puma, and M&S. In 2013, scrutiny of the digital sphere will increase, making exemplary corporate citizenship practices fundamental to protecting brands from adverse risks. Because apparel and fashion mirror both the individual and society, representing our tastes, values, and aspirations, these brands are under unique pressures to make ethical choices. As such, the role and responsibility of global players to deliver on sustainability continues to grow in importance as consumers become more aware—faster than ever through the internet and social media—of both mishaps and new initiatives. Consumers now expect a meaningful change in practices, from supply chain to all touchpoints.

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WHAT’S IN STORE FOR 2013

AUTOMOTIVE By Andrew Martschenko and Michel Gabriel

SMARTER, CLEANER, MORE CONNECTED: SUSTAINING MOMENTUM IN 2013 Walking the floor of the Detroit Auto Show in January 2012 you could feel a sense of renewed energy. Two years of pent-up demand and a slew of new product launches were just what the market needed. But the big question for 2013—what does sustained momentum look like? In the US, a continuous stream of new products and low financing costs should keep automakers happy. In Los Angeles there were 50 new models on display and about the same number at the Detroit Auto Show. Technology that used to be reserved for high-end models

is now making its way into mainstream models. And from collision avoidance to greater interaction with mobile devices, the driving experience continues to get safer, more fun, and more productive. MARKETS IN MOTION While China has been the growth driver in recent years, the so-called “Next 15” markets—which include countries like Brazil, Russia, and India, as well as Colombia, Turkey, Malaysia, Mexico, and Indonesia—means global competition is likely to heat up in 2013. Rising per-capita incomes and the availability of vehicles that are both affordable and tailored to address local mobility problems will ensure that car sales increase in these markets.

China is investing more money in intermodal transport systems to better address the needs of ever-expanding megacities. The investment is worthwhile for overpopulated cities and gives commuters a variety of mobility choices. For example, within such a system, a person could take a train into the city, then take a public electric car to their workplace and leave the car there for the next person who needs it. For large smog-plagued cities, electric cars will become increasingly popular, while vehicles with engines that run on ethanol are likely to sell better in Brazil with its large sugar-cane crops. Globally, the industry outlook is mixed. Over-capacity in Europe will keep sales at a sluggish pace while China could have

WHAT’S IN STORE FOR 2013

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short-term challenges with demand. Overlay Japanese automakers dealing with a strong yen, and the picture begins to suggest that most brands will feel some sort of financial impact. If the fourth quarter of 2012 is any indication, many automakers are also ready to sacrifice their premium with higher incentives to reach their revenue targets. From a branding perspective, which automakers decide to defer to old habits and which ones can leverage the power of their brands are the questions many should be asking. MARKET LEADERSHIP Consumer access to information has helped level pricing variations in the industry while permanently altering the traditional purchasing funnel. But utilizing Big Data can help brands connect with the right customers by harnessing volumes of proprietary data

and consumer insights with social media trends and other data sources. In a highly competitive market that provides consumers with many alternatives, the brands that can use this data to engage with the right customers and create online and offline branded experiences at the right time will strengthen customer retention and sustain consistent growth. In emerging markets, a new group of customers will be purchasing vehicles for the first time in their lives. These cars will sell in the $3,000 range and pose significant challenges for global brands entering these markets. To capitalize on the opportunity, Nissan is resurrecting the Datsun brand, while Volkswagen is appreciating the difficulty in stretching its brand values to connect with these new customers. Creating the right experiences and remaining profitable in the short term will test the commitment

“FROM A BRANDING PERSPECTIVE, WHICH AUTOMAKERS DECIDE TO DEFER TO OLD HABITS AND WHICH ONES CAN LEVERAGE THE POWER OF THEIR BRANDS IS THE QUESTION MANY SHOULD BE ASKING” 10

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WHAT’S IN STORE FOR 2013

of the brands that decide to enter these high-growth environments. SMARTER CARS Consumers in established markets will also be looking for “smarter,” connected cars, allowing them to check traffic jams or the weather, or make appointments or order food utilizing speech recognition technology. As of now, smartphone integration and voiceactivated multimedia functions are relevant for one out of two motorists, but given the rising demand for digital services providing congestion and photo radar alerts, for instance, and the growing interest in synchronized mobility, connected cars will eventually become the new norm. Audi customers, for example, have the option of turning their vehicles into moving hotspots. Passengers traveling in equipped Audi Connect vehicles can connect up to eight mobile devices, while vehicles with LTE technology can deliver data-transfer rates that are equivalent to broadband speeds at home. To make vehicles more connected, automakers will have to embed more and more brands in automobiles that previously had no presence there. Those partnerships will mainly include social networks, mobile communication brands, and application service providers. At the hardware level, multimedia screens will display smartphone and operating system brands. For automakers, this is a great opportunity to expand their own value proposition with vehicle-borne internet services. BOOSTING THE ALLURE OF CLEANER CARS In mature markets, public perception of the electric vehicle (EV) momentum seems to have stalled. At the start of the decade EVs showed so much promise. The battle between the Chevy Volt and Nissan LEAF instigated a passionate response to using cleaner technology. But since then, the EV market continues

to sort out infrastructure issues, work out the kinks of first-generation products, and deal with consumer affordability. Hybrid plug-ins have become the more pragmatic solution in filling the void that was created. But with Tesla launching its S model and Nissan LEAF going into full production in the US, there is an opportunity for one, if not both automakers, to command EV leadership. The price of oil will continue to remain high and products will continue to improve, but a lot of consumer education is required to reduce range anxiety and deepen understanding of why a car buyer should pay a premium for an EV. THINKING LONG-TERM IN 2013 The trend toward greater fuel economy will be sustained, but many automakers will also woo buyers with extra power, luxury, and convenience features. In the domain of concept cars, anticipated new models debuting this year include the Acura ILX and NSX, the Lexus LF-LC, the Lincoln MKZ, Ford’s new Fusion, and Mercedes’ revamped E Class. As the year unfolds, automotive debuts to watch out for include the Škoda Octavia and the new Porsche Macan. Smart will debut the new Fortwo, Nissan the revised Qashqai, and Porsche the 911 Spyder. With anticipated growth in emerging markets, plenty of challenges in Europe, and much to be optimistic about in North America, 2013 should be an interesting, and probably good, year for the auto industry overall. Brands that have a strong vision, are tuned in to consumer needs, and figure out the right ways to utilize technology for marketing and to enhance product offerings, have a rich opportunity to not only strengthen their positions for 2013, but for the rest of the decade.

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BUSINESS SERVICES By Josh Feldmeth

GOOD OPPORTUNITIES AWAIT THE CMO OF THE FUTURE To get some clarity around what 2013 holds for the business services sector, I sat down with Seán Meehan, the Martin Hilti Professor of Marketing and Change Management at the renowned International Institute for Management Development (IMD) business school in Lausanne, Switzerland. We discussed what business services brands—and specifically the business services CMO— must do to succeed in 2013.

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THE SCARIEST YEAR EVER There is no question that 2012 was a difficult year for the business world. Europe teetered, China disappointed, and the US economic recovery was sluggish at best. But don’t assume business services brands had a bad year. In fact, many business services organizations posted strong growth in terms of revenue and hiring as they helped clients navigate the consumerization of IT, increased regulation, the escalation of raw materials costs, and market instability—

WHAT’S IN STORE FOR 2013

all forces that continue to reshape the landscape. But what happens next? According to Seán, “2013 will be the scariest year in the last three to four decades for consumers and companies that serve them. It’s a little like Marie Antoinette at the guillotine, but in slow motion. You know the blade will fall. The last time it fell—2009—it happened really fast. But now, it’s all happening slowly and not knowing if, or when, the hammer will fall creates a challenging decisionmaking context.”

Herein lies the opportunity for business services brands. The value proposition is unchanged: supplementing the client’s core capabilities so they can focus on what they do best. Now, however, the stakes are higher and the rocks at the bottom of the cliff are sharper. The most empathetic and trusted business services brands stand to gain a disproportionate share. In 2013, business services brands won’t provide business services as much as they will provide business re-focusing services. They will address the client’s deeper need. Meehan advises, “Sort out the things I have no clue about so I can focus on the even scarier things I’m supposed to know how to solve.” THE NEXT-GENERATION CMO Smart business services brands will move closer to clients in 2013. Those with advanced marketing skills,

specifically the next generation CMO, will get there faster. Meehan and I identified four essential skills for the business services CMO in 2013: 1. Big Data Prophets—Business services brands have access to significant data stores. Most are highly unstructured, often in the heads of partners and senior consultants. CMOs in 2013 will use their training in marketing research and consumer insights to help their companies build sustainable big data platforms that power insights and attune their organizations to their clients’ rapidly shifting needs. 2. Cultural Custodians—M&A activity will continue in 2013 as business services brands grow capabilities. Each acquisition, however, will threaten to tear at

“THE ROLE OF MARKETING FOR BUSINESS SERVICES BRANDS IS TO PROVIDE INTERNAL CLARITY, HELPING THEIR CEOs AND LEADERSHIP TEAMS MAINTAIN A LASER FOCUS ON CLIENTS AND WHAT THE FIRM NEEDS TO DELIVER TO EARN A PREMIUM” WHAT’S IN STORE FOR 2013

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the fabric that defines the successful brand’s internal culture. CMOs must articulate a corporate narrative that knits the firm’s roots to its future. Meehan calls this “the cultural custodian”—aligning talent, old and new, around a shared strategic vision. 3. Connectors—Business services brands are not likely to increase their marketing and advertising budgets in 2013. In fact, many will pull back on traditional spending. This only amplifies the need for CMOs to maximize return on brand investment by linking each consumer touchpoint—from conferences to white papers to pitching new business—to the core brand proposition. For the CMO, connecting the dots starts with partners and senior associates. Meehan wisely suggests, “Make sure the guys that are running the business are delivering on the service promise.” 4. CEO Whisperers—Lastly, a CMO will need the ear of his/her CEO. As Meehan notes, “With so much turbulence in the markets, it’s easy to become distracted. The role of marketing for business services brands is to provide internal clarity, helping their CEOs and leadership teams maintain a laser focus on clients and what the firm needs to deliver to earn a premium.” 2013 will be, at times, scary for clients, but full of opportunity for empathetic and trustworthy services brands and a renaissance for the next-generation CMO willing to up-skill.

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WHAT’S IN STORE FOR 2013

DIGITAL By Erica Velis

HARNESSING THE POWER OF IMAGE IN A DIGITAL WORLD

the way we vote, communicate, eat, shop, and…dance, for better or worse.

Not so long ago, the web was all about text—but that is quickly changing. Considering the swift proliferation of memes and infographics in the past few years, the Twitter-led trend toward reduction of text in online communications, and the immense popularity of YouTube, Tumblr, Pinterest, and Instagram, there’s no denying that visual content will be a potent digital force in 2013.

For today’s companies, deploying brand imagery and branded content in effective, culturally meaningful ways is no longer a fun side project or an occasional departure from the norm in marketing. For the foreseeable future, it’s an absolute necessity for any brand that wants to stay relevant.

Visual content has been playing a more important role in how we communicate for at least half a century, but the internet—and now the shift to mobile— is accelerating this trend exponentially. From “Binders Full of Women” to “Gangnam Style,” viral videos and images are highly influential, changing

Time-crunched, easily bored, and always in search of the next new thing, consumers want information quickly and they want it to be easily digestible. They also want their digital interactions with a brand to be seamless and rewarding, as they have a lot competing for their attention—including content they’re generating themselves.

A PEEK INSIDE THE VISUAL CONTENT RESOLUTION

Take YouTube, for instance. The third most-visited site on the web has seen amazing growth since just last year. More than 800 million people around the world use YouTube each month, a stat that is expected to increase to a billion in the near future. With more than one trillion views in 2011, 72 hours of video uploaded every minute, and four billion hours of video watched each month, the numbers are simply mind-boggling. With nearly 55% growth in 2012, online video is the fastest growing ad format. Further, Internet Retailer reports that 85% of viewers are more likely to purchase a product after watching a video. In short, video content is a digital must in 2013. Then there’s Facebook. The numbertwo site on the web in terms of traffic, it’s also the largest photo-sharing site with over 2.5 billion photos uploaded

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“NOT ONLY DO CONSUMERS WANT —AND RESPOND TO—VISUAL CONTENT, BUT THEY ALSO WANT IT ANYWHERE, ANYTIME” each month. With a new plug-in to make sharing photos on the site even easier, that number is sure to increase. While video is shared on Facebook as well, photos really rule on this platform and perform best for likes, comments, and shares compared to text, video, and links. In fact, a recent study conducted by HubSpot found that, on both B2B and B2C branded Facebook pages, photos received 53% more likes and attracted 104% more comments than posts without an image. Also contending for dominance in the arenas of social content-sharing and socially driven marketing are Tumblr and Buzzfeed. With more than 200 million monthly visitors and 18 billion page views, the success of Tumblr, with its dashboard interface and minimal text, is further proof that shareable, visual content drives digital engagement. Buzzfeed, once famous for its lighthearted animated GIFs and other memeworthy internet ephemera, continues to

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fuel buzz with shareable, viral media. More freewheeling, flippant, and visual than Facebook, these growing platforms are capturing a larger share of the digital audience and social web, particularly among millennials. Pinterest, a site that only opened to the public in August of 2012, is now one of the top 35 most-visited sites on the web, gaining more traffic than Apple, Blogger.com, or Craigslist. Interestingly, women make up about 82% of active users on Pinterest, according to Google. Providing an opportunity to interact with customers and build communities online while feeding the desire for curated visual content, Pinterest drives significant sales directly from its website and generates more referral traffic for businesses than Google+, YouTube, and LinkedIn combined. To sum up, the percentage differences between 2012’s digital stats and the stats of previous years are substantial—

WHAT’S IN STORE FOR 2013

and emphasize a huge opportunity for businesses to use photos, videos, and images as a means to drive web traffic, build brand value, increase social media buzz, and promote products and branded content. USING VISUAL CONTENT TO DRIVE ENGAGEMENT Customers increasingly expect rich visual content as part of the digital experience. For instance, nearly half of consumers say that a website’s design is the number-one criterion for discerning the credibility of a company and how much they trust a brand. In more measurable terms, publishers who use infographics, on average, increase traffic by 12% compared to those who don’t. Not only do consumers want—and respond to—visual content, but they also want it anywhere, anytime. Tablets, larger phones, and 4G technologies have made watching video on mobile phones easier and more appealing to consumers. Despite its small-form factor, 66% of mobile phone users watch an hour or more of video on their phones each week. In North America, mobile video consumption increased by 27% and mobile video subscriptions are already generating billions in revenue. YouTube saw mobile video views triple over the last year. People are on the move, they have devices with them 24/7, and a photo, graphic, or video is much easier to view, “like,” and share than long-form text. That’s not to say that verbal content isn’t still important—we maintain that it certainly is—but, in an increasingly competitive marketplace, a picture is indeed worth a thousand words for brands that want people to stop and pay attention.

visuals 60,000 times faster than text. Further studies have found that the human brain deciphers image elements simultaneously, while language is decoded in a linear, sequential manner taking more time to process. Simply put, when it comes to quick, clear communication (and immediate emotional impact), one might assume that visuals will trump text almost every time—especially in the digital age. Yet, without words—the right words— a graphic may be lost to ambiguity or could fail to reach people. As Robert E. Horn, a scholar at Stanford University’s Center for the Study of Language and Information, has said, “When words and visual elements are closely entwined, we create something new and we augment our communal intelligence… visual language has the potential for increasing ‘human bandwidth’—the capacity to take in, comprehend, and more efficiently synthesize large amounts of new information.” As brands plan and execute their digital strategy for 2013 and beyond, bear in mind that what’s happening today is not merely a process of substituting images for text. We are entering a new communication paradigm—facilitated and quickened by digital technology and platforms— that integrates image and language in fresh, novel, and exciting ways. In 2013, as the numbers suggest, whoever effectively wields this intelligence will have a powerful advantage over their competition.

Visuals are no longer supplementary for brands; they are a primary form of communication, particularly in the digital space. Psychologist Albert Mehrabian demonstrated that 93% of communication is nonverbal, while 3M researchers found that we process

WHAT’S IN STORE FOR 2013

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ENERGY By Tom Zara

THE GRAND GREEN BARGAIN AND BEYOND Russia’s plans to drill in the North Pole, an estimated 90-year reservoir of natural gas in North America, the likely approval of the Keystone pipeline, and continuing instability in the Middle East all point in one regrettable direction: When it comes to energy, we are, rather illogically, embracing the status quo. While it was once true that energy was cheap and abundant, that is no longer the case: prices are soaring, supply is dwindling—and demand is rising. Until very recently, the mature industrial powers of Europe, Asia, and North 18

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America consumed the lion’s share of energy and left the dregs for the developing world. However, if current trends persist, the strong economic growth of rapidly industrializing nations like China, India, Brazil, Indonesia, Malaysia, Thailand, and Turkey, could drive the developing world’s share of energy use to 47% by 2030. The Chinese alone are projected to consume 20% of world energy by 2025—by which time, it will have overtaken the United States as the world’s leading energy consumer. What will happen when the rising economic dynamos have to compete with the mature economic powers for untapped reserves of exportable energy?

WHAT’S IN STORE FOR 2013

Anyone who has expertise in geopolitics could tell you, it won’t be a pretty picture—or lead to security, stability, or prosperity for any but a few. On top of the scarcity issue, the past year has brought extreme weather events that have put the climate change discussion back on the table. From Super Storm Sandy and record droughts in the United States to unusually heavy rainfall in Pakistan and temperatures so hot in Australia that a new color had to be added to their heat index, the very real impacts of a changing climate are swiftly shifting public perception and awareness. Instead of asking whether

climate change is happening, questions about the costs of inaction and what can be done are now being asked. This is a critical moment for enlightened leadership to begin a new conversation about the cost of carbon, as well as solutions that might avert the worst effects of climate change and ensure a future that will allow the greatest number of people to have a cleaner, more stable and secure energy future. While the exact solutions to our energy dilemma are not yet clear, what is clear is that now is the time for innovation, invention, and disruptive thinking to reshape the landscape of energy policy and behavior, across nations and economies. WHERE WE ARE NOW According to the US Department of Energy, fossil fuels –oil, coal, and natural gas— supply about 86% of world energy, while nuclear power provides another 6%. Based on current rates of development and investment, the DoE projects that by 2030, fossil fuels will still account for exactly the same share of world energy as in 2004, with a slight

increase in renewables and biofuels. Of course, this is good news for those who have a vested interest in fossil fuels. Both crude oil and natural gas production are expected to increase in 2013, with the US becoming a chief exporter of coal and natural gas. There are reserves enough to keep supply and revenue up for decades—but can this trajectory be sustained? THE CURRENT PICTURE Oil: Global oil supply has increased modestly, with production highest in Saudi Arabia, Canada, Iran, and Iraq. US production is up for the first time in decades. Oil prices will almost certainly remain high due to limited increases in supply, but gains are expected in the next few years. On the upside, this will help meet the rising demand in developing nations where many are expected to join the ranks of the middle class and buy their first vehicles—and energy brands will reap the benefit. The problem? Beyond potential oil spills and pollution from the refining process, the use of oil adds more carbon dioxide to our atmosphere and contributes to

“THERE IS CURRENTLY A DISCONNECT BETWEEN WHAT ENERGY COMPANIES SAY AND WHAT THEY DO—AND THAT GAP MUST BE BRIDGED THROUGH REAL EFFORTS TO ADOPT ENVIRONMENTALLY SENSITIVE PRACTICES, CLEAN UP ACCIDENTS IF THEY OCCUR, ADDRESS HEALTH IMPACTS, AND MAKE REAL COMMITMENTS TO RENEWABLE ENERGY” WHAT’S IN STORE FOR 2013

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global warming. Further, the pressure to increase supply of the world’s fuel of choice has pushed brands to explore the last pools of crude oil—including those in sensitive regions. Is it worth the risk to drill in the Arctic, for instance? Shell is currently testing the waters. The latest in a series of troubling incidents ranging from an oil spill containment system failing to ongoing investigations of safety and pollution control problems: on December 31, 2012, Shell’s oil drilling rig, Kulluk—with 150,000 gallons of fuel on board—broke loose from a tow vessel during a major storm and was grounded off the coast of Alaska. With consumer (and investor) trust at stake, brands like Shell that have built strong reputations do not want to risk going the way of BP—whose Deepwater Horizon debacle prompted hundreds of lawsuits, killed 11 workers, sent millions of barrels of crude oil leaking into the Gulf of Mexico, and did devastating damage to BP’s brand. On top of that, the company was slapped with the largest criminal penalty in US history, amounting to billions of dollars. Surely a cautionary example for all in the sector. Nuclear: The 2011 meltdown at Fukushima sent shockwaves throughout the world and, as a direct result, Japan shut down 50 reactors and Germany pledged to close all of its reactors by 2022, opting instead for new investments in renewables, particularly solar. Despite the soured sentiment around nuclear energy, world nuclear capacity is expected to grow, particularly in China, India, Russia, and North Korea. Though a “clean” choice in terms of carbon emissions, the risk of nuclear meltdown, the insoluble problem of nuclear waste, and the controversy over uranium—a top conflict mineral—will ensure nuclear energy will remain a problematic option going forward, as the growing anti-nuclear movement will attest.

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Coal: A huge contributor to greenhouse gases, “clean coal” technologies will probably extend the life of the industry. However, rising reliance on coal (especially in China, India, and the United States) means that global emissions of carbon dioxide are projected to rise by 59% over the next quarter-century, from 26.9 billion metric tons to 42.9 billion tons. The meaning of this is simple. If these figures hold, there is no hope of averting the worst effects of climate change. That said, a gradual decline in coal use is expected as more plants shut down, regulations on pollution tighten, and natural gas gains ascendency. Already some electric plants have switched from coal to natural gas, which has become, in many people’s minds, the answer to our energy dilemma—at least in the short term. Natural Gas: In North America, new discoveries and innovative drilling techniques have led to a vast oversupply of natural gas—which is increasing faster than demand, driving down prices dramatically (50 times cheaper than oil, at today’s depressed prices). Electrical utilities and trucking companies, among others, are already switching from coal or diesel to natural gas and, if it stays cheap, more industries are bound to follow. If the free market— rather than thoughtful analysis of the energy landscape and future trends—is to determine the answer to our energy problems, then natural gas is the clear winner. The problem? Fracking. While industry sector reports have downplayed the risks of hydraulic fracturing, scientists—and consumers— are not convinced of its safety. Further, the impact of documentaries like Gasland and now, Hollywood’s hardhitting take on the subject, Promised Land, continue to sow doubt. The “grand green bargain” as The New York Times columnist, Tom Friedman has referred to the natural gas compromise, will have

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to be made, but brands that want to lead will have to imagine a world beyond it. TOWARD A NEW VISION Realistically, oil will remain our collective fuel of choice for quite some time, coal will most likely decline, and natural gas will most certainly help the transition to a cleaner energy future, but there is no denying that a sense of discomfort with current energy choices is growing. In general, consumers have low confidence and satisfaction with energy brands because of rising energy costs and a justified perception of irresponsible actions regarding the environment. These negative perceptions tend to undermine a brand’s efforts to secure a more meaningful relationship with its customers. There is currently a disconnect between what energy companies say and what they do—and that gap must be bridged through real efforts to adopt environmentally sensitive practices, clean up accidents if they occur, address health impacts, and make real commitments to renewable energy.

audiences will stand to benefit. What consumers are really waiting for— what the world is really waiting for—is enlightened leadership, a change in tune, and a real commitment to solving, not only today’s energy problems, but the energy-related problems that loom ahead (not least of all, climate change). Companies that lay out a vision, that communicate as progressive, socially responsible organizations, that show they’re serious about investing in alternatives like wind and solar—for which many consumers are willing to pay a premium—may very well outcompete less progressive companies in the years to come. In the process, all business aside, they will also change the world for the better.

Brands in this sector need to appreciate the role of the public in determining their “social license to operate.” Oil companies, unlike other fossil fuel companies with longer supply chains and a less public face, are an easier target for boycotts and blame. Another unfortunate disadvantage is the tendency of consumers to lump all brands in a sector together and condemn them more or less equally, regardless of real differences in the track record and policies of individual companies. Amplifying these risks, the ubiquity and accessibility of social media has given consumers increased power to determine the fate of a brand—whether they have their facts straight or not. Brands that live up to their promises, show genuine commitments to safety and sustainability, and regularly engage and communicate with their target

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FAST DEVELOPING MARKETS By Daniella Bianchi

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WHAT’S IN STORE FOR 2013

2012 started off with high expectations for economic growth in most developing markets. But as the world crisis finally hit these “promising nations,” the strings and players that were once pushing the economies forward became instantly inert. All of a sudden it was time to settle down and rethink the frantic rhythm of investments towards the “lands of opportunity.” Needless to say, there is still a lot of money to be made in these booming economies, but it now seems to be the moment in which developing markets are confronting the mirror and facing their problems with a more practical and less presumptuous attitude. The lingering battle against the endemic issues of growing economies such as corruption, inflation, lack of infrastructure, poor education, and precarious health systems seems to be the main cause for the inertia that hit these markets in 2012.

While governments concentrated their efforts on solving their own dilemmas, the private sector—from banks to mining companies, from orange juice to coffee, from oil and gas, to pulp and paper—had to bring down their top investments both in tangible and intangible assets, including brands. The results immediately became evident in the stock exchanges as significant efforts were put into keeping foreign investors motivated, although their blue chips’ value did not reach the numbers predicted by analysts. Many anticipated major branding projects for the year suffered from deep cuts in marketing budgets and, consequently, were either postponed or evolved at a slower pace. Although mergers and acquisitions did happen among relevant companies (prompted by consolidation trends), their brand investments were less generous, in light of the big picture.

“2013 IS LIKELY TO BE THE YEAR THAT MARKS THE CONSOLIDATION OF DEVELOPING MARKETS, AS THEY ARE NOW PREPARED TO OVERCOME CHALLENGES AND BECOME GLOBAL PLAYERS” WHAT’S IN STORE FOR 2013

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Nevertheless, 2013 will not be another static year. After five years of furious economic growth, followed by a short lull, Latin America’s main growing industries, headed by the banks as well as infrastructure and commodity companies, are now prepared to pick up the pace and outperform developed markets once again. This time, however, a more mature and conscientious approach is expected, setting off the next growth cycle in which brands will be recognized far beyond the continent. Led by China—with an expected growth of at least 8% according to a central bank advisor—the BRICs (Brazil, Russia, India, China) will continue to push the economic growth of developing markets. In Russia, Putin wants to brand the country as the “explorer of innovative goods and services.” His goal is to maintain its growth level in an unstable environment, thus welcoming the participation of foreign investors in the privatization of state-run companies. Brazil is now accelerating the rhythm to keep up with the expectations generated by the 2014 World Cup and the 2016 Summer Olympics. Although the population remains somewhat skeptical, there is still hope that the country will recover its growth and be able to honor its position at BRICs. Natura, Havaianas, and Itaú are among the brands heading towards the internationalization path of Brazilian brands, which will bring their “bossa” abroad.

Argentina is boldly struggling with its brand under president Cristina Kirchner. Luxury brands are leaving the country in response to import barriers, currency controls, and soaring inflation. Yet, the country boasts strong brands like Havanna and Quilmes that are conquering the hearts of consumers in neighboring nations. Chile is investing heavily in retail branding with Falabella. National carrier LAN also plays a major role in the merger with Brazil’s TAM, which originated LATAM. The moment calls for multinational efforts towards building the next major global airline company. On the same path, Avianca, owned by nearby Colombia, was considered the airline company with the biggest growth in the past year. Both companies will be essential for attracting tourists heading south in years to come. All in all, 2013 is likely to be the year that marks the consolidation of developing brands in developing markets, as they are now prepared to overcome local challenges and become global players.

India, despite being challenged by a decline in private investments and weak external demand, still has a growth forecast of 5% or more. Mexico has been performing extremely well through the last decade, and everything indicates that this trend should continue in 2013. At the same time, Peru is growing and regaining confidence as a nation. It is now considered one of the most exclusive destinations in South America.

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WHAT’S IN STORE FOR 2013

FAST MOVING CONSUMER GOODS/ CONSUMER PACKAGED GOODS By Jamey Wagner and Rebeca Arbona

The outlook for the consumer packaged goods sector for 2013 resembles the sector’s forecasts in 2012 or even 2011. Social media, mobile, and online retail will be big areas of focus as will the need for brands to mind their digital footprints. These seismic shifts in consumer behavior are incredibly important, but we must be careful not to overemphasize any single method or technology. We must respond to the new ways consumers prefer to shop and engage with brands, but we also need to remember that no one behavior applies to all consumers in all cases.

Brands must continually find ways to keep connecting with consumers or they will lose relevance quickly. While new media and emerging technologies are instrumental in helping brands connect with consumers more effectively, we must not forget that these methods aren’t always the best way to communicate with every consumer in every case. For example, a recent study by Hitachi Consulting reveals that approximately two-thirds (65%) of Britons still prefer to shop in-store, rather than online.

THE CONSUMER MINDSET One of the things that is so remarkable about the way the internet and mobile have changed our shopping habits is that the benefits extend far beyond convenience. Social media, reviews, and pricing transparency allow us to comment on, complain, and compare our purchases, from largest to smallest. When we are in “gatherer” mode, these tools enable us to find the right price, the best quality, or the most individual and unique item. We are now able to forage from the comfort of our homes

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but, we still like to shop in more traditional ways. Think about how you get your groceries. Despite years of hype, web grocery services have yet to take off and, though we think it remains very promising, 2013 won’t be the year it hits the tipping point. As much as everyone loves to complain about this mundane chore, we also don’t seem to want to change the way we do it. When supermarkets remodel and move items around, consumers go batty. Objectively, it’s not that hard to learn a new store layout. We do it enthusiastically any time we discover a new retailer we love. But that’s because the stimulating in-store environment stokes our desires—we go into hunter mode, scanning for items that pique our interest and prepare to pounce when we spot the right object or deal. When it’s time to provide for basic necessities, such as staple goods like milk, eggs, and butter, our shopping style tends to be more passive and our expectation for novelty or excitement is not as high when we are prepared to gather. From package design to retail space and website design, special attention must be paid to how people shop for different items and whether convenience should be emphasized, (allowing people to find, gather, and get out), or whether it’s necessary to create a more stimulating experience, online or in-store, that

awakens the senses, engages, and spurs on the hunting mode that impels consumers to linger, browse, and “stalk.” AN EMOTIONAL CONNECTION Smart brands embrace digital platforms not merely to sell more products, but as a means to deepen brand relationships. Rather than using social media as a megaphone to blare out your own agenda, use it to listen to consumers and understand what matters most to them. Establishing and maintaining the emotional relationship between a brand and its consumers has always been a vital part of brand management. Due to the closeness consumers now feel with brands through TV commercials, ads, internet experiences, branded videos, and social media, this emotional connection is more important than ever. Just as Marshall McLuhan famously conveyed through his “the medium is the message” maxim, when it comes to shopping, the experience is an integral part of what we’re consuming. From a product’s form and design to its packaging, from the physical retail environment (or lack thereof) to the use of digital technologies to connect, inform, and inspire co-creation, we must always keep sight of the emotional relationships consumers have with a particular brand and consider how we can support, build on, and enrich that relationship.

“SMART BRANDS EMBRACE DIGITAL PLATFORMS NOT MERELY TO SELL MORE PRODUCTS, BUT AS A MEANS TO DEEPEN BRAND RELATIONSHIPS” 26

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WHAT’S IN STORE FOR 2013

FINANCIAL SERVICES By Mike Rocha

PRIORITY NUMBER ONE: REBUILDING TRUST IN TROUBLED TIMES “I’m not upset that you lied to me, I’m upset that from now on I can’t believe you.”—Friedrich Nietzsche A MATTER OF TRUST Trust will continue to be the most pressing issue for financial services brands in 2013, in particular, of course, for banks, the most tarnished group of all. Public distrust makes banks,

and potentially other financial services brands, an easy target for government. With regulation and taxation measures threatening returns, independence, and business models, rebuilding trust with consumers and customers should be a key priority for most brands in most markets. At present, many brands have decided to “lie low,” hunkering down as they are buffeted by a seemingly endless stream of bad news stories, LIBOR being the most recent and, potentially, the

most damaging yet. For those directly involved in LIBOR, it may make sense to wait a little longer for the storms to pass. For the rest, 2013 is the year to draw a line in the sand and say “we have changed, we are different now.” INTEGRITY: WALKING THE WALK Credible? Perhaps not immediately, but over time, and combined with actions, not just words, banking brands can take their first steps on the long road to redemption and a restoration of trust.

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“I’M NOT UPSET THAT YOU LIED TO ME, I’M UPSET THAT FROM NOW ON I CAN’T BELIEVE YOU”—FRIEDRICH NIETZSCHE The “Trust Equation”1 is shown here:

This equation was developed in the context of professional service advisors, but can be applied more generally to brands. The Trust Equation also reflects Interbrand’s Brand Strength, the ten factors that we believe are required to build a strong and valuable brand. ESSENTIAL PILLARS OF A TRUSTWORTHY BRAND Authenticity, as our Brand Strength factors indicate, is one of the hallmarks of a strong brand. For us, authenticity is about having clear and well-grounded values and delivering on expectations. Authentic brands have a firm identity, communicate their core values, and prove through their culture, their day-to-day business practices, and their relationships with customers, that they actually put their values into practice. Making good on promises and staying true to core values, consistently over time, is the only way to be perceived as authentic, credible, reliable—more trustworthy. Understanding is another important Brand Strength factor—and it’s a twoway street. Customers want to know

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they’re being heard and brands have to work to ensure customers have an in-depth knowledge and understanding of a brand’s distinctive qualities and characteristics. Customers who understand what a brand stands for— and feel that a company understands their needs and values their input—are more likely to feel a level of intimacy, and therefore trust, in their service provider. To foster understanding, focus must shift from self-orientation to clientorientation. Self-orientation is not selfishness, but a preoccupation with our own needs and goals that prevents us from hearing others. If we cannot hear what others really want and need, we can’t deliver for them. But if we tune into what our customers need, rather than what we need from them, our customers will feel like we care about them and will be more likely to consider us trustworthy. In Brand Strength terms, listening is the key to delivering solutions that are relevant (meeting the actual needs of specific customers) and being genuinely responsive (adapting quickly—and appropriately—to emerging needs and trends). Legitimate client focus, combined with relevance and responsiveness, will minimize the prevailing sense of self-orientation and begin to grow trust. 1 From The Trusted Advisor by David Maister.

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WHERE TO START? As always, start from the top. The effort to rebuild trust must start with the CEO and executive leadership team. There must be clarity about what the brand stands for, what purpose it serves, and a commitment to ensuring that this clarity flows from the leadership to employees, customers, and the broader public. There must also be alignment between what the company says and what the company does. It’s wonderful to speak of values like integrity, honesty, and superior client services, but it’s even more important to live them. Employees are also critical in helping to build the integrity of an organization. Their trust is an essential precursor to rebuilding trust with customers. They should be involved in a thorough review of the purpose and values of the organization, and be engaged and motivated behind a new promise. Further, their commitment should be tracked over time. Are employees really relating to clients in accordance with the company’s values, or are they cutting corners and promising things they can’t deliver? In large part, reforming an organization’s culture alone should lead to improved client outcomes, an improved reputation and, eventually, a restored public image. Greater support for small to mediumsized enterprises (SMEs) in particular can also be a strong catalyst for rebuilding trust. SMEs are recognized as being the engines of job creation and economic recovery, yet banks have been reluctant to lend to them. Starved of funds, small to medium-sized businesses have been left behind—and that is not helping to turn around the popular notion that banks are “the bad guys” and “only out for themselves.” However, supporting SMEs and creating success stories in this area, despite the risks of doing so, will help show that banks are acting for the good of society, not just their own pockets.

With trust at an all-time low, these steps must be taken very carefully: Listen to customers, lower self-orientation, be authentic, foster mutual understanding, and be relevant and responsive. Realize that leadership sets the tone and the example for the entire organization, and that broader social and organizational changes can begin with the actions of one person: you. Granted, the higher your position in an organization, the greater your potential impact. But whether you’re a CEO or a sales representative, start with your own actions and work on improving your own interactions with customers. Live your company’s brand values every day and encourage your colleagues and employees to do the same. You may be surprised to see what a difference small but steady steps in this direction will make. Ultimately, business is about exchanging things of value. In order to get value from your client relationships, you need to give them something of value first, which involves really hearing them and responding to their needs. Financial services brands that put renewed effort into rebuilding strained relationships and tarnished images will differentiate themselves from brands that are still practicing business as usual—and further alienating clients (and disappointing the public) in the process. In 2013 and beyond, it will be the brands that change voluntarily, transforming cultures of greed into cultures of cooperation and mutual benefit, that will survive in the longterm, withstand the vicissitudes of our uncertain times and build enduring business and brand value.

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FOOD & BEVERAGE By Bill Chidley

FROM MOORE’S LAW TO MORE’S LAW The microchip industry has been propelled by the famous “Moore’s law” for decades. Moore’s law is the observation that over the history of computing hardware, the number of transistors on integrated circuits doubles approximately every two years. In contrast, growth in the food and beverage sector operates under More’s law—more competition and more fragmentation, with a

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significant number of new entrants joining the fray every year. In this version of More’s Law, the need for food and beverage brands to stay relevant with new products, new messages, and new occasions, is perpetual. The food and beverage industry’s giants are placing bets on multiple initiatives and campaigns, in multiple markets at the same time, and seeking to determine winners from losers, as well as discriminate between fads and trends. And More’s law takes the biggest toll on

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the incumbent brands as new players seek to steal market share from market leaders. In some cases, the biggest threats involved in selling food and beverages can be internal competition, as new menu items and products threaten to cannibalize sales from higher margin offers in the brand portfolio. As a necessity of More’s Law we see the growth drivers in these sectors as a combination of invention, expansion, and acquisition that warrants looking at specific pressure points that will set the landscape for 2013.

MORE OCCASIONS As projected in Interbrand’s 2012 Best Global Brands report, the quick serve restaurant industry will see increasing erosion of their core business to premium burger concepts such as America’s Five Guy chain (reportedly expanding to the UK this year) as they are forced to focus on driving traffic for new occasions and new segments. McDonald’s recently posted its first monthly sales decline in nearly a decade, prompting new leadership and a new direction in 2013. McDonald’s and their franchisees are spending millions upgrading the restaurant experience in the US by 2015 to match the more premium experiences common in Europe and Asia, but the move seems to be more strategic—spurred by a desire to avoid falling behind, rather than an effort to build sales and brand loyalty. Overall, in 2013, traditional fast food brands will continue to struggle to find favor with younger adults and families

as they find themselves caught between niche “premium” indulgent burgers and burritos, and concepts based on healthier options. MORE RELEVANCE As Western brands seek to find more growth in Asia and in developing markets, the main challenge will be migrating from building distribution to developing more relevant products. Expect to see more regional autonomy in collecting market insights, analyzing that data, and developing products and flavor variants to meet local tastes, as McDonald’s is doing in Australia. Indigenous brands are becoming more sophisticated marketers and are eager to out-maneuver the big brands while beverage companies like PepsiCo are acting more local with brands like India’s Mirinda orange soda adding innovative flavor extensions aimed at Indian tastes. Another growth challenge is China’s slowing economy, which is causing beverage brands to evaluate their

“THE NEED FOR FOOD AND BEVERAGE BRANDS TO STAY RELEVANT WITH NEW MESSAGES AND NEW OCCASIONS IS PERPETUAL” WHAT’S IN STORE FOR 2013

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price/value equations. Coke is finding success with a new 300ml package that allows the brand to stay at an attractive price and build sales and “economic relevance” with a bigger percentage of the Chinese population. MORE ENERGY The energy drink phenomenon will continue to drive new products from familiar brands. Cola and coffee brands already known to contain caffeine will find that equity insufficient to tap into the energy category without amplifying their message through new brands and variants. Older consumers who are less familiar with or even skeptical of energy drink brands like 5-Hour Energy will likely see energy drinks from Starbucks and Coke to be legitimate choices. The question remains as to whether the energy category will create new occasions, migrate consumers up to more premium benefits, or decline quickly due to health concerns and media scrutiny. MORE ALCOHOL Overall, the alcoholic drinks market is expected to grow worldwide, with cider, flavored drinks, and beer leading sales. That said, beer and ale brands are expected to see some decline despite the craft movement—with the exception of lager, which is set to become even more dominant, everywhere. Because alcohol brands continue to face challenges from legislators and the healthcare community, low alcohol brands are expected to increase in popularity in 2013. In developing markets, distilled beer and spirits continue to see disproportionate growth, with young adults driving consumption in Brazil, India, and China. While cider is particularly popular in the UK, non-specialty spirits are increasing in popularity globally, with interest in specialty spirits particularly big in the BRIC markets.

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In the United States, unemployment has hampered beer sales and intensified related promotions, but growth is picking up amongst Millennials. The largest generation since the Baby Boomers, they’re frequent consumers of alcoholic beverages, more likely to try new things, and are increasingly driving key trends in the sector. As more young people in this generation reach legal drinking age, the preferences of this group will continue to influence alcohol sector trends in the years ahead. By strengthening their brands and seeking ways to drive preference, alcohol brands are likely to find growth opportunities around the world. In the United States, alcoholic beverage marketers need to pay special attention to the Millennial segment’s attitudes and behaviors regarding alcoholic beverage occasions and consumption to develop winning strategies that will resonate with this influential group. The food and beverage brand space will continue to be an exciting one to watch in 2013. We expect to see more innovation in products, digital marketing, and social media, as well as agile marketing in developing countries as these brands continue to grapple with thorny ethical issues, health concerns, and growth challenges that are unique to their sector.

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HEALTHCARE By Wes Wilkes

HEALTHCARE IN 2013: THE CHANGING RULES OF COMPETITION Many nations’ healthcare sectors are growing at a pace that significantly outpaces that of their GDP. Meanwhile, market players face increasing competition. Healthcare stakeholders are inflexible in their demand for full and continued attention to cost reduction while increasing value. In 2013, healthcare companies navigating this complex ecosystem will begin to compete in different ways. They will change their growth strategies, reach out to new customers with evolving value propositions, and re-focus on the role of the manufacturer. Such approaches will require a deeper evaluation of the role of

brand—and how it can help companies compete as the healthcare space shifts. GOING VERTICAL: A NEW APPROACH TO COMPETITION As healthcare companies are squeezed to deliver growth and innovation, they must look well beyond the more traditional horizontal integration strategies in 2013. They must focus on achieving growth through the acquisition of similar companies. Furthermore, healthcare organizations are now being forced to think differently about how they expand their realm of influence and financial growth. Going forward, they must explore new positions in the greater supply chain for growth opportunities. Certain

organizations are already tracking in this direction. Cigna now has its own webbased pharmacies. Kaiser Permanente is advancing its vision of fully integrated care by building out their large network of ambulatory care facilities, hospitals, and pharmacies. Even private equity firms are integrating digital technology supply chains to offer a new suite of services to the healthcare sector. These approaches require a renewed examination of the role that brand plays, not only with newfound audiences, but also as a key incentive for future partnerships and acquisitions. A HEALTHY FOCUS ON VALUE The target customers of InterbrandHealth’s clients are

WHAT’S IN STORE FOR 2013

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“INTERBRANDHEALTH EXPECTS TO SEE A CONTINUED MIGRATION TOWARD THE WELLNESS SPACE IN THE YEAR AHEAD. HEALTHCARE COMPANIES WILL INCREASINGLY SHIFT THEIR BRANDS FROM A FOCUS ON DISEASE TO A FOCUS ON HEALTH.” fundamentally changing, as well. For the first time, health plans, EU payers, hospital systems, and physician networks are beginning to supplant individual physicians and consumers as the primary target for numerous healthcare companies, especially in the US. Certainly, individual physicians and consumers need to understand and develop relationships with brands in order to generate demand, but payers and provider networks are now the gatekeepers to the physician and consumer audiences. Healthcare companies need to radically rethink their value propositions as they evolve their focus to meet the needs of these new entities. Those of us at InterbrandHealth expect to see a continued migration toward

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the wellness space in the year ahead. Healthcare companies will increasingly shift their brands from a focus on disease to a focus on health. While this is certainly a positive change, there is one caveat: this wellness space has its limits, especially in its ability to drive differentiation. The real winners will be those healthcare organizations that can extend their promise from physicians and consumers and offer the value story around patient outcomes that payers demand. A HIGHER CALLING: PLATFORMS VERSUS PRODUCTS As the customers of InterbrandHealth’s clients change, so do our clients’ respective offerings. Forward-looking and progressive healthcare companies are shifting from promoting individual products to selling more holistic disease

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management platforms. The year ahead should bring a new wave of efforts to redefine product proposition. Soon, more and more healthcare companies will ensure their products are surrounded by platforms that educate and provide additional services. Sanofi, a global and diversified healthcare organization, is one such company. It has approached the treatment of diabetes, for example, more holistically by supplementing the products it offers with educational tools, disease management tips, and digital tools for building social communities. Merck, too, is tackling major women’s health issues. The Merck for Mothers partnership with the United Nations gave Merck a bigger platform to foster engagement around its portfolio of women’s health products. Alongside the shift to platform offerings, the manufacturer brand is entering a new era. Traditionally limited to B2B relationships, the manufacturer brand will now play a greater (and more noticeable) role with these platform offerings. As such, InterbrandHealth expects to see healthcare organizations putting their energy into defining and differentiating their manufacturer brands in 2013 and beyond. As the level of competition increases in the global healthcare marketplace, so do the opportunities. The savviest of healthcare marketers will take the time needed to examine the role their brands play in defining the sector’s new rules of engagement.

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LUXURY By Manfredi Ricca

An initial, superficial glance at the current economic landscape would not seem to leave much room for optimism when it comes to global luxury brands. Uncertainty is the dominant force in business as well as in personal decisions. Mature economies are showing signs of further contractions. A GDP slowdown in developing markets is beginning to manifest itself as a consequence, with the engine of growth in recent years showing signs of doubt. Travel, a fundamental market for luxury, is expected to suffer in turn. Such a context will inevitably bring serious challenges to global luxury brands. However, the changes we are witnessing stretch far beyond economic

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cycles. They encompass and reshape the ways in which we live, learn, and choose as individuals. From environmental concerns to a much deeper and wider sense of personal care, from a questioning of consumerism to issues about future resources for an aging global population, the underlying thread driving the luxury consumer’s mindset these days appears to be a quest for depth and discernment in choices. A look at other categories, from FMCG/ CPG to the automotive sector, shows how this global social and cultural shift is forcing brands to reengineer themselves and adapt quickly to this changing mindset. Luxury brands are

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in a very different position. This gradual evolution in the culture of choice is more than cyclical goodwill; it is a historic and unprecedented opportunity. Out there is a world that is increasingly questioning the fundamental notion of value. In many ways, luxury brands express, by definition, the very notion of superior value. Whether their business model and brand paradigm is traditional luxury or meta-luxury, these global icons are best positioned to fulfill, or at least give voice to, people’s quest for unquestionable authenticity. Out there is a world of individuals wanting to escape hundreds of meaningless daily messages to engage

“WHETHER THEIR BUSINESS MODEL AND BRAND PARADIGM IS TRADITIONAL LUXURY OR META-LUXURY, THESE GLOBAL ICONS ARE BEST POSITIONED TO FULFILL, OR AT LEAST GIVE VOICE TO, PEOPLE’S QUEST FOR UNQUESTIONABLE AUTHENTICITY” with profound, masterful storytelling, in a way that is captivating and involving. Cartier’s L’Odyssée short film, whose viewership has already exceeded the population of several EU states, is the quintessential example of what luxury brands can do to create relevance for new generations. Some of the most sophisticated social and digital strategies today come from brands such as Burberry. Luxury brands are uniquely positioned to combine engagement and effectiveness in messaging. Many are showing that they can use traditional channels to create mass desire while providing unique, one-of-a-kind customer journeys for high-net-worth individuals and ambassadors. Out there is a world of customers increasingly interested in the contribution of companies as corporate citizens. And here are brands with the credibility and influence to promote causes which range from education, championed by Gucci, or contemporary art, supported by Prada. It is particularly fitting for luxury brands to have a citizenship agenda, because they have shown they stem from, and reflect, both business and cultural models.

Out there is a world where customer engagement is increasingly part of the business agenda. Luxury brands are leading the way in ensuring the retail experience is an integral component of their proposition, generating a sustainable return on capex and transforming point of sale into a selling point. Out there, finally, is a world that questions the virtues of short-term performance versus long-term prosperity. In today’s volatile markets, smart companies are demonstrating how the right, handpicked line-up of traditional, large-size luxury brands and resilient meta-luxury brands can create an optimum balance of expected returns and risk control. All this does not mean that life is going to be easy for the luxury sector in 2013. What it does mean is that few brands are better positioned to engage the desires and aspirations of the global consumer.

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MEDIA By Cassidy Morgan

The media landscape continues to be extremely fragmented. User-generated content and the continuous ascent of mobile platforms, social sharing, and consumption of information is driving an overflow of content that is readily accessible to anyone—often for free—in an unprecedented challenge to business models. Throughout this period of fragmentation and digital disruption the big media companies have failed to leverage their brand as a tool to extract incremental value from their customers. In 2013, the smart media companies will start to address this oversight with new models, fresh thinking, and investment in digital innovation. The challenges are enormous, as we are beginning to see the impact of this

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fragmentation and the pressure on traditional business models really take its toll. Be it companies like Newsweek, abandoning their print edition after almost 80 years, newspapers shutting down completely—especially in the US and Europe—or assets being put up for sale and companies downsizing to reduce their cost base, the media sector is in a crisis. Brands not only provide ways for people to navigate this world of fragmentation as they seek sources they can trust— they can also help media companies command a price premium and allow for extensions of their offerings to offset the revenue, technology, and consumer behavioral pressures they face.

WHAT’S IN STORE FOR 2013

In the race to the bottom and the desperate drive to keep subscribers, almost all media and publishing companies (focused on consumers, professionals, or businesses) have played with their pricing model and, in some cases, decreased their prices—to their peril. Fewer people buying their product at a lower price means less revenue, resulting in cost-cutting to stem margin erosion—which in turn results in a lack of investment for the future, which ultimately dooms their business. Somewhere in this downward spiral, companies forgot that one of their most valuable assets, their brand, can help them drive premiums—but only if managed well.

In addition, this overall lack of focus on their brands, some in existence for decades, has caused organizations to think about opportunities only within their traditional models. Instead, they should be thinking how, by using their brand, they can extend to new offerings that are outside of their sweet spot as a way to diversify their revenue base and to further strengthen and differentiate their offering.

context, and analysis that follows them wherever they are. Within the multitude of platforms, the demand for personalization and customer preference, and a brand-driven strategy to deliver media and information in new ways are presenting a significant and sustainable growth opportunity.

In 2013, consumers will increasingly look for trusted media brands that offer them simplified packages with easy universal access across platforms and channels with relevant content. Those media companies who take a brand- and customer-centric view; who offer bundled services and new content pricing models; who innovate by stretching their brands; and who realize that ‘in-with-the-new and outwith-the-old’ is the way forward, will be successful.

Brands drive premiums. Brands can help drive margin performance or create incremental revenues from adjacent markets and offerings extending to new places. But investment, in terms of resources and time, and most importantly the management’s commitment to the brand, is needed to help capture that upside. Content is no longer king because content is everywhere, free of charge—legally or illegally. Brands, if managed well, can take advantage of new technology and delivery models, and become the successors to content that will shape the future of media companies everywhere. The smart media players in 2013 will recognize that their brands can be the saviors of their business in this time of evolution, and start to take significant steps to leverage them.

Publishing companies such as Springer are introducing cross-platform subscriptions. Media companies with news outlets are trying to better leverage their brands across digital touchpoints in a time when consumers are seeking— if not demanding— trusted sources,

The challenge is to take these steps without devaluing the brand.

“IN 2013, CONSUMERS WILL INCREASINGLY LOOK FOR TRUSTED MEDIA BRANDS THAT OFFER THEM SIMPLIFIED PACKAGES WITH EASY UNIVERSAL ACCESS ACROSS PLATFORMS AND CHANNELS WITH RELEVANT CONTENT”

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RETAIL By Bruce Dybvad

NEW PROFIT FRONTIERS FOR RETAIL: GLOBAL EXPANSION AND DOMESTIC REFINEMENT 2013 finds international retail hitting its stride, expanding at full speed in the largest developing markets while staging entries into smaller countries around the world. In mature markets, the industry is making the most of new realities through efficiencies informed by consumer insights. RIDING THE WAVE OF THE GLOBAL SHOPPING BOOM In the past five years, the world’s leading retail brands—UK’s Tesco, German giant Metro, America’s Walmart, and Francebased Carrefour—grew their revenues 2.5 times faster in developing countries than in their home markets. Now more than ever, international expansion is the name of the game. 40

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For the most part, brands are well poised to take advantage of this opportunity. The arc of their evolution has taken them through boom, bust, and digital revolution, leaving them wiser, more agile, more in tune with consumers, and ready to take on new markets. Like many international big-box mass merchants, Carrefour has learned to make its brand concept work in various formats. Hypermarkets and supermarkets still prevail, but close-tohome convenience cash-and-carries— popular from Brazil to the United Arab Emirates—are growing quickly, along with e-commerce integration. Concepts are targeted to specific segments in local markets for precise consumer needs and occasions, and include formats as small as kiosks and vending machines. Such storefronts also act as low-cost billboards in busy metropolitan areas.

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Technology continues to transform retail in new markets. Consumer expectations and behaviors have been altered by access to the internet, as well as the prevailing economic climate. Spain’s Zara only recently expanded online in key markets to great success, long after establishing a brick and mortar presence in almost 80 countries. Today, however, expansion without a multi-channel strategy might be foolhardy. Growth in e-commerce and mobile commerce currently outpaces physical retail in countries large and small. Retail is no stranger to risk, and new markets present varying levels of it. To navigate complex cultural and regulatory issues, brands look to joint ventures with local partners, as in the case of LVMH in India, and Walmart in Brazil. For US fashion brand J.Crew, that approach resulted in loss of brand control; it has

since abandoned a key partnership and temporarily exited the Tokyo market. In some cases, the outright purchase of a controlling interest in an established like-minded local company offers a better chance of success. Expansion opportunities may appear endless, but they’re certainly not effortless. THE BURGEONING OF THE MIDDLE CLASS Commerce is powerful, yet it’s nothing without a strong middle class and an aspiring lower class with disposable income. Studies predict that in little more than a decade, more than half the world’s population will have joined the consuming classes. Emerging markets will account for nearly 50% of the world’s total consumption, up from 32% today. China and India will account for two-thirds of the expansion. Thanks again to the internet, consumers around the world are well aware of today’s leading international brands and follow Western trends. In many cases, they have sought out such brands, are comfortable with e-commerce and mobile commerce, and are often willing to endure lengthy delivery times. However, global brand awareness does not guarantee loyalty. In China, for example, price sensitivity and an attraction to value offerings may leave a brand wide open to competition. Mobile touchpoints can either inspire loyalty by engaging consumers on a deeper level, or destroy it by offering too many options. It pays to study consumer behavior in each market. Chinese consumers may be pricesensitive, but they are also the world’s largest luxury goods market with 12 billion USD in sales and growing. In Mongolia, wealth, stability, and democracy have created a consumer base for the likes of Zegna, Cartier, L’Occitane, and Burberry. Some things haven’t been changed by technology. Word of mouth carries

great weight in emerging markets where families and friends live in close proximity. Immense pressure is on brands to get things right the first time— location, price, convenience, service— and keep the bloom on the rose until they can begin to build brand equity and market share according to local needs. And one of those needs might be additional product information, since the in-store phase of the consumer decision journey tends to be longer in emerging markets where shoppers visit multiple stores multiple times to collect buying details. Emerging consumers around the world do share common ground, however. Studies show that across cultures they are concerned with value and how well a need is met. Luckily, those are things that brand-led companies do best. UNREALIZED POTENTIAL IN THE DOMESTIC SHOPPING EXPERIENCE Much has been said about the soft US economy and the struggling Eurozone, but too little about the potential in those markets. There is considerable opportunity, from a brand pointof-view, to fatten margins through innovation that gets the most out of the existing store base. There’s room to edit assortments, optimize space, evaluate categories, trim fleets, maximize the return on advertising, and enrich the shopping experience. The basic layouts of mass merchants, grocery and drugstores, for example, have remained stagnant for decades. Today, key shopping zones are in flux under the influence of brands such as US grocery giant Kroger. The front end, once defined by a narrow checkout aisle, is now considered an area for experience creation. Impulse zones disrupt the shopper experience in positive ways. Seasonal areas serve as centerpieces for brand stories. Digital integration throughout provides shoppers with inspiration and promotional stories.

WHAT’S IN STORE FOR 2013

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“MOBILE TOUCHPOINTS CAN EITHER INSPIRE LOYALTY BY ENGAGING CONSUMERS ON A DEEPER LEVEL, OR DESTROY IT BY OFFERING TOO MANY OPTIONS” Albert Heijn, the largest supermarket in the Netherlands, set the Eurozone standard for mobile apps. Its app lets you create a shopping list, shows you the easiest route through the store to fill it, acts as a product scanner, locates stores, and connects to Heijn’s website—it even suggests recipes.

fundamentally different than those of the past. In the meantime, around the globe, the foundation of a retailer’s success lies in how well its touchpoints enable shoppers to know it, love it, and successfully interact with its brand.

In its home market in Korea, W-store pharmacies leverage design to stand out from the non-differentiated whiteand-green competition. Its innovative courage has resulted in a cozy, café-like pharmacy. The feel-good experience gives shoppers more reason to attach to the brand and increases their perception of its value. Growth in the next three to five years will come from store types that are 42

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WHAT’S IN STORE FOR 2013

TECHNOLOGY By Nirm Shanbhag

For the technology sector, 2012 was a memorable—and tumultuous—year. Consider HP’s struggles, Facebook’s IPO, Zynga’s implosion, Über’s battles, Square’s mainstreaming, Dell’s transformation, Google’s push beyond search, Amazon’s push into everything, Apple’s struggles to surprise, and BlackBerry’s struggles to survive. If the events of 2012 were any indication, 2013 will be notable not only for the arrival of game-changing new entrants, but also for how quickly once-dominant tech leaders will lose ground. Here’s what Interbrand expects in the year ahead— and what we think tech brands can do to avoid sliding into the dustbin of business history.

SAY HELLO TO THE NEXT NEXT BIG THING The tech landscape will continue to constantly shift, with new entrants, new thinkers, and new business models reshaping the relationships consumers have with brands. Square, for instance, is revolutionizing how consumers pay with an electronic payment service that allows credit card payments to be made through mobile phones. What started as a way for small/micro-businesses to accept credit card payments is now driving a payments revolution at the likes of Starbucks. Similarly, Über, innovators of the on-demand car service app, is turning the tightly controlled

taxi and limousine markets upside down, empowering both drivers and passengers. One key to the success of both companies has been finding ways to scale quickly into protected positions to fend off the inevitable next next big thing. CHANGING LANDSCAPE WILL PUT MANY ON THEIR HEELS This rise in disruptors, of all shapes and dispositions, will put the incumbents— those brands that saw us through the rise of the PC, the rise of the internet, and the birth of the app economy—on defense. They will find themselves facing competition from all sides in

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2013. Whether Dell or HP, Intel or Microsoft, Cisco or IBM, the barons of the recent past will find themselves being challenged for influence and brand relevance. Some companies will struggle to deliver against their brand promises. Considering how Apple’s iPad mini launch was met with yawns in 2012, how will it awaken the crowds in 2013? Others will find it difficult to maneuver beyond the reach of their legacies. Can Microsoft, for instance, become a standard outside of its PC ecosystem? Even recent disruptors are not immune. Last year’s video game hero, Zynga, is this year’s laggard, largely due to the difficulty it’s had shifting from Facebookcentric gaming to mobile gaming. Google and Facebook, reigning champs of the tech world, will also find their positions challenged as niche players and old foes look for ways to shake up the new status quo. Companies like Yahoo! might very well reimagine themselves into the hearts and wallets of 2013’s consumers.

The keys to success for all tech brands— big and small, young and old—will be flexibility and agility. The winners will have the ability to respond quickly to changes and carefully recraft brands in a way that balances roots and vision, respecting where they’ve been and charting where they want to go. BEING HELPFUL WILL MATTER MORE THAN BEING BOLD Once upon a time, Yahoo! and AOL epitomized the internet, curating the wild, new frontier and putting everything users wanted on one page. Google later broke the mold, distilling search down to its essence, and producing a new generation of highly relevant results that honed in on what users wanted, filtered out what they didn’t, and let people get on their way. By helping users find the information they needed, quickly and easily, Google rose to the top. The same risks AOL and Yahoo! once faced remain for companies like

“THE KEYS TO SUCCESS FOR ALL TECH BRANDS— BIG AND SMALL, YOUNG AND OLD—WILL BE FLEXIBILITY AND AGILITY” 44

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WHAT’S IN STORE FOR 2013

Amazon, whose everything-under-thesun approach is being challenged by curators like Fab.com and Gilt Groupe. Not unlike Google, curators are helping consumers grapple with seemingly infinite choices and leading them to what is most useful and relevant. In short, companies that use brand and technology to simplify some aspect of life—or offer consumers choices that are personalized, curated, or customized— will free themselves to spend less time on short-term selling and more time on long-term engagement, getting more for their brand-building buck. WHEN EVERYTHING IS SMART, YOU STOP NOTICING HOW SMART THINGS ARE Increasingly, we are shifting from an era in which we recognize computer use as a distinct and separate activity to a new era in which computer technology is seamlessly integrated into every aspect of our lives. From healthcare, transportation, communication, and agriculture to the way we work and play, everything is becoming “smarter.” Nest, for instance, the startup focused on reinventing the home thermostat, epitomizes the invisible yet radical changes today’s technology is introducing into our everyday lives. Not only more attractive than the old beige eyesore most people once had on the wall, controlling the energy of their entire home, Nest’s thermostats can be programmed online from wherever you are using an iPhone or Android app. They “learn” from your manual adjustments, set their own schedule based on your patterns of living, and have numerous innovative, energysaving features. Home heating and cooling will never be the same, yet this change has entered our lives quietly, surreptitiously. It doesn’t feel like a revolution, because smart technology is so ubiquitous.

and Cisco, becoming visible beyond the enterprise and staying relevant is more critical than ever. To continue driving growth in 2013 and beyond, brands that support the connectivity that defines the modern, post-digital world will need to work even harder to deliver standout experiences and push for broader adoption of new technologies. LOOKING AHEAD Though we are living in times that are faster and smarter than any the world has ever known, one thing remains constant: brands that work hard to connect with consumers, become adept at identifying and solving real problems, and use brand and innovation in conjunction to improve upon what’s come before, will be the ones consumers buy into.

For tech brands that are traditionally invisible to users like Intel, Qualcomm,

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TELECOMMUNICATIONS By Kevin Perlmutter

Comedian Louis C.K. may have said it best when talking about people’s frustration with relatively new mobile technology. “Give it a second. It’s going to space and back. It’s amazing. Is the speed of light too slow for you? The worst cell phone in the world is a miracle. Why do we expect it to be perfect?” The telecommunications industry has changed dramatically in the last decade. In 2001, only 15.5% of the world’s population had a mobile

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device subscription, and by 2011 that number rose to 85.7%, according to the International Telecommunications Union. The scale and pace of change in this industry is unprecedented, and consumers are increasingly becoming addicted to new capabilities. As the cycle of demand and innovation accelerates, it will stimulate further changes in consumer and business behaviors, and the bar will continue to be set higher. This will put increasing pressure on

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telecom companies to evolve and stretch, just to keep up with the demand they’re creating. Beyond the build out of high-performing networks, Interbrand sees three key areas of focus for the telecom industry in 2013: 1. Increasing importance of customer experience and brand trust Brand trust is getting harder to earn worldwide and, in some markets,

earning trust in the telecommunications sector is even more challenging. As telecom brands look to expand their businesses into areas like mobile banking, digital life, connected cars, home security, and cloud services, they will need to strengthen customer relationships. They must excel at the most basic level of service if they expect to maximize their opportunities in new areas of business. They will need to increase efforts around understanding emerging behaviors in order to keep up with and/or drive demand, remain relevant, and stay ahead of the competition. The T-City experiment is helping Deutsche Telekom do just that. Since 2007, the company has turned cities into “future labs.” It has deployed emerging technologies in order to monitor their usage, demand drivers, and community impact. Ethnographic research at any scale will help telecom companies to uncover customer insights and develop truly customer-centric go-to-market

strategies. This is especially important as they expand into unfamiliar industries, and attempt to partner with players and alter the existing ecosystem. 2. Corporate citizenship Interbrand research has shown that socially responsible brands earn increased favorability and advocacy. Nielsen says that 66% of consumers around the world would prefer to buy from companies that give back to society. Telecommunications organizations are in a unique position to create incredible impact on the very communities they serve and will increasingly activate these programs. In the US, AT&T is doing exactly that with two significant initiatives. First, AT&T Aspire, an educational initiative backed by over 250 million USD, aims to reduce high school dropout rates and improve workforce readiness. Secondly, “It Can Wait” is an AT&T anti-texting and driving program that’s expanding in 2013. Also in the US, Verizon is supporting the awareness and

“AS TELECOM BRANDS LOOK TO EXPAND THEIR BUSINESSES INTO AREAS LIKE MOBILE BANKING, DIGITAL LIFE, CONNECTED CARS, HOME SECURITY AND CLOUD SERVICES, THEY WILL NEED TO STRENGTHEN CUSTOMER RELATIONSHIPS” WHAT’S IN STORE FOR 2013

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prevention of domestic violence with a corporate commitment of more than 40 million USD. Programs like these are important steps for telecom companies that wish to improve their societal contribution and brand sentiment. 3. International expansion and consolidation Business is increasingly global and people are traveling more—and telecoms are responding. Services like the eSim card, for instance, will enable travelers to easily switch mobile operators based on location and price. Telecoms are also becoming more price competitive when it comes to international roaming. Further, expect to see more cross-border industry consolidation and partnerships such as SoftBank’s proposed purchase of Sprint in the US, or Carlos Slim’s America Movil SAB’s overseas expansion in partnership with Royal KPN NV (Dutch Telecom), and Telekom Austria. In 2013, we believe that telecoms will increasingly begin to expand internationally, whether through international alliances or acquisitions— all to create international networks for their customers. In 2013, customer expectations will continue to increase, and telecom companies will need to respond in relevant ways in order to capitalize on the customer demand that their very own technology is responsible for creating.

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CONTRIBUTING AUTHORS Rebeca Arbona Executive Director, Strategy and Research, Cincinnati

Kevin Perlmutter Senior Director of Brand Strategy, New York

Daniella Bianchi Strategy Director, São Paulo

Manfredi Ricca Managing Director, Milan

Bill Chidley SVP, Shopper Sciences, Interbrand Design Forum

Mike Rocha Global Director, Brand Valuation Nirm Shanbhag Managing Director, San Francisco

Bertrand Chovet Managing Director, Paris Bruce Dybvad CEO, Interbrand Design Forum and Cincinnati Josh Feldmeth CEO, New York

Erica Velis Content Editor, New York Jamey Wagner Creative Director, Cincinnati Wes Wilkes Executive Director of Strategy, InterbrandHealth

Michel Gabriel Managing Director, Zurich

Tom Zara Global Practice Leader, Corporate Citizenship

Stuart Green CEO, Asia Pacific Andrew Martschenko Senior Director of Strategy, New York Cassidy Morgan CEO, Central and Eastern Europe

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Editor in Chief Daniel Diez daniel.diez@interbrand.com

Creative Director Chris Campbell chris.campbell@interbrand.com

Editorial Director Shirley Brady shirley.brady@interbrand.com

Design Director

Marketing Director Kristin Reagan kristin.reagan@interbrand.com

Designer Michael Waltzer michael.waltzer@interbrand.com

Features Editor Erica Velis erica.velis@interbrand.com

Marketing and Events Manager Shayla Persaud shayla.persaud@interbrand.com

Alan Lum

alan.lum@interbrand.com

ÂŠ 2013 by Interbrand Corporation Interbrand IQ is published by Interbrand. For more information, please visit: www.InterbrandIQ.com For questions and comments, email: InterbrandIQ@interbrand.com www.facebook.com/interbrand www.twitter.com/interbrand Interbrand 130 Fifth Avenue New York, NY 10011, USA T +1 212 798 7500

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