Predicting the decline in Apple’s brand equity

Back in 2011 I mocked the brand equity industry for playing catch-up in valuing Apple.  Everywhere I look the evidence is that these brand equity valuations rise long after the stock price rises, and decline long after it declines.

It’s the same story for predictions of sales success.

In short they predict nothing.  They just tell us things we already knew.

By 2012 Apple was entrenched as the most valuable brand in the world, not surprising given that much earlier it had achieved the highest market capitalisation.  Brandz gushed that Apple’s brand equity had risen a further 19% in their estimation.

Since then I’ve not heard any reports from the brand equity industry predicting a decline in Apple’s value.  Meanwhile its stock price has almost halved since September 2012 (see graph below).

Here’s my prediction – soon (ie late 2013) the brand equity firms will announce a  decline in Apple’s brand equity.  Even though Apple’s sale revenue has continued to climb (see chart 2 below and this link).  Even in traditional markets like the US it has increased its market share in phones and computers.

So if the brand equity firms do downgrade Apple’s brand equity it will have to be based on its stock price.  What value do these equity values give then, when anyone can look up the stock price of any public company and be many months ahead of the brand equity valuation?

Chart 1 – APPL Stock price

Chart 2 – APPL Sales revenues




Review of Jim Stengel’s disappointing book “Grow”

Research reveals the hidden secret to business success? No, sadly this is pseudoscience – that will only convince the most gullible of minds.

Jim Stengel seems a nice guy, he wants us to be passionate about our business and to feel that there is a greater purpose than simply making money.  Few would disagree.  But he also claims to have discovered the secret to sustained super profits – based on a flawed study dressed up as science.

Stengel is a marketing consultant, a famous one because he was formerly Chief Marketing Officer of Procter & Gamble 2001-08 until he surprisingly ‘retired’ to consult (and write this book). During the decade that Jim mostly presided over marketing at P&G the company was pretty successful, at least in comparison to the 3 year period immediately before he became CMO of unsuccessful restructuring and CEO turnover. However the success of the 2000s has been exaggerated; the reality is that during Jim’s decade P&G’s stock price doubled, though that is a misleading overstatement due to the brief dramatic dip in 2000 (the reasons why are discussed here). Without that dip the year before Jim took over as CMO the stock price only improved 20% over the full decade. That’s less impressive than the previous decade (90s) when stock price had increased 5-fold (or 3 fold when the brief dip of 2000 is considered), similar gains were also made in the prior decade (80s). So P&G’s performance during Jim’s tenure should perhaps more accurately described as a mild turnaround, or partial restoration. This chart shows the full history of the stock price.

In all fairness though, Jim Stengel doesn’t ask us to believe his amazing discovery just because he was (like millions of others) a successful practitioner, his claims are based on what he calls an unprecedented 10-year empirical study of highly successful firms and the brands they own. But his study does have precedent, it joins a growing list of books that claim to have discovered a few simple rules for business that near guarantee profit performance that will beat all rivals. Each of these books are based on severely flawed research that ‘proves’ just what the author wanted to say in the first place (which is the opposite of a surprising discovery). “In Search of Excellence” was one of the first of these books, which was largely discredited when the excellent companies went on to make poor financial returns in the years after the book came out.

Professor Phil Rosenzweig exposes these flaws in his 2007 book “The Halo Effect: … and the Eight Other Business Delusions That Deceive Managers“.

I describe and critique “The Stengel Study”, which is the basis of Stengel’s book, here. A quick summary is that to detect factors that might cause financial success then Stengel should at least compared very carefully matched samples of both successful and unsuccessful firms, and developed hard objective measures of strategy – not relied almost entirely on interviews with experts. Also, to avoid confirmation bias, the researchers who described the firms and their strategies should not have been aware of which were the successful and unsuccessful ones. And finally, any resulting theories should be tested against the future performance of the firms. Otherwise what looks like science turns out to be simply a story.

Tellingly the ‘research’ takes up small portion of Stengel’s book, the rest is a story: anecdote and assertion. Jim tells us what to do, but experienced marketers looking for strategic advice won’t find much new or particularly helpful. It’s pretty much the standard sort of consultant fare such as “deliver a near-ideal customer experience”.

It’s well meaning though, Stengel wants us to all be passionate about our business and to feel that there is a greater purpose than simply making money (even if finding out how to make money was the motivation of his ‘research’).  This is a nice sentiment, however, the success of brands (and the large corporations behind them) is far more complex than Stengel’s book and its predecessors claim.

Purple Cow – where’s the beef ?

There is a small, nay large, industry that makes claims like:

“consumer behaviour has changed radically”
“marketing doesn’t work anymore”

And yet then presents nothing more than a repackaging of the orthodoxy.

For example, Seth Godin’s “Purple Cow” says that marketing is “broken”, that advertising could once turn a sow’s ear into a silk purse but has lost its effectiveness due to clutter and ad avoidance. This is spite of research that shows advertising continues to perform as well as ever (1) (2) (3).

So says Seth, companies need to adopt his radical new marketing strategy which is…wait for it…. to produce remarkable products and market them in remarkable ways. Wow. I don’t remember my old Uni textbooks saying anything like this, they only used words like “great” not “remarkable”. What a step forward in thinking.

Seth’s a great story teller, his books are entertaining. But it is a sad reflection on our discipline that these best sellers are so shallow.

Professor Byron Sharp. July 2011

(1) Jamhouri, O., & Winiarz, M. (2009) “The enduring influence of TV advertising and communications clout patterns in the global marketplace”, Journal of Advertising Research, 49(2), 227-235.

(2) Rubinson, J. (2009) “Empirical evidence of TV advertising effectiveness”, Journal of Advertising Research, 49(2), 220-226.

(3) Hammer, P., Riebe, E., & Kennedy, R. (2009) “How clutter affects advertising effectiveness”, Journal of Advertising Research, 49(2), 159-163.

Footnote – Above I argue that Godin’s contribution to marketing theory is to merely replace words like “good” or “great” for “remarkable” so I had to laugh when I read this note in my dictionary about the word “remarkable”:

Properly, remarkable should not be used as a synonym for good. It is value-neutral and means only “worth being remarked upon.” Actually, what’s really remarkable is how many words, like this one, have lost their specific meanings as they’ve been corralled into the sterile confinement pen of synonyms for good, notably fabulous (literally, like something in a fable), fantastic (like something in a fantasy), wonderful (fills you with wonder), incredible (not to be believed). You help restore the richness of the language when you use these words in ways closer to their original meanings.
— DA

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.


Logos and other distinctive assets rarely have meaning

It’s not uncommon for marketing consultants to preach the need for a meaningful logo, something that communicates by itself from day one. Ries and Trout used to argue that brand names like ‘Head and Shoulders’ were much better than meaningless names like ‘Pantene’ or ‘Vosene’. We marketing people tend to take our brands, and logos, very seriously and tend to assume that consumers do too, but this is misguided out-of-touch thinking.

Brands, and their distinctive assets, identify – that’s it. They (potentially) ensure that people know it is you, not someone else advertising. They allow people to repeat-buy you, to see you on shelf.

Consumers rarely stop to think about whether the logo looks nice, trustworthy, or conveys any other connotation. Few people (outside of the marketing industry) ponder….

  • Why America’s largest most famous burger chain has a Scottish name ?
  • Why one of Australia’s largest banks is named after a word that means to steal (nab) ?
  • What does purple have to do with chocolate ? And what do the words Snickers, Mars or Kit-Kat mean ? Why is Toblerone a triangle ?
  • What does IBM stand for ? What does the word Accenture mean ? Why is Google called Google, or Amazon called Amazon ?
  • Is HP Sauce sold by HP (computing) ? Do Walker’s crisps and Walker’s shortbread come from the same company ?

People don’t ask these questions because brandnames and logos are simply that. THEY BRAND THAT”S ALL. They stand for a particular company operating in a particular category. And getting consumers to even understand that requires very hard marketing work and lots of money and time. Consultants and designers who think that brand names, logos and other brand assets have any deeper intrinsic meaning are merely showing how poorly they understand real consumer behaviour, and commercial reality.


This isn’t to say that designers don’t put an awful lot of thought into logos.  For example see this video (I’m sure parts will surprise you).  This thinking is one of the reasons why brand owners tend to over-estimate how consumers use their logo.

Mental availability is not awareness, brand salience is not awareness

A brand’s mental availability refers to the probability that a buyer will notice, recognize and/or think of a brand in buying situations.  It depends on the quality and quantity of memory structures related to the brand.  See chapter 12 of “How Brands Grow“.

So this is much more than awareness, whether that is top-of-mind awareness, recognition or recall.  Indeed all of these measures are flawed by the use of a single, a-situational, cue (usually the product category name, i.e. what the marketer calls the product category).

And mental availability is not attitude.  It’s not about what consumers like about the brand, or not.  Though the better a consumer knows a brand the better they tend to feel about it – familiarity breeds contentment.

A brand’s availability varies across situations, so higher mental availability means being easily noticed and/or thought of in many different buying situations.  Some brands do well in some particular situations, some do well in many situations.  Some do well with a few consumers, some do well with many consumers.  The easier the brand is to access in memory, in more buying situations, for more consumers, then the higher the overall mental availability.

And this means that advertising to refresh and build mental availability requires  more than merely reminding consumers that the brand exists, but that’s another story.

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How Brands Grow book now available for pre-order

Oxford University Press will be publishing my book early in 2010.  It’s available for pre-order in a number of countries – here is a list of online outlets where you can order it.

Science has revolutionized every discipline it has touched, now it is marketing’s turn!!  All marketers need to move beyond the psycho-babble and read this book… or be left hopelessly behind.
Joseph Tripodi,
Chief Marketing Officer,
The Coca-Cola Company

How Brands Grow by Dr Byron Sharp

Brand value quackery

Ad Age today reports:

Despite the pounding global business is taking, the $2 trillion value of the top 100 brands has held steady, according to Millward Brown’s annual BrandZ report. “Consumers are blaming companies and leaders for the current troubles, not the brands,” said Joanna Seddon, exec VP at Millward Brown, the WPP-owned research company.

Wow, wouldn’t we marketers like to believe that, our assets are still fine, aren’t we good.  But to believe this we have to close our eyes and pretend we are in wonderland.

An asset class that has remained immune to the global recession that has wiped trillions of dollars off the value of companies (the same companies that are made up of these brand assets).  Hmm.  So will WPP stand behind their valuations and be prepared to buy any of these brands at their recession-proof price?!  Ah, no, Sir Martin Sorrell isn’t stupid.

This to me is the 13th stroke of the clock (that makes one wonder about all that came before).  If anyone previously had any faith in the financial quackery that produces Brandz valuations then this should bring you back to reality.  Perhaps I shouldn’t be so mean to single out Millward Brown’s Brandz when there are plenty of other equally fanciful brand equity valuators, it’s just the sort of financial silliness that was practiced by so many (mind you, including some crooks) prior to the bubble bursting.  But what annoys me is that it sheds a poor light on marketers, it makes us look arrogant and stupid.  We don’t know enough about marketing but we think we can take on finance as well.

Cadbury Gorilla Advertising Gets It Right – at last.

Cadbury’s TV Commercial featuring the drum playing gorilla is a wonderful, and now much awarded piece of creative.  But it’s not perfect advertising by a long shot.

1) It grabs attention. Tick.

2) It’s worth watching, over and over. Tick.

3) People do realise it is for Cadbury. Tick.  The brand is far from being the star but the commercial creates tension “what’s this all about ?” which makes people look for the brand, and fortunately Cadbury do own a distinctive asset in the colour purple (shown in the background behind the Gorilla).  So the branding does work, at least in Cadbury dominant countries like the UK, Australia and New Zealand.  It would be far less effective elsewhere.

4) It refreshes and/or builds appropriate memory structures that make the brand easier to come to mind of be noticed in buying situations.  Ahh, no.  This is the commercial’s BIG weakness.  It builds a link between Cadbury and the Gorilla, and few of us think of gorillas when in potential chocolate buying situations.  Perhaps today when people think of gorillas (e.g. at the zoo) they are more likely to think of eating a Cadbury chocolate bar but that’s going to make a trivial effect on sales.

That’s why the TV commercial has not been a roaring sales success.  It’s played its little part in helping Cadbury recover from the lows of its salmonella contamination but the brand was already bouncing back before ‘the Gorilla Ad’.

So what Cadbury needs to do is get its gorilla, a distinctive asset they now own, close to purchase situations.  And I now see that they are – see below for a photo from my local supermarket.  The competition is just an excuse to get the gorilla into a prominent position close to the chocolate display (or at least I hope the marketers realise this is the important objective).

PS If anyone tells you that the Gorilla ad works for the brand because it taps the brand’s core essence of joy run from the psychobabble.

Do TV commercials need a USP ?

The answer would appear to be no, given that much advertising does not even make the slightest attempt at saying the brand is better than others.  But a fair amount of advertising does – so is this particularly good advertising ?  Does it work better ?

David Stewart, a Professor at University of Southern California, has published several important large content analyses of TV advertising.  The 1980s US TV ads (more than 2000)  were analysed Continue reading

The concept of brand awareness has been hijacked by poor measures

When marketers first came up with the very worthy concept of brand awareness they were thinking, obviously, about the number of consumers who know the brand. Intuitively you would measure this by showing it to consumers and asking them if they are familiar with it, but last century this was expensive, phone surveys were cost effective but the brand couldn’t be shown (and printing pictures in mail surveys was expensive).

So rapidly the measures of brand awareness became verbal/written product category prompts, e.g. “what brands of fabric conditioner are you aware of ?” The problem with this type of measure is that it doesn’t really fit the concept. This measure doesn’t so much measure awareness as association of the brand with the product category cue. It also assumes that consumers can remember and say or write the brand name. Continue reading

Differentiation vs Distinctiveness

Differentiation’s role in marketing strategy is rethought in this journal article (which builds on an earlier report for corporate members). It presents a small mountain of varied empirical evidence, including direct measures of perceived difference:

Romaniuk, Jenni, Byron Sharp, and Andrew Ehrenberg (2007), “Evidence concerning the importance of perceived brand differentiation,” Australasian Marketing Journal, Vol.15 (2), pages 42-54.

(Download journal version of differentiation)

Differentiation (a benefit or “reason to buy” for the consumer) and Distinctiveness (a brand looking like itself) are different things. This isn’t just semantics, as any lawyer or judge will tell you. Distinctiveness (branding) is legally defensible, while differentiation is not (other than time limited patent protection).

Market-based Assets (early article)

Here is my 1995 article which introduced the term “Market-based Assets” which was picked up by Raj Srivastava in his excellent 1998 JM article “Market-Based Assets and Shareholder Value”:

Sharp, Byron (1995), “Brand Equity and Market-Based Assets of Professional Service Firms,” Journal of Professional Services Marketing, 13 (1), 3-13.My article is very hard to obtain now, I couldn’t find it on the web and even on my computer it was in an old file format. So before it is lost to the world I thought I should post it here. It might be of interest to some readers.