Tech Brands Resilient to Reputation Challenges – Research Study

12 December 2018
This article is more than 1 year old.


· Despite privacy scandals and reputation challenges, consumers continue to rate tech brands positively as sector scores podium finish in global research study

· Hotel brands rank #1 globally and in UK for overall reputation

· Banking and telecoms brands close ranking, challenged by negative consumer sentiment and tech disruption

Consumers continue to hold the tech sector in high regard despite scandals tarnishing reputation of some industry giants, according to a global market research study by leading brand valuation and strategy consultancy Brand Finance. The sector ranks joint-third out of the 10 sectors covered in Brand Finance’s research, with a score of 7.0 out of 10 globally, and 6.8 in the UK, higher than that for banking, telecoms, and utility brands.

Steven Thomson, Insight Director of Brand Finance, commented:

“A strong brand reputation is a valuable asset for any business, driving higher customer acquisition, satisfaction, loyalty and advocacy, and the ability to sustain premium or full pricing. The net result is that strong brand equity is a significant contributor to business growth and profitability.”

In the UK, brands such as PayPal (8.0) and Samsung (7.6) enjoy very strong reputations, with Google (7.4) and Amazon (7.4) also in the top 20 out of over 200 tech brands assessed. The mistrust that consumers have developed towards Facebook (5.5) and Uber (5.1) does not erode trust in the sector as a whole.

Steven Thomson, Insight Director of Brand Finance, commented:

“Throughout 2018, tech brands have faced a number of reputational challenges regarding data privacy, corporate practices, tax avoidance, and market dominance. While individual brands have clearly lost their reputations as a result, this has not dragged the whole sector down. Distrust is only apparent where a brand has had a clear lapse in standards or service.”

Hotels Boast Five-Star Rating

Overall, the hotel sector boasts the highest score for reputation (7.3 globally and 7.1 in the UK), with premium hotel brands held in especially high regard, e.g. Mandarin Oriental scoring 7.6 for reputation, but also many mass chains, such as Premier Inn (7.5), receiving high marks from consumers around the world.

Steven Thomson, Insight Director of Brand Finance, commented:

“Across the world, hotel brands are considered more reputable than those in other sectors. It remains to be seen if the negative impact of the unprecedented Marriott data leak spreads to reduce trust in the hospitality industry as a whole, or if – similar to the situation observed in the tech sector – its toxicity will be limited to the brand in question alone.”

Banks and Telcos Lag Behind

Banking brands and telecoms providers continue to struggle to earn the respect of consumers, taking the bottom places globally (6.2 and 6.2) and in the UK (6.2 and 6.0 respectively). In banking, reputation is recovering only slowly since the days of the global financial crisis; in the UK, the average reputation score for banking brands was unchanged vs 2017, with perennial struggler RBS (5.0) still something of a toxic brand, and more recent problems such as the IT meltdown at TSB (5.7) holding back recovery of the sector overall.

As tech brands increasingly move into financial services, the banking sector generally appears vulnerable to encroachment – brands such as Amazon and Google enjoy significantly higher scores for reputation, innovation, and closeness.

Telecoms providers are in a similar fix – rated lowest of all for overall reputation (6.0) and quality of service (3.2 out of 5). Brands in other sectors are more likely to be seen as ‘consumer champions’, and there is a significant degree of distrust of brands such as Vodafone (only 40% UK consumers trust this brand ‘a lot’ or ‘a little’). As tech and telecoms increasingly overlaps, the telecoms brands need to address this reputation challenge.

Autos Keep Up in the Race

Auto is another sector facing disruption by new technologies, but here the brands appear more resilient. Brand reputation is high, led by premium German brands such as Mercedes (reputation score 7.9 in the UK) and Audi (7.6), with Volkswagen still in recovery mode (6.8). Ratings for trust are matched only by hotels (trust score 61%). Crucially, auto brands also generally rate high for being innovative (at 27% second only to tech both globally and in the UK). From a branding standpoint, the auto leaders can hold their own if they continue to innovate and embrace radical new technologies.

Low-Cost Airlines Hit Turbulence

Airline brand reputation is somewhat mixed, hence the sixth-place ranking in the UK (reputation score 6.7). Asian and Middle-Eastern airlines, such as Emirates (7.6), have the best reputation in this sector globally and in the UK, but many respondents mark them down on ‘value for money’. The reverse is unsurprisingly true for Ryanair, which received the lowest reputation rating of all brands covered in the UK – only 4.5 out of 10.

ENDS

Note to Editors

Brand Finance’s global market research study examines customer sentiments across a variety of metrics, such as reputation, trust, and innovation, measured in 31 markets and 10 industry sectors. The results of the study are used to evaluate the strength and calculate the value of the world’s biggest brands.

Rankings of the most valuable and strongest brands are published in sector and country reports every year following the launch of the Brand Finance Global 500 report. The 2019 iteration of the Brand Finance Global 500 report will be launched on the 22nd of January at the World Economic Forum in Davos.

Brand strength is assessed through a balanced scorecard of factors (such as marketing investment, stakeholder equity, and business performance) and used to determine what proportion of a business’s revenue is contributed by the brand.

Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market.

Brand Finance helped craft the internationally recognised standard on financial Brand Valuation – ISO 10668, and the recently approved standard on qualitative Brand Evaluation – ISO 20671.

Data compiled in Brand Finance studies are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.

Media Contacts

Florina Cormack-Loyd
Florina Cormack-Loyd
Senior Communications Manager
Brand Finance

About Brand Finance

Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.

Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.

Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.

Methodology

Definition of Brand

Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.

Brand Strength

Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.

Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.

Brand Valuation Approach

Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.

The steps in this process are as follows:

1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.

3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.

4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.

5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.

6 Apply the royalty rate to the forecast revenues to derive brand revenues.

7 Discount post-tax brand revenues to a net present value which equals the brand value.

Disclaimer

Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.

The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.

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