Big names prove worth in crisis

INTERNATIONAL MARKETING

BIG NAMES PROVE WORTH IN CRISIS

John Gapper APRIL 28 2010

For companies whose financial value depends heavily on the health of their brands, the severity and abruptness of the recession was a challenge.

The abruptness with which many consumers stopped spending, and large companies reduced capital investment and wound down capital investment, caused a shock to the system. Many companies experienced not only the financial crisis, but also a crisis of confidence.

Marketers and advertising agencies preach the gospel that the companies that emerge best out of recessions are those that maintain their marketing budget and protect brands when the going gets tough. In practice, few companies were certain enough of the future to comply.

Yet some of the Doomsday scenarios about the value of brands in a new, less leveraged world, have not come to pass. Emerging from the recession, luxury goods companies and many other consumer brand companies are enjoying a rebound.

The underlying value of any brand – the premium commanded by products and services with strong reputations and identities – has not been eliminated by the crisis. Even those companies that did not invest heavily in their portfolio in the worst times are regaining some confidence.

Indeed, this year’s BrandZ brands survey suggests that, even if the value of brands is below its 2007 peak, it has rebounded more sharply than the S&P 500. Millward Brown Optimor, the WPP subsidiary that compiles the ranking, calculates that a portfolio of the top 100 brands – updated each year as a new list is compiled – is 18.5 per cent up from its level four years ago, compared with an 11.5 per cent fall in the S&P 500.

The premium for the top 100 brands was squeezed as many countries went into recession but it opened up again coming out. In other words, the outlook for brands has not been fundamentally altered as a result of the recession; instead, it looks familiar.

“Brands outperform in good times and when there is a recession they do go down, but they come out the other side with a sustainable advantage,” says Joanna Seddon, chief executive of MBO.

The nature of brands continues to evolve. Technology rather than marketing is now the defining characteristic of seven of the top 10 brands, with Coca-Cola, McDonald’s and Marlboro making up the other three.

Google remains the world’s most valuable brand, but edging up close behind it are two other technology companies, IBM and Apple. Both of these outrank Microsoft, whose brand value was stable during the year.

Meanwhile, China Mobile, General Electric and Vodafone occupy the lowest three places in the top 10, which comprises the same brands as last year’s ranking. Although GE’s brand value fell by 25 per cent from $59.8bn in the list published a year ago, due mainly to its difficulties with GE Capital, the technology and infrastructure-related parts of its business retain their strength.

The resurgence in Apple under Steve Jobs, through the iPod, the iPhone and now the iPad, continues unabated and, on present trends, it could be pressing Google for first place within a year or two. That is a tribute to a company that inspires devotion among customers.

It may also be a reflection of the value of inspirational leadership, and the way in which consumers identify some of the world’s most valuable brands, such as Oracle and Starbucks, with founders who embodies their qualities. Larry Ellison of Oracle and Howard Schultz of Starbucks are not only the founders but keepers of the flame.

This broad shift towards technology is a reflection of the importance of the internet and communications in the fortunes of many companies, including Telcel, the mobile phone group controlled by Carlos Slim Helu. Telcel is the first Mexican company to enter the top 100 (in 69th place).

The social media boom led by companies such as Facebook and Twitter – as well the rise in smartphones led by Apple – has had a broader impact on the top 100. It has boosted mobile operators such as Verizon and AT&T, despite the complaints of iPhone users about AT&T’s 3G coverage.

  

1. Complete this table with words and grammatically related words from lines

NOUN	ADJECTIVE AND MEANING
Abruptness	Abrupt	Very sudden
Confidence	Confident	Feeling good about the future
Health	Healthy	In good condition
Finance	Financial	Relating to money
Severity	Severe	Very difficult
Value	Valuable	Worth a lot of money

2. Find expressions in the article and correct these statements

a) If you say that something is true and that people should act in accordance with it, you preach the bible gospel about it.

b) If conditions become difficult in a particular situation, the journey going gets hard tough.

c) A series of very bad events that might happen is a fateful narative Doomsday scenario.

d) A formal way of saying that something has happened is to say that it has come past to pass.

e) If a company does well after a period of doing badly, it undergoes enjoys a bounce rebound.

3. Read the article again and give True or False

a) The value of brands was completely destroyed during and after the recession.

à False.  The worth predictions have not come true.

b) Companies that did not invest in their brands have been totall eliminated.

à False. They are now regaining confidence.

c) The value of brands goes down during recessions.

à True

d) Companies with valuable brands do better than those without in the long run.

à True

4. Which of the brand(s) mentioned:

a) relate to technology-based companies or their products?

è Google, IBM, Apple, ipod, ipad, Microsoft, Oracle, Facebook, Twitter, Verizon, AT&T, iphone.

b) relate to non-technology companies?

è McDonald’s, Marlboro, Starbucks, Coca-cola

c) is top in the rankings?

è Google

d) is technology-based, and below three other technology companies?

è Microsoft

e) are names of products related to a technology company?

è Verizon, AT&T

5. Find expressions that refer to:

a) the thing that people think about most in relation to a brand.

è defining characteristic

b) a period of success following a period of decline.

è resurgence

c) makes you admire a person, brand, etc.

è inspires

d) a feeling of complete admiration, respect, etc.

è devotion

e) company founders who are still building their companies.

è keepers of the flame

f) companies such as Facebook, Twitter.

è social media