SOCIAL BRAND VALUEbrand value through social interaction -

the Germany ranking 2009

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The pursuit of community is one of the most basic desires of mankind. Eversince people have craved for the security and orientation of communities. However in the 19th and 20th century, industrialization led to an anonymization of our daily living- and working-environment. Similarly, as traditional communities were on the decline, brands took an ever more important role in the pursuit of personal identity-construc-tion projects of consumers.Recently, mainly due to the rapid diffusion of digital techno-logies, a re-emergence of the community can be observed in the context of consumption practices. These communities are, contrary to their ancient counterparts, based on shared passions and interests of consumers. Never has it been so easy to identify like-minded people and exchange thoughts and ideas about shared interests than it is nowadays.

This craving for community is the chief misery of every man individually and all humanity from the beginning of time.fyodor M. Dostoyevsky, 1881

Successful marketing leads to unique customer benefits. Given the altered behavioural patterns of consumers, mar-keting needs a fresh perspective that takes into account the dynamic development regarding communities. Marketing thinking and practice used to be dominated by product spe-cifications, advertising messages and one-sided top-down communication. Today a brand cannot create true added value without taking social structures into account. The value of a brand seems to be less and less based on product charac-teristics, but rather on the benefits a brand provides in daily usage situations and its relation to others. The Harley David-son Owners Group (HOG) with over one million members is only one example of how a brand creates value beyond the product.

1950

productionfocus

productfocus

sellingfocus

customerfocus

servicefocus

community focus

1960

1960 1

980 19

90 2000Marketing orientation

is changing towards the consumer. In the future, community will play an important role in determining a brands success.

Community-Orientation of Marketing

Although the success of a brand has always been based on social acceptance and social exchange within communities, it has never been easier to facilitate this dialogue among consumers than in the digital world of today. Consider micro-blogging sites, social networks or business communities. what all these platforms and tools have in common is, that they all focus on the individual consumer and his or her con-nections. This development is not limited to the digital world. Also in the offline world, consumer communities seem to re-emerge. In the case of Tupperware consumer communities are even an crucial aspect of the brands business model.The traditional benefits of a brand, however, are not lapsing. what has changed though, is that brands are not under total control of companies anymore. Trust in other commu-nity members for instance is already higher than the trust in brands among consumer. Also the information and orienta-tion benefits of a brand are increasingly created by the com-munity and its members. The brand in the users hand thus is not a temporary hype but rather an increasingly important aspect of successful brand management. Just as differenti-ation on the basis of product specifications becomes incre-asingly difficult, facilitating and managing communication among customer groups becomes increasingly important. The consumer as a trustful believer of advertising messages is dying out.

Changing Benefits of a Brand

Benefits of a brand

Company impact

Community impact

How the community influences the benefit

Orientation/in-formation

product ratings and user expe-rience reports reduce ones own search costs

Trust Trust in like-minded people is much higher as trust in compa-nies and brands

prestige The prestige benefit of a brand is negotiated within the user community

Identity The rapid access to information and experiences of other uses, affect the personal identifica-tion with brands effectively

The Social Brand Value occurs at the interface between the consumer and the brand. The Social Brand Value is the value, which is based on the interactions between users of a certain brand. Today successful brand management is impossible wi-thout an understanding of the role a brand plays in the social context of the consumer. Thus the Social Brand Value is an important and valuable performance indicator for optimizing customer-based brand equity.

Social Brand Value

for users:

the percei

ved value,

which res

ults from

exchange

and inte

ractions a

mong

brand use

rs within

a commun

ity.

for comp

anies: the

share of a

brands e

quity whic

h results f

rom socia

l interacti

ons

among b

rand user

s and whic

h is not di

rectly und

er control

of the com

pany.

Social Bran

d Value is

Relevance of a Social Brand Value ranking

If one un

derstands

brands as

social co

nstructs, a

deep und

er-

standing o

f the soci

al meanin

g of bran

ds is with

in commu

ni-

ties centra

lly for the

brand ma

nagemen

t and the

future bra

nd

success

Numerou

s strong C

ommunity

brands do

not appe

ar in

classical b

rands ass

essment p

rocedure

s, becaus

e these

grasp the

brand val

ue on the

other side

from class

ical fi-

nance dat

a only ins

ufficientl

y (facebo

ok etc.)

The Social

Brand Val

ue grasps

the value

of a bran

d in the

social con

text and

thereby ex

tends the

understa

nding of

brand val

ue after t

he pure p

urchase d

ecision

Monetary brand valuation approaches focus primarily on the underlying financial performance indicators of a company or brand. Even though community brands such as facebook et al yield an enormous brand value from a consumer`s perspec-tive they fail to be recognized in this perspective due to their low financial returns. A Social Brand Value Ranking allows to assess brands from a psychographic perspective in their soci-al context and stresses the value of a brand that lies beyond the purchase decision in the daily life of consumers.

This study verifies the significant impact of the Social Brand Value on customer loyalty (apart from well-known factors such as product quality and brand image): On average about 15% of customer loyalty are driven by social interaction in communities. Brand image building is not sufficient to drive usage and preference of a brand anymore. To successfully manage a brand today, also means to understand the conver-sation between consumers and their communities.

Approximately a third of brand perception is shaped through interaction within those communities. In spite of this signifi-cant influence, today far less than 10% of brand budgets are allocated to measures that stimulate and steer social interac-tion within communities.

The structure of Social Brand Value

The Social Brand Value study examines both big, commer-cially successful brands and strong community brands (par-ticularly online). To calculate the Social Brand Value the five dimensions informational value, affiliation value, brand evan-gelism, conversational value and identity value were opera-tionalized into 28 items in total. These items were surveyed through an representative online survey.

The results: Apple comes out ahead of all examined brands in the Social Brand Value study, followed by StudiVZ (biggest German social network) and Google. Established powerhouse brands such as Coca-Cola or McDonalds find themselves at the bottom of the ranking. Although many of the legacyb-rands possess a high monetary brand value, the study results suggest that they are insufficiently prepared for the new chal-lenges of community interaction.

Informati

-

onal Valu

e

Social

Brand

Value

Converti-

nal Value

Brand

evangelis

m

Identity

Value

Affiliaton

Value

Community members pro-vide relevant knowledge rund um around brands,

Reciprocal support in solving problems

Joint consumption experiences create

emotional ties between

users, Social

interaction between

communi-ty members

creates feeling of security and reas-

surance

Com-munity members promo-

te their brands and

convince others to use/buy it

Community mem-bers defend brands from external at-tacks

Newsand know-ledge about a brand spread fast and che-

aply among community mem-

bers, Brands stir con-versations and stay top-of-mind

Communities represent a platform to identify

with brands Members express and

live their personality

within the brand

community

Social Brand Value: Overall

The comparison between the Social Brand Value and the customers willingness to pay a premium price draws even clearer picture. Among the examined brands, Apple mana-ges it best to play out its perceived Social Brand Value into a premium price. This shows that it is not only the product and the brand image which are responsible for a brands success. The success of Apple rather stems from the companys out-standing capabilities in handling and nurturing its user com-munity - based on an open and cooperative communication approach.

In the case of Coca-Cola the consumers` distinct willingness to pay a premium price mainly originates from its establis-hed brand image. As our results indicate however, Coca-Cola seems to create only little value in daily usage situations of its German customers. The brands ability to cause social value is rather limited today. Brands such as Nokia and Starbucks are should aim to ramp up their capabilities and efforts to crea-te value the daily life of their customers in order to increase their Social Brand Value.

Those brands, which are not able to create a high willingness to pay a premium price, nor offer a high Social Brand Value, are the clear underdogs of the study. Due to the increasing exchangeability of brands, these brands would be well ad-vised to increase their social value, because it is the Social Brand Value which more and more is responsible for the customers willingness to pay a premium price.

33 %

32 %

31 %

30 %

29 %

28 %

28 % 27 % 27 %

26 % 26 %

24 % 24 %

21 %

21 % 20 %

15 %

15 %

13 %

0 % 10 % 20 % 30 %

Social Brand Value and price premiumThe 5 key insights form the study:1. Besides traditional factors such as product quality and

brand image, a significant part of customer loyalty is exp-lained by the Social Brand Value (about 15 %)

2. In terms of offering true customer value through social in-teraction, Apple, Google and studiVZ outperform all other brands in the study

3. Apple and Tupperware are two high performing product brands in the Social Brand Value ranking. from the very beginning their business model was based on a strong user community and social interaction. This pays off!

4. On the other hand, an online-only business model does not guarantee high levels of social value as the example YouTube demonstrates. The mere distribution of content to a large and anonymous group of users does not auto-matically lead to community benefits.

5. Even though the social value of a brand originates from in-teractions within the user community, companies do have the chance to actively facilitate and manage the creation of Social Brand Value.

Soci

al B

rand

Val

uehi

gh

winner of thestudy

low

Loser of thestudy

low highprice premium *

studiVZ

Tupperwarefirefox

MySpace

YouTube

flickr

Apple

Starbucks

Microsoft

Coca Cola

Nokia

McDonalds

eBay

facebook

Twitter

Xingwikipedia

Amazon

Google

Brands with a high social value, which is currently not commercialized through an

increased willingness to pay a premium price (e.g. due to exchangeability on the

Internet)

Brands with a low social value, for which the user is not willing to pay a premium

price.

* Readiness to pay more for the respective brand than for an otherwise identical no name product

Brands that can rely on a high willingness to pay a premium price, which is not based on the brands social value. To maintain this, the-se brands are well advised to increase their social value in the future.

Brands with a high social value, which also leads to an increased willingness to pay a premium price among customers (however price premium is not only based on the Social Brand Value).

Study BackgroundThe increased networking and social interaction of consu-mers on the internet has yielded new communities around brands. The goal of this study is to identify, examine and asssess the resulting value of this development both from a consumer and company perspective. The study thereby aims to identify specific success factors for effective brand ma-nagement in community contexts

Research Design Online survey (representative) Total number of respondents (sample size): 1.301 Number of sampled brands: 19 Region: Deutschland Survey period: September 2009

facts & figures about the Study

Hyve AG, MnchenDr. Johann fller ist Vorstand der HYVE AG in Mn-chen, Research Affiliate am MIT Massachusetts Institute of Technology in Cambridge und Habilitand am Institut fr Strategisches Management, Marketing und Tourismus an der Universitt Innsbruck. Er hlt regelmig Vortrge und Vorlesungen zu Open Innovation, Online Communities, Innovationsmanage-ment und virtueller kundenintegration in die pro-

duktentwicklung. Im Anschluss an seine Dissertation zum Thema Com-munity Based Innovations arbeitete Johann zwei Jahre als Assistant professor an der Universitt Innsbruck. Zuvor war er 3 Jahre als Unterneh-mensberater bei pricewaterhouseCoopers im Bereich Strategic Change ttig. weitere Erfahrungen sammelte Dr. fller bei Mckinsey & Comp., Siemens und Allied Signal. Im Zuge seiner forschung verffentlichte er mehr als 60 Artikel in unterschiedlichen Zeitschriften. Dazu zhlen das Journal of product Innovation Management, das Journal of Business Research, das Journal of Travel Research, der Harvard Business Manager und Technovation. Im Rahmen seiner Ttigkeit als Vorstand der Hyve AG begleitet Johann seit mehr als 8 Jahren namhafte internationale Unter-nehmen bei der Entwicklung kundenzentrierter Innovationen.kontakt: johann.fueller@hyve.de oder jfueller@mit.edu

Vivaldi partners, MnchenDr. Markus pfeiffer ist Managing Director der Vivaldi partners Bros in Mnchen und in London.In rund zehn Jahren Beratungsttigkeit hat er sich auf die Entwicklung von wachstumsorientierten Mar-kenstrategien spezialisiert und betreut klienten im deutschsprachigen Raum und eine Reihe internatio-naler klienten. Er spricht regelmig auf internatio-nalen Marketingkongressen, ist Gastprofessor an der

Solvay Business School in Brssel und hat mehr als 20 Bcher und Artikel zu verschiedenen Themen des Marketings verffentlicht. In vielen Jahren Strategie- und Markenberatung hat er ber 40 klienten bei komplexen Marketing- und Markenstrategieprojekten betreut. Er verfgt ber weit-reichendes wissen bei der Entwicklung von kreativen und faktenbasierten Lsungen der Entwicklung von Markenstrategien, Optimierung von Markenarchitekturen, Entwicklung von Brand Extensions und Markencont-rolling.Bevor sich Dr. pfeiffer Vivaldi partners anschloss, war er als Marketingbera-ter fr verschiedene deutsche und internationale klienten aus der konsum-gter-, Informations-, kommunikations- und Unterhaltungsindustrie (z.B. philip Morris, Burda) ttig. Als Geschftsfhrer eines deutschen Beratungs-unternehmens war er fr den Ausbau des Neugeschfts und die Betreuung der Hauptklienten verantwortlich. kontakt: mpfeiffer@vivaldipartners.com

Autoren

Vivaldi partners, MnchenDr. Markus Zinnbauer bert als Director im Mnchner Bro von Vivaldi partners vor allem klienten aus Dienstleistungs-, Technologie- und fMCG-Unterneh-men. Besondere fachliche Expertise bringt er in den Bereichen Markenstrategie und -controlling, Budget-planung und -effizienz, quantitativen Methoden und Social-Media-Strategien ein. Vor seiner Ttigkeit bei Vivaldi partners sammelte er langjhrige Erfahrung als

projektmanager einer Mnchner Beratung und untersttzte internationa-le sowie mittelstndische Unternehmen bei strategischen Marketingthe-men sowie bei finanziellen und organisationalen problemstellungen. Markus Zinnbauer hat sein Betriebswirtschaftsstudium an der Ludwig-Maximilians-Universitt Mnchen und dem M.I.T., Cambridge, absolviert und am Institut fr Marktorientierte Unternehmensfhrung der Ludwig-Maximilians-Universitt promoviert. Er ist regelmiger Referent auf konferenzen und Autor in nationalen und internationalen fachzeitschrif-ten.kontakt: mzinnbauer@vivaldipartners.com

Vivaldi partners, MnchenTobias Honer ist als Senior Consultant im Mnchner Bro von Vivaldi partners ttig. Er arbeitet schwerpunkt-mig fr nationale und internationale kunden im Dienstleistungs-, Technologie- und fMCG-Sektor. Seine Expertise bringt er inbesondere bei Entwicklung von Marken- und wachstumsstrategien, sowie bei frage-stelllungen des Innovations- und portfoliomanage-ments ein. Zudem beschftigt er sich intensiv mit der

Entwicklung von Strategien im Online- und Social-Media Bereich. Tobias Honer verfgt ber umfangreiche projekterfahrung in quantitativer und qualitativer Marktforschung und bernahm vor seiner Ttigkeit bei Vivaldi partners diverse Marketingfunktionen u.a. bei Booz & Co., der Lufthansa AG und dem fraunhofer Institut. Sein Studium der Betriebwirtschaftslehre mit den Schwerpunkten strategisches Marketing und Distributionspolitik hat er in pforzheim und Sydney absolviert. kontakt: thoner@vivaldipartners.com

Autoren

Leopold-franzens Universitt, InnsbruckRoland Schroll ist Doktoratsstudent und wissenschaftli-cher Mitarbeiter am Institut fr Strategisches Manage-ment, Marketing und Tourismus der Leopold-franzens Universitt Innsbruck. Im Rahmen seines Doktoratsstu-diums beschftigt er sich mit Themen wie Brand Com-munities, user-generated brands sowie dem Einfluss von Communities auf Marken. Zuvor studierte Roland Schroll wirtschaftsinformatik sowie Strategisches

Management mit Spezialisierung auf Strategie und Branding. praktische Erfahrung sammelte er unter anderem im In- und Ausland bei firmen wie Siemens, Hilti und Vivladi partners.kontakt: roland.schroll@student.uibk.ac.at

2009, HYVE AG, Vivaldi partners

HerausgeberHYVE AGSchellingstr. 4580799 Mnchenwww.hyve.deMail: info@hyve.de

Vivaldi partnersBurgstr. 880331 Mnchenwww.vivaldipartners.comMail: munich@vivaldipartners.com

in kooperation mit MIT und UNIVERSITT Innsbruck

Layout & GrafikMelanie Eckl, HYVE AG

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