Competitive memory interference

“Ads are like alcohol: the more you have the less you remember… least for competing brands in the same product category”

A great quote from Max Sutherland page 183, “Advertising and the mind of the consumer” Allen & Unwin: 2008.


BrandZ ‘predicts’ Apple’s climb in brand value – long after it happened

Last year the BrandZ ranking of “the most valuable brands in the world” was criticized for ranking Apple below IBM. When Apple  had the 2nd largest market capitalization among US companies.

Now, lo and behold, this year’s ranking now has Apple at number one, with a staggering 84% increase in value.  Last year it was supposed to be worth $83M and this year has jumped enormously to $153M.  Granted that Apple had a(nother) good year, but it wasn’t equal to all the years that came before combined!  In fact Apple’ market capitalization grew 50% over 2010, but it had grown by over 100% the previous year (a year that BrandZ lifted its value by just 32% (why???).

Now that Apple is listed as the most valuable brand in the world is the credibility of BrandZ restored? I think not – in fact this back-flip makes it look more ridiculous.

And BrandZ appears to be backward looking. Instead of being a future indicator of brand performance, as their marketing spiel claims, BrandZ reports the past. It tells what everyone already knows.

Personally I think it still looks like pseudo-science and pseudo-finance.  As do many other such brand equity measures, as discussed in “Brand Value Quackery“.

Professor Byron Sharp, May 2011.

Brand Keys (and other brand equity monitors) can’t predict a brand’s future

There are a number of market research products that claim to predict a brand’s future.  Some even make the outrageous claim that they can predict a company’s stock-price, which makes you wonder why these people are still doing the hard work of selling surveys, why aren’t they stockmarket billionaires by now?

Brand Keys is one such market research agency.  I asked them for evidence for their predictive claims and they were nice enough to point to documentation in their book (and many subsequent conference presentations).  But when I looked at the public evidence (it wasn’t hard, I just used Google) I found that the changes in the brand rank in their Customer Loyalty Index occured after real market place changes, not before as they had implied.

Below is the email I sent outlining the evidence to Brand Keys, I received no reply. I don’t mean to single out Brand Keys.  Their rivals in the brand equity business are no better – I have seen no evidence that such surveys can predict a brand’s future.  There is also no good reason to think they should/could.

Dear Robert

Thank you for sending the slide, I also bought your book and have read it, including the Starbucks case study. Unfortunately the evidence does not support the assertion that Brand Keys is able to predict changes in trends ahead of time.

The book and slide give a selective group of different metrics which are supposed to tell a story of Brand Keys predicting, at the start of 2007, Dunkin Donuts awaking from its slumber and Starbucks ending its growth run. It would be impressive if there was evidence of Brand Keys predicting ahead of time a change in trend for either brand but the evidence says differently.

Dunkin Donuts began its resurgence in 2003 (reported by BusinessWeek), long before the 2007 you predicted.  By Aug 2004 it posted an annual 6.9% increase in same store sales, opening 423 new stores, and hence 14% increase in overall sales. Back then Starbucks posted a 10% increase in same store sales, but that was their last year of rises in same store growth, i.e. things started going sour for them in 2004 (when you rated them as fantastic).

Perhaps your 2007 prediction of decline referred to Starbucks’ overall sales revenue – but in 2007 (they year they slipped on your ranking) they posted 22% increase in sales revenue.

Perhaps you meant to predict a change in Starbuck’s share price – but it started declining in 2006, i.e. before you predicted any change in trajectory. Perhaps you meant same store sales – but, as I said, that growth trend ended after 2004.  And actually went negative in 2008 (after practically no change in the Brand Keys score).

Perhaps you meant profits – but these dropped only in 2008, and rose again the next year.

Perhaps you meant market share – but Starbucks has led Dunkin Donuts throughout all this period (and still does). Yes Dunkin Donuts has been growing for a long time now, opening stores where it had none.  Yes Starbucks opened too many stores, especially overseas (it eventually happens to most companies on an expansion drive).  Yes Starbucks got hit by the housing crunch (with big exposure to California and Florida).  But in mid 2009 Starbucks posted a turnaround in same store sales growth achieving record quarterly earnings for the last 3 months of 2009  – note that this before the Brand Keys ranking for Starbuck rose from 3rd to 2nd.

So what predictive claim are you making ?  The facts suggest a rear-view mirror on a host of performance metrics. Please do tell me if I’ve missed some important facts.