Shareholder value may be the most important operating principle in the modern world; the north star for most people’s life’s work. Whether or not we consciously ‘work for the shareholders’ each day, the reality is most business decisions are made with that framing as an orientation — ‘what will create most (shareholder) value?’.
Shareholder value has a lot of merits. But it is also a very myopic sense of value creation: it diminishes the importance of consequences of a company’s activities that don’t directly affect shareholder value. That leads to some perverse activities (like agriculture companies heavily dosing animals with antibiotics; a boost to animal growth and near-term value creation; catastrophic to the effectiveness of antibiotics).
So what could help accelerate the shift from shareholder value to world value?
As we asked ourselves that question, we became excited about creating a new metric that showed how people value brands, and how motivated they are to publicly take action in support of brands’ purpose. Our aim is to help spark conversation within brands about making the shift towards purpose-oriented business.
We began developing a research tool we’ve called Brand World Value.
This is the structure we developed with Quadrant Strategies for testing how the US population perceives brands to be adding value to the world, relative to each other.
First, Awareness of Purpose: are people aware of a brand’s purpose, beyond just making money?
Second, Alignment with Purpose: does that purpose align with what people care about, with their values?
Third, Active Support: would they publicly, actively support a brand in achieving its purpose?
Fourth, Impact on Purchase: does the purpose make them more motivated to buy from the brand?
Quadrant Strategies fielded these questions to three waves of 1,000 people each in a representative sample across the US, and we tested 150 brands — the leaders of the typical brand value studies, plus some purpose-driven brands and non-profits to see how they fared.
We combined a brand’s score for each of those dimensions, using the Active Support metric as a multiplier, given the power everyday people have to determine the success of a brand, or idea.
2016 Brand World Value Index
We didn’t know what to expect. And frankly, the results surprised us. Here they are:
Goodwill ranked #1 — above mighty corporate brands that spend billions of dollars on marketing. In fact, four of the top 20 brands are non-profits.
Amazon, Google, PayPal — none of which existed 25 years ago, are in the top 10. Everyday usefulness is apparently highly valued.
Apple, which is always in the top three brands in traditional brand value rankings, came in at #26.
Patagonia, long-time gold standard of a purpose-driven brand, ranked a relatively low #85 — but for Elite people (earning over $100k and at least college educated), they shoot up to #13.
Purpose oriented brands, did well across the board, including TOMS,Medium (hi, Medium!), Chobani and KIND.
Finally, near the bottom of the list are brands that are perceived as less valuable: banking, financial, alcohol, oil and cigarette brands.
An interesting comparison that caught our eye is TOMS and Nike’s rankings across demographic and psychographic subsets:
TOMS (in green) and Nike (in grey) vary in rankings, but you’ll notice that for Millennials, as well as Optimists and Democrats, TOMS ranks above Nike. That is fascinating: Nike spends about $6Bn/ year on marketing, and TOMS’ total enterprise valuation is about 10% of that. Purpose has differentiated and powered the TOMS brand.
And here’s one last look at the data: all the brands plotted against two axes, Awareness of Purpose and Active Support.
You can see there’s a broad distribution, with some outliers: Goodwill top right (high on both metrics), Monsanto bottom left (low on both metrics); brands like Annie’s Homegrown that have high support within the relatively small population that knows them, and Marlboro that has relatively high awareness but low motivation to support.
So that leads to the conclusion that the task for brands differs — from boosting awareness of purpose, to boosting motivation of purpose, to turning high awareness and motivation into as large scale impact as possible.
As you read this, it’s worth remembering what this index shows: people’s perception of a brand’s purpose, how closely it aligns with their own values, how motivating it is to purchase, and importantly, whether they would be willing to publicly support the brands’ purpose. In other words, it can be thought of as a measure of how well a brand resonates with what people care about.
What it is not: a measure of what “good” the brand is actually doing through its supply chain, employee relations, customer benefit, environmental impact, etc. There are many great efforts that exist to measure brand’s social impact activity (e.g. B Corporation’s work); Brand World Value is designed as a complement to those studies. It’s possible that a gap may exist between the impact a brand is having, and people’s perception of that value as measured in Brand World Value (e.g. a brand not getting credit for a lot of great work)—in that case, the brand has an opportunity to close that perception gap.
Some brands have clearly established a strong perception of creating value for people and the world; others have the opportunity to build their business success by clearly articulating their purpose in a way that aligns with people and motivates action. There is a lot of value to be created as the focus of brands shifts from serving just shareholders to serving the broader world. enso exists to support that.
This is the beginning of Brand World Value research. We plan to dig further into understanding what purpose people identify in brands, include global respondents and dig deeper into market segments and brand types.