Take the Wachovia corporate brand, for example. The brand was growing and contributing every year to the value of the corporation. Due to some unwise acquisitions that hurt the financial fundamentals of the bank, it was forced to merge and, subsequently, lost its corporate identity.
The brand held up while the bank behind it didn't. The result is the brand's being crushed in the wreck. With Merrill Lynch, the iconic image of the bull comes immediately to mind, but it wasn't stronger than the underlying financial fundamentals, and so it too went the way of the Dodo.
AIG, A Dead Brand Walking ...
In contrast, AIG's brand has taken a pounding in the news, and its financials are equally weak as demonstrated by the multiple massive government bailouts. If the company is to survive what is both a financial and a brand crisis, it will need to do so under a different corporate name. AIG, which represents the very essence of a brand crisis, is a dead brand walking.
Let's take a broader view of corporate brands. How have they been faring in the wildly gyrating capital markets? CoreBrand has, since 1990, conducted a quantitative research survey called the Corporate Branding Index® that tracks 1,200 companies across 49 industries. Every year 12,000 business leaders are interviewed about their familiarity with the companies in indexed.
These leaders are also asked about the reputation, their perception of management, and the investment potential of the companies they are familiar with. Using this data, along with regression models, we identify how much the corporate brand impacts the corporation's market capitalization. This index provides a platform to identity norms as to how brands work in good times and in bad.
Here are some observations from the study:
1. The strongest corporate brands continue to grow despite the downturn. The CoreBrand Power 100 corporate brands generate a higher contribution to market capitalization, which, based on the 2008 findings, averages 16.74%. This percentage has grown steadily and consistently in recent years, increasing from 15.03% in 2002.
2. The average corporate brand's contribution remains strong. The CoreBrand 500 average corporate brand contributes between 5-7% of brand equity across all the companies in the index. The average varies slightly depending on economic conditions. In 2002 the average was 6.42%; it increased to 7.33% in 2003 and increased again to 7.42% in 2004. Since that time it has declined to its current level of 5.98%, which remains within its normal range.
3. The dollar value of corporate brands is significant. The average dollar value of the CoreBrand 100 corporate brands grew significantly from $7.18 billion in 2002 to a peak of $11.06 billion in 2006. Since that time, the dollar value has dropped significantly to $7.32 billion, which is still higher than in 2002. The average dollar value of the CoreBrand 500 company has increased from $1.49 billion, in 2002, to a peak of $2.67 billion in 2006. While it has now declined to $1.58 billion in 2008, this is still above the 2002 level.
4. Top corporate brands dominate the value available. In 2006, CoreBrand 100 firms accounted for 86% of the total brand equity dollar value of the CoreBrand 500. In 2008, that number rose to 93% of the brand equity value. That means while total brand equity dollar value has declined, there appears to be an identifiable monetary leverage to being among the higher perceived brands.
The bottom line: Corporate brands matter in a significant and measurable way. When managed over time, the contribution of the brand to market capitalization, with all its attendant benefits, is clearly demonstrable and valuable.