Nowadays, it seems that as long as you place a signboard in front of your shop, you are now a brand owner. But, that isn’t exactly how a brand works. Forbes Magazine ranks brands from all over the world yearly and estimates their value. In 2013, Forbes pegged the brand name of Apple (just the brand, not the whole business) to be worth US$104 billion. To put things into context, that brand value is worth more than the combined market capitalisations of S$115 billion for DBS Group Holdings Ltd (SGX: D05), United Overseas Bank Ltd (SGX:…
Nowadays, it seems that as long as you place a signboard in front of your shop, you are now a brand owner. But, that isn’t exactly how a brand works.
Forbes Magazine ranks brands from all over the world yearly and estimates their value. In 2013, Forbes pegged the brand name of Apple (just the brand, not the whole business) to be worth US$104 billion. To put things into context, that brand value is worth more than the combined market capitalisations of S$115 billion for DBS Group Holdings Ltd (SGX: D05), United Overseas Bank Ltd (SGX: U11), and Oversea-Chinese Banking Corp. Limited (SGX: O39). Have you ever wondered how that’s even possible?
In fact, what exactly is a brand and what it does it mean to have a successful brand? This is an important question for investors to ponder as having a great brand can also mean strong demand for a company’s products or services, leading to more business. Let’s take a look into some of Singapore’s strongest brands to find out.
What is a brand?
A brand is more than just a symbol or name which is stamped onto a company’s product or service. The very mention of a brand should evoke an emotion in us (that emotion can be good or bad, depending on how the company handles its branding image).
Hearing the word Coca Cola reminds us of the wonderful times we spend with our friends and family due to the beverage giant’s advertising campaigns. It brings the idea of happiness and celebration into our mind. A true brand should have a strong loyal following and might act as a defence against competitors.
A simple test
A simple test of the strength of a brand can lie in the following: If a product or service you use often is provided under a new brand that’s totally unheard of, will you still use it? If you actually reject the product if it is provided under a different brand, that could be a sign of the intangible but nonetheless real worth of the current brands you’re fond of.
According to Brand Finance, the top 3 brands in Singapore for the year 2014 belong to DBS Group Holdings Ltd, Singapore Airlines Ltd (SGX:C6L) and Wilmar International Limited (SGX:F34). We can actually do our simple test on these companies.
For instance, when you choose a bank for your banking needs, DBS’s brand might give you some confidence in its capabilities and provide a feel of assurance that your money is safe with it and that the bank would not be running into financial trouble any time soon. In this sense, the brand of DBS is indeed valuable.
However, if we look down the list given by Brand Finance, there are some brands which I might not feel so strongly about. For example, public bus and rail transport operator SMRT Corporation Ltd. (SGX: S53) is considered the 24th strongest brand in Singapore. But, do you choose which bus or train to take based on the brand of the service provider? With the new rulings from the Land Transport Authority to liberalize Singapore’s public bus industry, will you stop taking a bus if it is no longer operated by SMRT? I know I surely could not care less – I just want to get from Point A to B! In that sense, SMRT Corp might have a much weaker brand than what the numbers suggest.
It’s not that easy to develop an emotional connection with a person. Given that a worthy brand exists to instil a positive emotional connection between a company and its customers, it’s easy to see why it’s tough to build a strong brand.
Therefore, it is important for companies to constantly spend on advertising to reinforce the image of its brands. There’s another important façade to building a brand though: The brand owner must also act in accordance with its brand image. As Warren Buffett once put it succinctly, “it takes 20 years to build a reputation and five minutes to ruin it.”
Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool's free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.
The Motley Fool's purpose is to help the world invest, better. Like us on Facebook to keep up-to-date with our latest news and articles.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim owns Wilmar International.