The topic of emotional loyalty has been a topic of interest for us for a while, as it gives tantalizing clues to decoding what it is about certain brands that give them a halo effect in media coverage, and how to ascribe value to that intangible asset. This halo gives them the ability to defy gravity by trading at multiples in the stock market not necessarily explained by financial ratios; garner share of voice percentages that are out of proportion to market share; and to appear to be immune to PR mishaps, Teflon-coating their sentiment ratings against negative news coverage. In short, they are the brands we all talk about.

A recent study published in Booz Allen’s Strategy+Business, point to some of the same reasons  that we have found in our research for this effect, and include much that is relevant to communications professionals. The study, authored by Young & Rubicam’s John Gerzema and Ed Lebar, and titled “The Trouble with Brands,” presents data that makes the case that brands have been losing power over time, with the exception of a handful of brands whose values are afforded a premium and financially outperform their peers. This is based on intangibles the study’s authors call “energized differentiation,” but really boil down to having an emotional connection with customers (i.e., emotional loyalty), in that the brands speak to their customers (relevance) and have a unique meaning to their customers (differentiation). Further, these brands “add up to a more exciting, dynamic, and creative experience” to use the authors’ words. These brands have built valuable equity with both customers and prospective customers, creating intangible value. Apple is probably the most obvious example of such a brand at the moment, but since we do a substantial amount of work in the technology industry,they are an inescapable example. Apple has emerged as one of the more revered brands of recent times, and in our research the brand continually elicits a share of voice and sentiment that is completely out of proportion to its share of the markets in which it competes, be it PCs, laptops, mobile phones or consumer electronic devices. If you also look at market capitalization and valuation ratios, the company is afforded a rich premium by investors (PEG ratio of 1.5 and P/S ratio of 4.15 at this moment). Customers are also willing to pay a premium (Apple has a market share of 91% for all PCs priced over $1,000 – which shows clear dominance of the premium segment). And the media loves to write about Apple. Much of that is explainable by rational factors: investors like the margins and growth rates, and customers like the innovative products and product design. But, there is an emotional connection that causes both investors and customers to be willing to pay a premium and sustains the momentum. This premium is due to the company’s ability to excite the public, the fact that the products delight the customers, and the fact that a leader like Steve Jobs can captivate journalists to the point of worship.

PC/Notebook Market: Share of Voice Vs. Market Share

While these intangibles may seem very wooly, they are in fact very measurable. As an example, in the 90s I worked on building a customer satisfaction and loyalty program for a large software company who had a dominant position in one market and wanted to extend it to another – and they needed to understand how well loyalty would extend to this market that was relatively new to them. One of the key findings from our research – based on interviewing senior-level executives at the 2000 largest companies in the world – was that our client had two types of loyal customers: those who bought because they either had no choice or logic dictated it (e.g., because of issues such as compatibility, cost, or corporate policy), or those who not only stayed loyal because of the facts, but also showed a high level of emotional involvement in the purchase. They were more likely to recommend the brand (something Net Promoter has since exploited in its simple brand advocacy model), but they also exhibited other perceptions that indicated that there was an emotional connection that shouldn’t necessarily be part of a rational purchasing decision process. In understanding these perceptions lay the key to  a successful marketing strategy.

Ultimately, in our current environment where trust is easily lost and brand value is eroding, it is more important than ever for a brand to understand the strenght of the emotional bond with their customers, and to use that knowledge to better manage their brand. And if you think about it, much of what goes into creating that bond boils down to good PR strategy: design and communicate a clear vision of the brand that is distinct, is authentic, resonates and engages its audience (aka the DARE methodology employed by Text 100). Further, the leadership of a brand is key to communicating this vision, and marketing must back this up by sticking to the same message and effectively engaging the brand’s audience. Great brands don’t create value by accident – they do it through deliberate planning, thorough research and flawless execution. So if you do not have a clear strategy on how you will excite your market, then ultimately, your brand value will suffer. And of course, if you do not measure, you won’t know.