The World’s Most Engaged Brands and How to Interpret Correlational Data

Nils Mork-Ulnes — Wed, 22 Jul 2009 02:30:37 +0000

We were curious to read the recently published study correlating social media engagement and financial performance for the world’s 100 most valuable brands (per Interbrand), published by the Altimeter Group and WetPaint, since it covers an issue we are particularly interested in: how do you link a brand’s social media activities to bottom-line results? To add to our interest, the study used very similar methodology to the one we used in a study we released earlier this year, where we looked at Interbrand’s list of the world’s 100 most valuable brands, but focused on correlating overall media prominence and the relationship it had with brand value.

There is an old saying in statistics – “correlation does not imply causation” – and we would have to respectfully disagree with the conclusions of the report on the grounds of that saying. The report goes a long way in implying that social media engagement is the cause of the financial out-performance that successful brands display relative to others. In our opinion, the correlation is more likely a result of the fact that the most financially successful brands have attributes that make them more apt to be an early successful adapter of social media (they have more resources, are better attuned to the market, they’ve hired better marketers, or whatever other reasons you might think of), than it is that social media engagement is such a big driver of financial success. The correlation is real – or at least appears to be so from the graphics, though the report doesn’t actually state any numbers around the strength of the correlation.

But the question is what the direction of the causality is – or to put it in the plain words of TechCrunch: “I really doubt that their level of social media engagement had anything to do with their revenue growth, it is just that the strongest brands are the most engaged.” This is not to say that successful social media marketing strategies can’t add value to a brand. To the contrary, the report could have simply stated that successful companies are more likely to be engaged in social media, and that laggards ought to try to catch up to keep up with successful brands.

New Study Finds That Media Prominence Predicts Brand Value Better than Ad Spend for High Involvement Brands

Seth Duncan — Tue, 17 Mar 2009 06:37:11 +0000

Of all things that could potentially contribute to the financial value of a company’s brand, including product quality, customer service, and R&D, public relations has been one of the least studied and understood. We recently conducted a study to take a closer look at the role that public relations plays in building brand value by assessing the statistical relationship between media prominence (a measure of prominence of mentions in unpaid media) and brand value for the 100 companies in Interbrand’s 2008 Best Global Brands report.

What we found was that media prominence is in fact linked to brand value, especially for certain product categories, underscoring the importance of PR’s role in maintaining and building a brand. In the current environment where budgets are under pressure and corporate reputations are quickly undone, companies should pay close attention to how the media can impact the financial value of their brand.

Here are some of the key findings:

Overall, we found that how often a company appeared in the press accounted for over a quarter of the brand value among Interbrand’s 100 most valuable brands.

The relationship between media prominence and brand value depends on “product involvement” – i.e., the degree to which customers research a given product or solution prior to purchase. Media prominence was more associated with brand value for “high involvement” products compared to “low involvement” products. Media prominence was a particularly important component of brand value for computer-related industries, such as software and hardware manufacturers, as well as computer and Internet service companies, accounting for 48 percent of differences between companies’ brand values.
Advertising expenditures, however, predicted brand value only for “low involvement” products, and accounted for very little brand value among “high involvement” products.
These results suggest that the more complex a product is to a buyer, the more likely they are to research the product category and to look for information that they can trust. Much has been said of the increasing power of word-of-mouth and distrust in advertising in the past few years. If unpaid media placement, as opposed to paid media (or advertising), is more credible to buyers, then it too should play a key role in building brand value for high involvement brands.

Perhaps the most important take away message from this study is that, regardless of the direction of causation, a sizable amount of brand value, particularly for high involvement industries, is tied into media coverage. So, even if one interprets this study as showing that high brand value leads to more media coverage, it is still important for media coverage to be carefully managed since it is the window through which others will see your brand.

context analytics» Brand Value

The World’s Most Engaged Brands and How to Interpret Correlational Data

New Study Finds That Media Prominence Predicts Brand Value Better than Ad Spend for High Involvement Brands