THE ENERGY INSIDE
The emailable version of this booklet is at pubs.yr.com/energy.pdf
THE ENERGY INSIDE Unique selling propositions. Competitive advantage. Single-minded propositions. Whatever the jargon, marketing is about identifying a unique benefit for your brand, right? Welcome to the real world Welcome to the real world, where: • Most food brands perform identically in blind taste tests to supermarket private labels. • Any promise an electronics brand makes can be made by its competitors within months. • Half the front line staff who deliver a service’s ‘unique’ benefits will be working for a competitor in six months’ time. Marketing based on USPs simply no longer works.
And yet And yet the world refuses to commoditize.
BUZZ PIZZAZZ JE NE SAIS QUOI STAR QUALITY VAVOOM DISNEY DUST Many words have been used to describe energy in the past.
Brands still mean things – sometimes great things - to the people who buy them. People continue to pay a premium for brands that offer little more than their competitors. And they gravitate towards brands that, despite having little different to offer, seem to have a certain buzz, or energy about them.
The funny thing is though that no one bases their marketing plans on this energy. Perhaps because energy is difficult to define.
Perhaps because energy is less tangible than taste preference scores. But perhaps above all because no one has ever managed to measure energy. Until, that is, now.
For years Wall Street has undervalued the impact of inspired marketing. That need no longer be the case.
MEASURING ENERGY Y&R has spent the last two years studying energy. We have collaborated with professors from the University of Washington Business School and Columbia University. We set out to define energy as objectively as possible, and then to quantify it. Energy attracts customers to brands, and makes them grow. And that makes the companies that own them grow too. And if those companies grow, so does their stock price. So we reasoned that the most objective way to define energy was to look at the many brands – like McDonalds, Apple and Coca-Cola, that are also companies listed on the New York Stock Exchange, and to use their performance over time to identify their energy.
$15,000
$14,000
ENERGY FUND
$13,000
$12,000
$11,000
S&P 500
$10,000
$9,000
$8,000
$7,000
$6,000 30 Dec 01 TECHNICAL BACKGROUND: We analyzed the fifty brands that gained the most energized brand strength from our data on a quarterly basis, allowing six months for the energy to work its way through the price of the stock, and found they outperformed the S&P 500 on average by 31.7% across varying market conditions between 2001 and 2005. Energized brand strength is a composite measure, combining energy with differentiation and relevance. We use it to form a stabilized measure of energy. (The Energized Brand Strength Index portfolio was updated each half with the top 50 energized brand strength gainers. The portfolio was weighted by relative energized brand strength changes. Transaction costs were ignored.)
ENERGY DRIVES STOCK PRICE
30 Dec 05
We created a hypothetical fund based on stocks associated with brands of rising energy. The fund outperformed the S&P 500 in periods of market growth and market decline.
We did this by performing regression analysis of stock prices against brand imagery. And we used those brand imagery characteristics that explained stock price movements to contruct a precise, scientific formula for energy. How did we measure brand imagery? Fortunately, Y&R has been collecting brand imagery attributes for the past thirteen years through its global research study, BrandAsset Valuator. BrandAsset Valuator¤ has interviewed 500,000 consumers about 35,000 brands in 44 countries. It is one of the largest brand databases in the world. It the connection surprising? Is it surprising that the performance of a brand, and the stockmarket performance of the company that owns it are so connected? Not really. The days when a company’s worth was tied up in factories or machinery are long gone - indeed many companies nowadays outsource their manufacturing altogether to China.
ENERGY CREATES BRAND LOYALTY • Virgin Atlantic • SouthWest Airlines
% BRAND LOYALTY
16
• JetBlue
14 12 10
• British Airways • American Airlines • Delta Airlines • United Airlines • Continental Airlines
8 6 4 2 0
30
40
50
60
70
80
90
ENERGY ‘Once you fly Virgin, you can never go back to an ordinary airline’ say many international execs. And it’s the same with many other high energy brands.
What’s left, and the source of most companies’ value today is their ability to engage and to keep customers. And these abilities are encapsulated above all in their brand. Today, a high-performance business is increasingly based on a high-performance brand. So what exactly is energy? We’ve been looking hard at energy and its impact on consumers. Energy represents the perception that a brand is moving in a particular direction; that it has a clear purpose in the world. Applying the formula We have used the Energy Formula to look at all of those 35,000 brands. Energy comes in a scale from 0 to 100. If your brand comes near to 100, congratulations. If your brand comes near the bottom, don’t give up the day job.
DIAGNOSING ENERGY ISSUES Of course, it would help if we knew why brands have the energy level that they have. To do this we've looked at a number of factors that can help energy move. Chief amongst these are three factors we have named vision, invention and dynamism: Vision is what a brand stands for: its sense of purpose and leadership qualities. Nike, the ‘Just Do It’ brand, is a good example of vision. Invention is about the degree to which a brand keeps updating itself, through new product launches and improvements to its service. iPod, a brand that keeps launching new variants, like Video iPod, and new services like Podcasting is a highly inventive brand.
THE THREE ELEMENTS OF ENERGY
VISION
ENERGY
INVENTION
DYNAMISM
Dynamism is the degree to which a brand keeps creates a persona or cultural buzz in the marketplace. Google, with its logo that changes for St. Patrick’s Day, Valentine’s Day and other holidays and events is a good example of dynamism. Fixing problems If your brand has a weakness in vision, invention or dynamism, fixing this weakness can be a good way of improving your energy score. And of course, if you fix this weakness, you are likely to fix your brand - and with it your company - too.
GETTING MORE ENERGY Energy can be created in many ways. Attention to detail, and just making sure that every aspect of your operation delivers a consistent experience can help. But the thing that above all can shift your energy upward is a strong, powerful energy-driving idea. The process we use to develop such an idea is called ignition. But Ignition is a powerful process. But it doesn’t work unless we fully understand the brand’s situation fully.
THE IGNITION PROCESS
So the first step in ignition is to surround the problem with all the information and thinking that can help us.
As part of an ignition session, we look thoroughly at: • The business background to the brand • The marketplace and the competition • The target consumer • The architecture and history of the brand • And of course, in a world where the media solution may be a profile on MySpace as much as a TV commercial, we look at channels in depth too. Once we have done this, we produce the creative brief. And this leads us to the energy-driving idea.
In a world where media choices include Google, SecondLife and YouTube, no creative brief is complete without a touchpoints analysis.
Energy is volatile. Handle it with care.
SO? Can energy fix the big problems of the marketing world? We hope so. We are working further on analysing energy and discovering laws that derive from its study. In this fast moving, ever-changing digital world of the twenty-first century, thinking about branding and communication is out of date. And we are all desperately in need of new rules and new ways to think about what we do. Because we measure energy in exactly the same way for all brands, it offers a better way to look at new, categoryindependent marketing phenomena like social networking.
And because Energy has been derived fundamentally from basic stock performance rather than from transient marketing theories, it gives us an objective, big picture view of markets. In the current environment, energy is therefore one of the few marketing measures we can trust.
THE SEVEN ENERGY LEVELS Illustrated using H1 2006 U.S. energy data.
VOLCANIC: ENERGY LEVEL 90-100 Congratulations. Your brand is up there in the mediascape along with Harry Potter and Google. You are already part of the popular consciousness, and your brand means something to people way beyond its basic functionality. You are truly in a fortunate position. The only thing now is how to keep your brand there – because a brand can lose its energy just as fast as it gained it: • Brands with this level of energy need to monitor attitudes of their innovator and early adopter users carefully. Many users will consider dropping the brand as the mainstream start to use it. • Of those that have much, will much be demanded: consumers expect brands with this much presence to entertain them in spectacular fashion. • You need to do this fast. For every C.S.I., there are ten TV shows that get their fifteen minutes of fame and nothing more.
C.S.I. IPOD GOOGLE VICTORIA’S SECRET NIKE XBOX AMAZON.COM
BURNING: ENERGY LEVEL 75-89 Your brand is already buzzing. Consumers feel its presence in their lives, and see it as a big, famous brand. Now is the time to give it truly iconic status: • Brands in this position have already come a long way, and can be uncomfortable in the glare of the limelight. Now that greatness is being thrust upon them, they may need to act different. • Do you think that if you did try to connect with pop stars, no one would listen? That’s what everyone thought about U2 until they agreed to connect with the iPod. • Some brands in this position in the Energy Index have around two years’ grace before their energy levels begin to slip. Use these two years well – you can only be the new kid on the celebrity block for a while.
STARBUCKS MOTOROLA
VIAGRA MYSPACE
CHARGED: ENERGY LEVEL 60-74 Your brand is being noticed, and is moving in the right direction. Now is the time to debate how to get it further into the mass consciousness. To do this, you may need to think beyond the confines of your market, and the basic functionality of your product, and consider how to give your brand a wider social relevance: • Nike did this early in their brand’s life with Just Do It. It transformed what had previously been just an innovative running shoe into a sports philosophy. • Coke did this back in the 1930s when they gave Santa a Coke-red coat and moved from being a summer-time refreshment into being an all-year-round beverage icon.
HOT WHEELS
STOLICHNAYA
VISA PIZZA HUT
PULSING: ENERGY LEVEL 45-59 Your business may be doing well. Your market share may be growing. But you are still not fully leveraging the power of branding to give your brand a life of its own. As the Roman philosopher Juvenal remarked, it was not enough for a politician to feed his people, he must also capture their imagination. Your brand needs to do this, embodying more than basic product functionality. • Consider where the fast food chains would be today if they had stuck with a brand built around an offer of meat in a bun at a low price. It’s birthday parties, Happy Meals and fun that built McDonalds over the past three decades, not the taste of the patty.
‘Bread and circuses – that is what the mob wants’
• Making a trend your friend is not enough. Plussize teen clothing brand Torrid is on to a winner with their sexy clothes for chunky teens. But they still need to build the cachet of Gap or Zara.
JUVENAL
KRISPY KREME BANANA REPUBLIC
BARBIE YU-GI-OH!
LEAN CUISINE
INERT: ENERGY LEVEL 30-44 Your brand may be doing all the right things in terms of image, saliency and share on your tracking, but it is still a minnow in the great scheme of things. You need to raise your sights and get your brand to drive your business. Do you think it can’t be done in your industry? With the right branding thinking, you can transcend that industry: • In the lowly computer industrial components industry, Intel rose to become a consumer icon. • SouthWest became the strongest brand in airlines by doing less, not more.
DORITOS
TIMEX
ESPRIT
SLEEPING: ENERGY LEVEL 15-29 Your brand is alive, but needs a wake up call, if it is going to help you retain and grow your business. On the other hand, perhaps it’s that you’re doing the wrong things – like telling your passengers to bring their own pillows on to your flights; or perhaps you’re an insurance company stuck in the old ways of the industry. No matter what marketplace you operate in, your brand could do with a rethink. • Is your existing marketing strategy differentiating enough? You may be advertising your industry rather than your brand. • Are you focussing on a sharp target? ‘If you ain’t segmenting.’ said Theodore Levitt of the Harvard Business School, ‘you ain’t marketing.’ • Are you doing anything different to your core competitors? Sacrifice is the essence of strategy.
HOLIDAY INN
AMTRAK
ALLSTATE
MUTUAL OF OMAHA
DECAYING: ENERGY LEVEL 0-14 You have a brand that is really is just a name that people have heard of rather than a brand with real, added values. Now is the time to take a fundamental look at your business, and work out why your energy level is so low. • Your brand is so weak, you may be better off marketing to your customers via an intermediary. • If you are an fmcg brand in this position, you may be swamped by private label over the next few years. • If your competitors are also in this position, your industry may be vulnerable to competitors like Sir Richard Branson, whose skill is to reinvent an industry in his own image.
GREYHOUND
TECHNICAL BACKGROUND BrandAsset Valuator: Young and Rubicam's Young & Rubicam Brands worked with Robert Brand Asset Valuator survey (BAV) has been Jacobson of University of Washington assessing brand health since 1993, and has Business School and Natalie Mizik of done quarterly brand tracking in the USA Columbia University to develop the energy since 2001. theory. Each quarter in the US, a panel of 10,000 The research conducted used seven intervals consumers is polled via of Y&R BAV data as the a printed survey on a centerpiece, and DIFFERENTIATION total of approximately supplemented this with The brand’s point of 2,500 brands. Standard and Poor's difference ENERGY BAV assesses brands The brand’s sense Compustat data tapes of direction on over 55 key brand for accounting RELEVANCE measures independent How appropriate performance measures. a brand is to you of category and against It also utilized monthly ESTEEM the entire brandscape. How well regarded data from The a brand is KNOWLEDGE BAV studies have been University of Chicago's An intimate done in 44 countries Center for Research in understanding of the brand around the world, and Security Prices (CRSP) are repeated in many on stock returns over How energy fits into a brand. countries each year. time. Over 35,000 brands To improve accuracy, have been examined and more than 500,000 analysis was restricted to ‘mono-brands’ consumer interviews have been conducted represented in the data, meaning a firm where globally over BAV's history. one brand represents the majority of the company's business. Examples of this are Microsoft, Disney, and Coca-Cola.
By: Simon Silvester simon_silvester@eu.yr.com tel: +44 20 7611 6356 For new business enquiries, please contact: Yossi Schwartz yossi_schwartz@za.yr.com tel: +27 11 797 6314 Helen Kimber helen_kimber@eu.yr.com tel: +44 20 7611 6750 For press enquiries, please contact: Bernard Barnett bernard_barnett@eu.yr.com tel: +44 20 7611 6425 Thanks to: John Gerzema, Ed Lebar, Maria McHugh, Michael Sussman, Jim Williams
Y&R EMEA, Greater London House, Hampstead Road, London NW1 7QP BrandAsset Valuator is a Registered Trademark of Young and Rubicam Brands The emailable version of this booklet is at pubs.yr.com/energy.pdf
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