THEENERGYINSIDE

The emailable version of this booklet is at pubs.yr.com/energy.pdf

Unique selling propositions.

Competitive advantage.

Single-minded propositions.

Whatever the jargon, marketing is about identifying a uniquebenefit for your brand, right?

Welcome to the real worldWelcome to the real world, where:

• Most food brands perform identically in blind taste tests tosupermarket private labels.

• Any promise an electronics brand makes can be made byits competitors within months.

• Half the front line staff who deliver a service’s ‘unique’benefits will be working for a competitor in six months’ time.

Marketing based on USPs simply no longer works.

THE ENERGY INSIDE

And yetAnd yet the world refuses to commoditize.

Brands still mean things – sometimes great things- to the people who buy them.

People continue to pay a premium for brands thatoffer little more than their competitors.

And they gravitate towards brands that, despitehaving little different to offer, seem to have acertain buzz, or energy about them.

The funny thing is though that no one bases theirmarketing plans on this energy.

Perhaps because energy is difficult to define.

Perhaps because energy is less tangible than tastepreference scores.

But perhaps above all because no one has ever managed tomeasure energy.

Until, that is, now.

Many words havebeen used todescribe energy inthe past.

BUZZ

PIZZAZZ

JE NE SAIS QUOI

STAR QUALITY

VAVOOM

DISNEY DUST

For years Wall Street has undervalued the impact of inspired marketing.That need no longer be the case.

Y&R has spent the last two years studying energy.

We have collaborated with professors from the University ofWashington Business School and Columbia University.

We set out to define energy as objectively as possible, andthen to quantify it.

Energy attracts customers to brands, and makes them grow.

And that makes the companies that own them grow too.

And if those companies grow, so does their stock price.

So we reasoned that the most objective way to define energywas to look at the many brands – like McDonalds, Apple andCoca-Cola, that are also companies listed on the New YorkStock Exchange, and to use their performance over time toidentify their energy.

MEASURING ENERGY

$15,000

$14,000

$13,000

$12,000

$11,000

$10,000

$9,000

$8,000

$7,000

$6,000

30 Dec 01 30 Dec 05

We created a hypothetical fund based on stocks associated withbrands of rising energy. The fund outperformed the S&P 500 inperiods of market growth and market decline.

ENERGY DRIVES STOCK PRICE

S&P 500

ENERGY FUND

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We did this by performing regression analysis of stock pricesagainst brand imagery.

And we used those brand imagery characteristics thatexplained stock price movements to contruct a precise,scientific formula for energy.

How did we measure brand imagery?Fortunately, Y&R has been collecting brand imageryattributes for the past thirteen years through its globalresearch study, BrandAsset Valuator.

BrandAsset Valuator¤ has interviewed 500,000 consumersabout 35,000 brands in 44 countries. It is one of the largestbrand databases in the world.

It the connection surprising?Is it surprising that the performance of a brand, and thestockmarket performance of the company that owns it are soconnected?

Not really. The days when a company’s worth was tied up infactories or machinery are long gone - indeed manycompanies nowadays outsource their manufacturingaltogether to China.

‘Once you fly Virgin, you can never go back to an ordinary airline’ saymany international execs. And it’s the same with many other highenergy brands.

ENERGY CREATES BRAND LOYALTY%

BRANDLO

YALTY

ENERGY

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30 40 50 60 70 80 90

• British Airways• American Airlines• Delta Airlines• United Airlines

• Continental Airlines

• JetBlue

• Virgin Atlantic• SouthWest Airlines

What’s left, and the source of most companies’ value todayis their ability to engage and to keep customers. And theseabilities are encapsulated above all in their brand.

Today, a high-performance business is increasingly based ona high-performance brand.

So what exactly is energy?

We’ve been looking hard at energy and its impact onconsumers. Energy represents the perception that a brandis moving in a particular direction; that it has a clear purposein the world.

Applying the formulaWe have used the Energy Formula to look at all of those35,000 brands.

Energy comes in a scale from 0 to 100.

If your brand comes near to 100, congratulations.

If your brand comes near the bottom, don’t give up the dayjob.

Of course, it would help if we knew why brands have theenergy level that they have.

To do this we've looked at a number of factors that can helpenergy move.

Chief amongst these are three factors we have namedvision, invention and dynamism:

Vision is what a brand stands for: its sense of purpose andleadership qualities. Nike, the ‘Just Do It’ brand, is a goodexample of vision.

Invention is about the degree to which a brand keepsupdating itself, through new product launches andimprovements to its service. iPod, a brand that keepslaunching new variants, like Video iPod, and new serviceslike Podcasting is a highly inventive brand.

DIAGNOSING ENERGY ISSUES

THE THREE ELEMENTS OF ENERGY

VISION

INVENTION DYNAMISM

ENERGY

Dynamism is the degree to which a brand keeps creates apersona or cultural buzz in the marketplace. Google, with itslogo that changes for St. Patrick’s Day, Valentine’s Day andother holidays and events is a good example of dynamism.

Fixing problemsIf your brand has a weakness in vision, invention or dynamism,fixing this weakness can be a good way of improving yourenergy score.

And of course, if you fix this weakness, you are likely to fixyour brand - and with it your company - too.

Energy can be created in many ways.

Attention to detail, and just making sure that every aspect ofyour operation delivers a consistent experience can help.

But the thing that above all can shift your energy upward isa strong, powerful energy-driving idea.

The process we use to develop such anidea is called ignition.

ButIgnition is a powerful process. But itdoesn’t work unless we fully understandthe brand’s situation fully.

So the first step in ignition is to surround the problem withall the information and thinking that can help us.

GETTING MORE ENERGY

THEIGNITIONPROCESS

As part of an ignition session, we look thoroughly at:

• The business background to the brand

• The marketplace and the competition

• The target consumer

• The architecture and history of the brand

• And of course, in a world where the media solution maybe a profile on MySpace as much as a TV commercial,we look at channels in depth too.

Once we have done this, we produce the creative brief.

And this leads us to the energy-driving idea.

In a world wheremedia choices

include Google,SecondLife and

YouTube, no creativebrief is complete

without atouchpoints analysis.

Energy is volatile. Handle it with care.

Can energy fix the big problems of the marketing world?

We hope so.

We are working further on analysing energy and discoveringlaws that derive from its study.

In this fast moving, ever-changing digital world of thetwenty-first century, thinking about branding andcommunication is out of date.

And we are all desperately in need of new rules and newways to think about what we do.

Because we measure energy in exactly the same way for allbrands, it offers a better way to look at new, category-independent marketing phenomena like social networking.

SO?

And because Energy has been derived fundamentally frombasic stock performance rather than from transient marketingtheories, it gives us an objective, big picture view of markets.

In the current environment, energy is therefore one of the fewmarketing measures we can trust.

THE SEVEN ENERGY LEVELS

Illustrated using H1 2006 U.S. energy data.

VOLCANIC: ENERGY LEVEL 90-100

Congratulations. Your brand is up there in the mediascapealong with Harry Potter and Google. You are already part ofthe popular consciousness, and your brand means somethingto people way beyond its basic functionality. You are truly in afortunate position.

The only thing now is how to keep your brand there –because a brand can lose its energy just as fast as it gainedit:

• Brands with this level of energy need to monitor attitudesof their innovator and early adopter users carefully. Manyusers will consider dropping the brand as the mainstreamstart to use it.

• Of those that have much, will much be demanded:consumers expect brands with this much presence toentertain them in spectacular fashion.

• You need to do this fast. For every C.S.I., there are ten TVshows that get their fifteen minutes of fame and nothingmore.

C.S.I.

VICTORIA’S SECRET

GOOGLE

XBOX

NIKE

AMAZON.COM

IPOD

BURNING: ENERGY LEVEL 75-89

Your brand is already buzzing.

Consumers feel its presence in their lives, and see it as abig, famous brand.

Now is the time to give it truly iconic status:

• Brands in this position have already come a long way, andcan be uncomfortable in the glare of the limelight. Nowthat greatness is being thrust upon them, they may needto act different.

• Do you think that if you did try to connect with pop stars,no one would listen? That’s what everyone thought aboutU2 until they agreed to connect with the iPod.

• Some brands in this position in the Energy Index havearound two years’ grace before their energy levels beginto slip. Use these two years well – you can only be thenew kid on the celebrity block for a while.

VIAGRA

STARBUCKS

MYSPACE

MOTOROLA

CHARGED: ENERGY LEVEL 60-74

Your brand is being noticed, and is moving in the rightdirection.

Now is the time to debate how to get it further into the massconsciousness.

To do this, you may need to think beyond the confines of yourmarket, and the basic functionality of your product, andconsider how to give your brand a wider social relevance:

• Nike did this early in their brand’s life with Just Do It. Ittransformed what had previously been just an innovativerunning shoe into a sports philosophy.

• Coke did this back in the 1930s when they gave Santa aCoke-red coat and moved from being a summer-timerefreshment into being an all-year-round beverage icon.

HOT WHEELS

STOLICHNAYA

VISAPIZZA HUT

PULSING: ENERGY LEVEL 45-59

Your business may be doing well. Your market share may begrowing. But you are still not fully leveraging the power ofbranding to give your brand a life of its own.

As the Roman philosopher Juvenal remarked, it was notenough for a politician to feed his people, he must alsocapture their imagination. Your brand needs to do this,embodying more than basic productfunctionality.

• Consider where the fast food chains would betoday if they had stuck with a brand builtaround an offer of meat in a bun at a low price.It’s birthday parties, Happy Meals and fun thatbuilt McDonalds over the past three decades,not the taste of the patty.

• Making a trend your friend is not enough. Plus-size teen clothing brand Torrid is on to a winner with theirsexy clothes for chunky teens. But they still need to buildthe cachet of Gap or Zara.

‘Bread andcircuses – that is

what the mobwants’

JUVENAL

BANANA REPUBLIC

BARBIE

YU-GI-OH!

KRISPY KREME

LEAN CUISINE

INERT: ENERGY LEVEL 30-44

Your brand may be doing all the right things in terms of image,saliency and share on your tracking, but it is still a minnow inthe great scheme of things.

You need to raise your sights and get your brand to drive yourbusiness.

Do you think it can’t be done in your industry? With the rightbranding thinking, you can transcend that industry:

• In the lowly computer industrial components industry, Intelrose to become a consumer icon.

• SouthWest became the strongest brand in airlines by doingless, not more.

DORITOS

ESPRIT

TIMEX

SLEEPING: ENERGY LEVEL 15-29

Your brand is alive, but needs a wake up call, if it is going tohelp you retain and grow your business.

On the other hand, perhaps it’s that you’re doing the wrongthings – like telling your passengers to bring their own pillowson to your flights; or perhaps you’re an insurance companystuck in the old ways of the industry.

No matter what marketplace you operate in, your brand coulddo with a rethink.

• Is your existing marketing strategy differentiating enough?You may be advertising your industry rather than yourbrand.

• Are you focussing on a sharp target? ‘If you ain’tsegmenting.’ said Theodore Levitt of the Harvard BusinessSchool, ‘you ain’t marketing.’

• Are you doing anything different to your core competitors?Sacrifice is the essence of strategy.

HOLIDAY INN

MUTUAL OF OMAHA

AMTRAK

ALLSTATE

DECAYING: ENERGY LEVEL 0-14

You have a brand that is really is just a name that people haveheard of rather than a brand with real, added values.

Now is the time to take a fundamental look at your business,and work out why your energy level is so low.

• Your brand is so weak, you may be better off marketing toyour customers via an intermediary.

• If you are an fmcg brand in this position, you may beswamped by private label over the next few years.

• If your competitors are also in this position, your industrymay be vulnerable to competitors like Sir Richard Branson,whose skill is to reinvent an industry in his own image.

GREYHOUND

TECHNICAL BACKGROUND

Young & Rubicam Brands worked with RobertJacobson of University of WashingtonBusiness School and Natalie Mizik ofColumbia University to develop the energytheory.The research conducted used seven intervalsof Y&R BAV data as thecenterpiece, andsupplemented this withStandard and Poor'sCompustat data tapesfor accountingperformance measures.It also utilized monthlydata from TheUniversity of Chicago'sCenter for Research inSecurity Prices (CRSP)on stock returns overtime.To improve accuracy,analysis was restricted to ‘mono-brands’represented in the data, meaning a firm whereone brand represents the majority of thecompany's business. Examples of this areMicrosoft, Disney, and Coca-Cola.

BrandAsset Valuator: Young and Rubicam'sBrand Asset Valuator survey (BAV) has beenassessing brand health since 1993, and hasdone quarterly brand tracking in the USAsince 2001.

Each quarter in the US, a panel of 10,000consumers is polled via

a printed survey on atotal of approximately

2,500 brands.BAV assesses brandson over 55 key brand

measures independentof category and against

the entire brandscape.BAV studies have been

done in 44 countriesaround the world, andare repeated in many

countries each year.Over 35,000 brands

have been examined and more than 500,000consumer interviews have been conducted

globally over BAV's history.

DIFFERENTIATIONThe brand’s point ofdifference ENERGY

The brand’s senseof direction

RELEVANCEHow appropriatea brand is to you

ESTEEMHow well regardeda brand is

KNOWLEDGEAn intimateunderstandingof the brand

How energy fits into a brand.

By:Simon Silvestersimon_silvester@eu.yr.comtel: +44 20 7611 6356

For new business enquiries, please contact:Yossi Schwartzyossi_schwartz@za.yr.comtel: +27 11 797 6314

Helen Kimberhelen_kimber@eu.yr.comtel: +44 20 7611 6750

For press enquiries, please contact:Bernard Barnettbernard_barnett@eu.yr.comtel: +44 20 7611 6425

Thanks to:John Gerzema, Ed Lebar, Maria McHugh, Michael Sussman, Jim Williams

Y&R EMEA, Greater London House, Hampstead Road, London NW1 7QP

BrandAsset Valuator is a Registered Trademark of Young and Rubicam Brands

The emailable version of this booklet is at pubs.yr.com/energy.pdf

WE ENERGIZE BUSINESS.