A powerful brand can tell you a lot about the value of a company. It reflects the company's power to win and keep customer loyalty and its power to attract and retain talented employees -- both of which contribute to the company's bottom line and future financial prospects.
Take three guesses as to the most popular brand in the world. There's a good chance you'll get it on the first try. That's because it's Coca-Cola (KO).
In its recently released list of the top 100 Global Brands, Interbrand, a global consulting firm specializing in branding, put Coca-Cola in the top spot for the second year in a row. The judging is based on three criteria:
The financial performance of the branded products
The degree to which brand influences customer decisions to choose the company's products
The brand's ability to meet future earnings expectations
In this year's report, Interbrand commented on Coke's heavy exposure through popular international events like the FIFA World Cup. In addition, the company has tied itself with socially conscious promotions in the areas of global sustainability, disaster relief, and youth empowerment, putting itself in a strong position to keep a good public image and continue to build customer loyalty across its global market.
Let's take a look at the other companies joining Coke in the top 10.
International Business Machines (IBM)
General Electric (GE)
*"Brand value" is meant to represent the number of dollars Interbrand attributes to the company's brand.
The Midas Touch in Tech
As you can see, tech companies dominated the top 10 in this year's ranking. These companies score high marks on a handful of key components Interbrand claims a strong brand must have:
Clarity: Clear communication both inside and outside the organization about what the brand stands for and what audience it serves
Protection: Legal protection of the various elements of the brand, including the images and words
Responsiveness: An ability to respond to the challenges and opportunities presented by market changes
Authenticity: A product that lives up to the expectations associated with the brand
Differentiation: Customer perception that the brand is distinct from its industry peers
Investors would do well to keep an eye on brand value to determine their ability to promote growth and maintain loyalty to the companies they own.
What could topple the tech titans?
While tech powerhouses may rank high in popularity right now, their position is always at risk. In a competitive industry all it takes is one flop -- or one more innovative competitor -- to send a company's reputation tumbling. It's what these companies do going forward that will determine their rankings in years to come.
Google, whose brand ranking has remained in the No. 4 spot since last year, has brand power that not only helps bring more customers to its site than any other, but also helps it attract some of the country's best tech talent. Google's reputation for innovation is well known among both employees and the broader public.
On the other hand, Google's extreme popularity has caused people to use the word "google" to refer to any basic web search, which puts the company at risk of diluting its brand and losing its ability to differentiate itself from other companies in the industry.
Apple, whose brand ranking rose from last year's No. 17 spot to a No. 8 ranking, faces a similar obstacle as the popularity of its iPhone increases, since many people refer to all smartphones as "iPhones." While these ways of speaking result from the huge success of Apple's and Google's products, the continuation of this trend can interfere with brand differentiation and even undermine the companies' ability to legally protect their brands.
Unless these companies respond appropriately, this could be bad news for investors since it leaves room for competitors to piggyback on the credibility of these brands to sell their own products.
Jim Royal, Ph.D., does not own shares of any company mentioned here. The Motley Fool owns shares of Google, Coca-Cola, International Business Machines, Apple, Microsoft, and Intel. The Motley Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Google, Microsoft, Apple, Walt Disney, Coca-Cola, Intel, and McDonald's. Motley Fool newsletter services have recommended creating bull call spread positions in Apple, Intel, and Microsoft.
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