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Not long ago, Motorola saw itself the same way its customers did: as a tech-driven seller of products, not a brand. The success of the RAZR changed all that. By ringing the consumer's bell, the hot-selling mobile phone validated a new strategy, internally dubbed MOTOME. Suddenly Motorola (MOT) was a company that had rediscovered its identity as a major consumer brand.
The key, says global marketing head George Neill, who came to the company last year from Apple (AAPL), was to think of the brand as providing experiences to consumers, not just hardware. "We're focused on giving access to what people want -- music, video, Internet -- wherever customers roam." That translated into an 18% gain in the company's global brand value on this year's BusinessWeek/Interbrand Annual Ranking of the 100 Top Global Brands. The phonemaker, adds Interbrand Group CEO Jez Frampton, is "redefining the place people make for the Motorola brand in their lives."
This year's list is brimming with hot brands such as Motorola that are crafting new and surprising ways to branch into entirely new product arenas. Hyundai is launching a premium sedan. Google (GOOG) is wading into selling ad time on the radio. Others are revving up their brand's goodwill value to dodge problems, as McDonald's (MCD) is doing with its health and fitness marketing to counter concerns about junk food.
Every company wants its brand to get bigger. The hard part is balancing what the brand is with a vision of what it would like to be. "As soon as you try to go someplace that doesn't fit or where you don't have credibility, it can detract from your organization and your brand," says Frampton. The sixth annual BusinessWeek/Interbrand rankings measure an elusive but crucial quality. Companies that score high can count on plenty of customer loyalty as they push into risky expansions.
DON'T FEAR PUBLIC FLOPS
The Google name is stronger than ever: In this year's ranking it gained 46% in brand value -- the biggest year-over-year rise of any company ever on the list. Revenues climbed by 105% last year. With market share in Internet search still surging, it can afford to gamble with its universally recognizable brand.
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That allows Google to launch a slew of new products with small investments, gain valuable user input at early stages of development, and in turn challenge market leaders such as Microsoft (MSFT) in mature businesses. "The way you find really successful innovation is to release five things and hope that one or two of them really take off," says product czar Marissa Mayer.
When your brand is a verb in the Oxford English Dictionary, you can weather the sting of a few product flops. In the process you can harness the power of early releases, when users offer tons of suggestions, and engineers can fold in upgrades and adapt on the fly. That's what the company did with Google Video, which was expanded to let people upload and showcase their own creations. Another example: When Google initially launched Gmail in 2004, it scared some would-be customers by scanning e-mails for keywords and serving up ads relevant to their content. Since then the company has invited Web critics and consumer advocates to weigh in during the test phases of other new offerings.
Google's brand may not always ride this high. Failed product tests can pile up and dent all the positive brand buzz. That's a worry, particularly since only a few of its services beyond search have found real acclaim, much less significant new revenue.
Still, the company has a toehold almost everywhere and a knack for speed. In the past year it has launched an online finance site, a spreadsheet tool, and a word processor, and it plans to resell radio and TV ad time to its ad clients. Several of these may never be big cash machines, but with revenues growing 77% last quarter, it's hard to blame Google for failing in small ways when it's winning so big on the Street.
FACE YOUR WEAKNESSES
In the five years leading up to 2003, McDonald's saw its market capitalization fall by $12.2 billion. And this is no Internet stock. The problem was that despite the company's nearly 100% brand awareness in every global market, the old images of Ronald McDonald weren't wearing well. Just as troubling, evidence was mounting that junk food was fueling an obesity epidemic in the U.S. McDonald's had long struck a defensive pose against such barbs. But it was time to take control of the brand before outside forces did it for them.
McDonald's discovered that while its big-budget Disney (DIS) tie-ins and Olympics sponsorships kept the Golden Arches in kids' sights, mothers were its real problem. Opinion studies and focus groups showed a mounting distrust of McDonald's and guilt among suburban moms about letting kids eat there. "Everything we do is really driven through the eyes of our customers and understanding what their needs and desires are," says Global Chief Marketing Officer Mary Dillon.
So the chain set out to appeal to moms. In the past three years, one-third of its 13,725 restaurants have been upgraded, and new premium-priced salads and chicken meals have been added. Fruit offerings such as apple slices have helped change Mickey D's image -- it's now the nation's biggest wholesale buyer of apples. This year, McDonald's global brand value rose a healthy 6%, and its market capitalization grew by $2 billion. The company took the mom-friendly message to a new level last February. McDonald's kicked off a global campaign tied in with the Olympics that talks up the importance of exercise and nutrition, using such athletic role models as tennis stars Venus and Serena Williams.
The campaign ("It's what I eat and what I do...I'm lovin' it") includes TV ads, new packaging, and a series of Ronald McDonald videos teaching children how to eat well and stay active. Meanwhile, average restaurant sales are up to a record $1.9 million thanks to the premium-priced items. Says Dillon: "One of the fun things about McDonald's is we are always learning about how we can expand our brand."
EARN PERMISSION TO GROW
In 1998, Hyundai's reputation in the U.S. was so ravaged by a decade of quality problems that the South Korean company considered pulling up stakes. Chung Mong Koo took over that year and began reinventing how Hyundai viewed quality. A carmaker without a U.S. presence, he reckoned, could never be a global brand.
Quality improved, but Hyundai was still far behind. So Chung devised an aggressive strategy: Until at least 2008, Hyundai models would carry a 100,000-mile/10-year warranty to give customers peace of mind. This created hundreds of millions of dollars a year in extra provision costs, of course. Meanwhile, Chung ordered plant managers to obsess about quality, even to stop production lines if defects were detected. The practice was common in Japan and catching on in the U.S. but still unheard of in Korea.
The moves paid off. In the U.S., Hyundai saw its sales grow from less than 100,000 in 1998 to 455,012 last year. Global brand value climbed an impressive 17% last year. In the latest quality scores from J.D. Power & Associates (MHP), released in June, Hyundai was the top-rated nonluxury brand ahead of Toyota. (TM) That now gives Hyundai the street cred, for example, to sell its new Azera sedan, which costs close to $30,000 and has been compared seriously to the Chrysler (DCX) 300, Toyota Avalon, and Buick (GM) Lucerne.
Having earned stripes from critics, Hyundai says it's looking for more creative validation as it contemplates a sub-brand to compete with Lexus and Cadillac. "One important objective of our brand is to create emotional connection with our clients," says Nam Myung Hyun, general manager for brand strategy. It shouldn't be too hard. Americans love an underdog, especially one that has learned new tricks.
MAKE SIMPLICITY KING
When Gerard Kleisterlee took the helm of Royal Philips Electronics (PHG) in 2001, the Dutch conglomerate's empire included TVs, lighting, medical devices, and semiconductors. The missing key: a coherent brand. "We had to choose whether Philips was a company built around its core technologies or one built around its core brand," says Kleisterlee, who presided over a healthy 14% gain in global brand value last year.
He wisely chose the latter. In doing so he had to shake up the way the company thought about customers and communication without alienating the engineering and science units critical to innovation. In 2004 its "Sense and Simplicity" global branding effort launched. The idea is to create a "health-care, lifestyle, and technology" company that offers easy-to-use products designed around the consumer. To get the effort on track, the CEO created an internal think tank, the Simplicity Advisory board, comprised entirely of Philips outsiders: a British fashion designer, a Chinese architect, an American radiologist, and an American Massachusetts Institute of Technology professor.
The board looks at overarching questions like: How does simplicity get executed? Their strategic advice changed the way the company thinks, leading to a series of new, user-friendly products. It wasn't enough to design a small defibrillator that could be stashed in public spaces such as airports and workplaces. Consumers dictated that it be the size of a laptop and simple enough that the untrained could spark a heart back to life in seconds using built-in audio instructions. There's also Perfect Draft, a home draft-beer dispenser that's a twist on Philips' hugely successful Senseo coffee machines.
Philips installed new test centers around the world where products are extensively critiqued by consumers. That saved the company from flubbing the launch of its WACS7000 Wireless Music Center & Station, which it postponed when the software was rewritten because of complaints of overcomplexity.
Brand value hasn't come cheaply for Philips. Analysts say the company spent $170 million in 2005 and plans to invest around the same amount this year on the new campaign. But Kleisterlee knows the company's future valuation depends on the strength of the brand: "Everything we do, from our products to the way we work with our suppliers and customers, has to live up to the simplicity promise."
PROTECT YOUR CULTURE
Starbucks (SBUX) hardly advertises, instead relying on its ubiquitous cafés to do the talking and create its 20% bump in global brand value. That means keeping them free of the clutter of other brands and products, which are constantly trying to piggyback on the Starbucks aura and access to 30 million weekly customers. At the same time, the chain has come to view its brand as a kind of cultural portal -- after co-producing a series of music CDs, Starbucks this year backed a book and a film. So it was a spirited discussion that took place within the Consumer Insight Group last fall about how to use the sacred store environment to promote the movie, Akeelah and the Bee. Until then the chain had never sullied its cafés with movie posters or TV monitors.
The answer was to make the cafés a sort of extension of the film, which is about an inner-city African American girl who competes in a national spelling bee. So last April vocabulary words from the contests in the film went on Starbucks cup sleeves and on café walls, challenging customers' vocabularies. It wasn't an overly obvious promotion. Rather than use traditional methods, says Senior Vice-President for Marketing Ann Saunders, new projects like this are launched "based mostly on our intuition and out of our brand culture.... We know when it feels right." Starbucks plans to co-produce at least two more movies next year.
Missteps have been helpful in understanding how to grow -- and how not to. Joe magazine, in 1999, was one. Magazines are a smaller niche than newspapers and a highly personal choice for consumers. After six months, Joe was tossed. Last year's "drinking chocolate," called Chantico, served in a dainty six-ounce cup, didn't work, either. It was too pricey at almost $3, in too small a cup, and had too many calories (390). Gone.
Perhaps Starbucks' riskiest ventures are its music bars, which let customers compile songs on CDs or in MP3 folders from a song library. The bars change the atmosphere of the cafés and have been criticized in the media and on blogs as an unnecessary diversion. Saunders counters that customer satisfaction is high, and more music bars are likely next year. She knows the plan is ambitious. "But if you know where your brand lines really are, you can push them."
By David Kiley, with Ben Elgin in San Mateo, Calif., Michael Arndt and Roger Crockett in Chicago, Kerry Capell in London, and Moon Ihlwan in Seoul