Imagine two car companies. Company A sold eleven million new vehicles around the world last year and its sales figures are rising year on year. Company B sold 367,500 cars in the same period, i.e. around 30 times fewer. Prize question: Which of these two companies has the greatest market value? You can probably guess the correct answer from the way I framed the question (B). But how can this be? First, let’s reveal the identities of our two companies and garnish our example with some astonishing (and true) figures. Company A is VW and Company B is Tesla, which has a current market value of $180 billion. Tesla is not only worth more than VW, it is worth about $20 billion more than Germany’s three automotive giants (VW, Daimler and BMW) combined. Incidentally, these market values are calculated by multiplying each company’s share price by the number of shares in circulation. Stock market professionals call it market capitalisation. I prefer to call it brand capitalisation.
Success, now and in the future
There are several reasons for Tesla’s stock market miracle. In this blog, I would like to explore three key factors that explain how and why Tesla has so easily left its larger competitors trailing in its slipstream. The first is Tesla’s absolutely clear positioning as an electric vehicle (EV) specialist. Anyone who hears the name Tesla knows exactly what the company does. Secondly, Tesla is an industry leader in a sector that belongs to the future. Investors want to invest in companies whose shares offer good value right now and which they are convinced will increase in value in the future. Stock market investors trade in the future, in our case EVs, ergo Tesla. The third reason for Tesla’s market / brand capitalisation success is that the company is way more adept at marketing its products than most of its rivals. Elon Musk, Tesla’s charismatic CEO, has become a ubiquitous, omnichannel media figure, presenting his dazzling and inspiring visions of the future. As a result, Tesla has not only convinced hundreds of thousands of buyers, it has also amassed legions of devoted “disciples”, who worship the brand and its charismatic CEO. The analogies to Apple and Steve Jobs are clear: Elon Musk is not only the unmistakable face behind an unmistakable product, he also embodies a clear and positive vision of the future, offering hope that we can and will overcome the crises we face. With his web of affiliated companies, Musk personifies the belief that dreams can come true. And it doesn’t seem to matter whether he turns his attention to e-mobility, private space travel or even medical technology, a field in which he is developing brain implants that, at least according to Musk, will cure previously incurable diseases.
Brand value, now and in the future
The fact that a good product also needs a strong brand to achieve long-term success is particularly evident in times of crisis. The way that companies with evocative names, companies that are inextricable associated with high-quality products and services, have mastered the current Covid-19 crisis offers undeniable proof of this – and can be expressed in figures. For example, an analysis of 55,000 listed companies by the experts at Brand Finance, a London-based brand valuation company, showed that the companies’ total enterprise value increased by 3.8 percent from January to September 2020, even though the global economy contracted by 4.4 percent during the same period. Year-on-year, leading brand behemoths such as Amazon and Google increased their brand values by 17 and 12 percent, respectively – and they did so against the backdrop of the largest global economic crisis in recent history. On the one hand, they owe their success to high-quality products that both reflect the current situation and open the door to the future (e.g. e-mobility at Tesla, e-commerce at Amazon, personalised digitalisation at Google), and on the other hand to accompanying brand work that knows how to communicate these values authentically.
Data-driven brand capitalisation
What applies to automotive, retail and tech companies is equally true in the world of real estate. Companies that have managed to embody core future values such as sustainability/ESG, employer branding/human resources and digital marketing leadership, and that consistently align their products and services with these values and credibly communicate all of this to the public through their brand communication, are among the crisis-resistant winners. It is not without reason that companies with these competencies make the podium every year in the European Real Estate Brand Institute rankings, which are determined on the basis of empirical market and brand data. At the same time, they are the companies that spare no effort in deploying scientifically validated data to analyse the market environment and their own company’s strengths and weaknesses. The decisive factor here is to constantly evaluate and compare external customer and competitor perceptions with the company’s own perceptions. This is the only way a company can position and market its products and services accordingly, and readjust, realign and fine-tune its corporate communications. In the long run, companies that fail to be proactive in this process, and fail to make decisions based on validated data, will negate the essential interplay between their own products and services, market requirements, competition rules and marketing.
For many brands, the full truth of the above may not reveal itself when times are good and everything seems to be running smoothly. However, it can soon become abundantly clear, and perhaps even fatal, when a crisis emerges and a brand needs to adjust or even completely overhaul its range of products or services. At the latest, that is the point at which an understanding of dynamic economic processes, based on data and their analysis, comes into play. This is when it pays to know where you stand, where you want to stand and where you have to stand on the basis of a precise analysis of the competitive environment and your own position. At this point, when the external crisis is at its most severe, it also becomes clear that having a strong brand value is a key factor in successfully implementing emergency, evolutionary or even disruptive changes in one’s own product portfolio.
With this in mind, we will continue to scientifically analyse the market, companies and brands for you in 2021, including the publication of our special study on the hot topic of “Disruption meets Resilience”, in which we will be evaluating the importance of resilience and its influence on brand values. 2020, the “Year of Corona”, will certainly provide us with a wealth of extremely valuable data and insights. Whatever our data ultimately reveal, Tesla & Co. clearly confirm one abiding insight: Today’s brand equity is tomorrow’s profitability.
With branded regards
Your Harald Steiner