How Brands Succeed or Fail

By Tien Tzuo October 25, 2019

Last week, Charles Trevail, CEO of Interbrand, sent me their list of the top 100 global brands of 2019. This is a company that has been studying and building brands for over 40 years, and their insights are always worthwhile. In the report’s thought-provoking introduction, there’s a really interesting discussion about how, because people are now moving faster than businesses, the most successful brands must constantly answer three basic questions: :

  • What needs and desires will we address?
  • Through what experiences?
  • And with what business model and returns?

I perked up when I read this. Notice the emphasis on outcomes (needs and desires) and experiences, versus products and features. Successful companies start with the customer, who is dynamic, versus focusing on selling a product, which is static. They identify the needs and desires of their customers first, then create compelling experiences that solve for those needs and desires. These are the kinds of companies that are finding success in what we call the Subscription Economy.

Staring at the logos, and the growth (or decline) of their calculated brand values, I decided to try something. Below are the top 20 companies, but grouped into two buckets — the companies whose brand values increased significantly, and the companies whose brand values decreased or were essentially flat. Take a look at the result:

Significant Increase in Brand Value
1. Apple +9%
2. Google +8%
3. Amazon +24%
4. Microsoft +17%
7. Toyota +5%
8. Mercedes-Benz +5%
10. Disney +11%
16. Nike +7%
17. Louis Vuitton +14%
20. SAP +10%

Decrease in (or Flat) Brand Value
5. Coca Cola -4%
6. Samsung +2%
9. McDonald’s +4%
11. BMW +1%
12. IBM -6%
13. Intel -7%
14. Facebook -12%
15. Cisco +3%
18. Oracle +1%
19. General Electric -22%

So what’s your first reaction? Overall, the names should not be a surprise, they are all ones we are familiar with – that’s why they are the top brands! But I’d argue that the companies whose brand values have grown are the ones that start with the customer and are hyperfocused on the 3 questions Interbrand proposes, while the other column are companies still stuck on viewing the world through the lens of their product.

Take a look at Coca-Cola. Now, I get that Coke is an iconic brand. It arguably helped define the whole concept of a brand. If the sole criteria of this list were commercial ubiquity, Coke would probably be at the top.

But the basic brand dynamics of Coke are very familiar. It’s the same script that almost all companies have followed since the post-war period: advertise the heck out of the product with billboards and jingles, and then hope basic consumer psychology kicks in. Just look at their Superbowl 2019 commercial: a Coke is a Coke. Everyone drinks Coke, maybe you should too.

Coke is still stuck in the past. They are spending hundreds of millions of dollars on TV ads in the hopes that your next drink purchase (maybe) will be a Coke. But that’s not how people think anymore. They don’t think “I want to buy a Coke.” They think “I want to feel energized” or “I want to stay hydrated.” (Or I want to “murder my thirst”?) They’re looking for an outcome.

Louis Vuitton, for example, doesn’t sell bags, it sells fashion and identity. Nike doesn’t sell shoes, it sells fitness and health. Disney doesn’t sell movies and amusement parks, it sells family entertainment.

The top 3 brands certainly know this. There’s an all-out war right now between them to “own the customer”. The question they are asking is: for every part of your life — food, entertainment, home, health — are you going to turn to your Apple ID, your Google ID, or your Amazon ID? And Microsoft has been the poster child these last few years as the successful pivot to subscriptions.

What about the car companies on the list? Aren’t they still all about the bells and whistles? Actually, I’d actually argue that new vehicle features are becoming less important to consumers and car companies alike. Mercedes sells luxury, and Toyota sells dependability and safety. They want you to sign up for a specific kind of transportation affluence.

And as for those other negative percentage names (IBM, Intel, Facebook, General Electric), all of them have been going through some public struggles as of late. It’s not that surprising that a company that is reacting to internal dysfunction, as well as market challenges, is going to turn inward, potentially losing sight of its customers in the process. In fact, for Facebook, I’d argue that the advertisers are their customers — you and I are the “product”.

What’s the lesson here? Start with the needs and desires, and create compelling customer experiences that address those needs and desires. Execute a relentlessly customer-focused business model that emphasizes constant creative experimentation (“always in beta”) in pursuit of a clearly defined trajectory.

Because as Interbrand notes, “The combination of a fixed long-term ambition and flexible short-term action increasingly stands out as the common trait of those organizations that thrive in the most turbulent markets in history.” These are the new rules of business.

PS. I’m not sure why SAP wound up in the positive column. Someone will have to explain that to me!

 

For more insights from Zuora CEO Tien Tzuo, sign up to receive the Subscribed Weekly here. The opinions expressed in the Subscribed Weekly are his own, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.

And check out his book SUBSCRIBED: Why the Subscription Model Will be Your Company’s Future – and What to Do About It.