GLOBAL 2016: New research shows that innovative brand experience delivers faster value growth
by Iain Ellwood
Higher purpose produces devoted brand fans and financial rewardby Iain Ellwood, Worldwide Strategic Growth Director
Brand Union & Group XP
Martin Guerrieria, Global BrandZ™ Research Director
The CEO’s who will be successful in the future focus on two burning questions: how to grow top-line revenues and how to generate greater bottom-line profits? The first requires identifying future opportunities with more valuable customer groups, accessing latent markets and creating category shaping products and services. While the second requires joining the dots across their operations so that people, products and processes are optimized together around the customer.
New data analysis by Group XP has led to a breakthrough in how the most valuable brands drive both revenue and profit growth. This reveals that higher performing businesses focus on creating and delivering extraordinary brand experiences that uniquely engage customers to build enduring and highly profitable relationships. These brands are able to integrate business model improvements, new technologies and design to create innovative customer experiences that unlock new revenue streams, while facilitating better cross functional teamwork and binding the entire organisation cohesively around the customer and their needs.
It is this holistic approach to creating customer experiences that delivers on CEO’s needs for increased business growth and efficiency. Building on thinking done at Brand Union, the “XP Capital Index” quantifies the financial impact of creating compelling brand experiences. These data results are reinforced by Harvard Business Review’s study: “The most important marketing metric going forward will be Share of Experience”.
The BrandZ™ team worked with Group XP to decode brand experience into four critical components; applying a BrandZ™ metric to quantify each one:
Impression – “Stand for something unique”
Interaction – “Deliver on your most important needs”
Responsiveness – “Have better online services and engaging content”
Resilience – “Strive to make people’s future lives better”
Winners and Losers: key findings in brand value growth
By combining the four components equally we are able to create a single score for each brand and create an “XP Capital Index” for all brands in the BrandZ™ database. We also proved this had a strong relationship with current consumer demand. We were then able to examine the relationship between brands with High, Medium and Low Brand Experience Capital scores and their trended brand value over a 10- year period. Our research revealed:
1. Ultimately brands with High Experience Capital scores were much more likely to experience value growth than those with Medium Experience Capital. While those businesses with Low Experience Capital scores actually declined in value over the same period.
2. There is no evidence of geographic or sector bias in the study; brands across all major markets and sectors from high tech online only brands to long-established hospitality, retail and financial services brands are represented in each of the three levels of Experience Capital.
3. The data show that brands with high Experience Capital outperform the market by up to 166 percent. These brands score highly across all four of the components. However, one of the distinguishing strengths of these brands is their stronger scores on the “Resilience” component. Consumers recognize that these brands have a higher brand purpose beyond their immediate product category and exert greater impact on the wider society. This has helped these brands turn customers into devoted fans and reaped the financial benefits of that.
4. The data show that brands with medium Experience Capital outperform the market by up to 66 percent. Brands in this group may have scored highly in one or two components but not consistently strongly across all four components resulting from ad hoc customer experiences that are not united around a holistic experience strategy and have therefore only gained average brand value growth.
5. Brands with low Experience Capital actually declined in value over the 10 years by around -0.4 percent. These brands scored poorly across all the four components with a slight focus on more traditional brand building components of Impression and Interaction. Their use of more traditional marketing techniques and transactional customer service has resulted in brand experiences that provide some functional but little emotional attachment for customers.
All of this is good news for CEOs and CMOs charged with delivering top line revenue and bottom line profits. We have clear quantified evidence that superior customer service accelerates business growth. And we know that the most valuable brands exhibit a profound customer centricity that enables more innovative approaches to business models and technologies and, most important - this results in customer experiences that can generate completely new revenue streams.
With the XP Capital Index CEOs and CMOs can better understand the components of brand experience and measure their effectiveness. XP Capital Index combines the science and art of brand building in one extremely useful package.