The demise of Australia's great brands?

At last week's Economic Forum in Brisbane, Julia Gillard declared that Australia was well placed to become the "engine room” of the Asian century. Brand value figures for Australian companies – which are similar to a credit rating and measure the strength, risk and potential of a brand relative to its competitors – tell us that she has it around the wrong way. Asia is pulling ahead.

Analysis by branding specialists Brand Finance shows that Australian companies are overshadowed by the brand values of their overseas counterparts. According to Brand Finance, Apple was ranked as the world's most powerful brand and at $71 billion, it was worth 1.4 times larger than the value of Australia's top 30. Alarmingly, the study shows that some of Australia's biggest companies have in effect trashed their brands.

The problem is that many of Australia's biggest companies see brand management as marketing – as putting a veneer of spin and TV commercials around the product and service that people will ignore. It's where American and British companies were 10 years ago. When they do that, the branding becomes expendable instead of being at the core of what a company is about.

Why is a brand important? It's simple: if I as a customer have to choose between company A and company B, I'll go for the stronger brand. A strong brand is predicated on how much a company can deliver on its promise, it's about trust.

Investing in brand management therefore is not about marketing and running ads. It's about investing in systems and processes that allow the companies to keep those promises. It's something retailers, banks and businesses like Qantas need to do – they have to restore trust.

Instead, many Australian companies just go for cheap solutions. They think brand management is about marketing so they run slick TV commercials. Think of the ads run by the Commonwealth Bank, NAB and the mining industry now campaigning to connect with the community in the wake of the divisive mining tax debate. That's just hype and spin, it's not real brand management. And it's so easy to do when you have lots of money, your company is making huge profits, it's making workers redundant, it's locked in industrial disputes with bolshy unions, it's running political campaigns against elected governments, offshoring call centres, stranding 100,000 passengers worldwide, announcing bogus death-threats, selling overpriced goods, putting up lousy web sites as a lip service to online retail and cutting back on customer service. For that matter, no amount of marketing will stop the trashing of the Fairfax brand built on independence, integrity and trust when Gina Rinehart moves onto the board.

Still, Australia has some runs on the board. It's impressive that a country with a population the size of Calcutta can have four banks in the Global Top 50 brands. But let's get that in perspective. The value of the leader, Commonwealth Bank at $4.12 billion, is eclipsed by HSBC which is now named as the world's most valuable banking brand at $27.5 billion. HSBC has shifted its strategy, investing heavily in China and India while scaling back its operations in the eurozone basket case and a sluggish US economy, ensuring it is well placed for the shift in geo-political and economic powers in the years ahead. That means its brand value will grow as well.

Now the reality is Australia will always be killed globally when it comes to brands. Our market is too small, American and European companies have a tremendous resources advantage in spreading their brand good will around the world and a company like Apple, with a share price somewhere in the stratosphere and selling products everyone wants, is a 400 pound gorilla.

While Gillard might suggest Australia could become an engine room for Asia, the reality is that Asian countries like Singapore and China are pulling ahead, investing heavily in their brands for world markets.

Brand Finance Australia managing director Tim Heberden says that many sectors in Australia have pulled back on their investment in brand assessment, staff training and R&D. "There is no reason why a country such as ours which has the human capital and brand management capabilities can't create and maintain ownership of strong local brands. It hasn't got worse here but we're not closing the gap,'' Heberden says.

"We can either rely on the resources boom or we can make Australia more of an intellectual property hub rather than just a market that imports global brands.”

He says this is in contrast to China and Singapore which are focused on becoming leading intellectual property markets and creating brands for the world. "Our position might not have deteriorated relative to the US or Europe but we are underperforming relative to some our nearer neighbours,” he says.

Now the Brand Finance methodology has its limitations. It's heavily skewed towards financial metrics and that can produce a picture out of whack with reality.

Based on the Brand Finance methodology, for example, it's not surprising that the four big banks with strong profits, share prices and a monopoly on our market, are right up there with the best in the world. Who wouldn't be? Talk to bank customers or employees, however, and it's a different story. The bank reputation index, conducted by East & Partners and Daymark PR, published last month found that smaller businesses take a dim view about Australian banks. Regardless of what Brand Finance might say, small business thinks the Australian bank brand stinks. Significantly, the big four didn't get a look-in for the Readers Digest 2011 rankings of Australia's most trusted brands. That went to the Bendigo and Adelaide Bank. Different methodology, different results.

The Brand Finance survey did point to some alarming signs of how badly certain companies have treated their brands.

Like its share price – propped up only speculation of a takeover – the brand goodwill for Qantas is now in freefall. According to the study, its brand value has declined by $108 million, a result of bad news stories about punctuality, safety and last year's lock-out which divided the nation. Years ago, the once iconic Australian brand had a brand value of $1.8 billion. It's now less than $1 billion.

Brand values plummeted In the Australian retail sector with 11 of the country's most valuable retail brands losing $44 million in value. By way of contrast, the world's most valuable retail brands led by Walmart gained $5.3 billion. Walmart's value is $38.32 billion, five times more than Woolworths.

At $7 billion, Woolies is still Australia's most valuable brand, but its brand value fell 6.6 per cent with Coles (now in number three spot) eating its lunch. Harvey Norman's brand value has crashed to $404 million, down 21.5 per cent and David Jones similarly suffered a 20.4 per cent decline in its brand value. Myer was down 11.5 per cent. Significantly for Myer, Harvey Norman and DJs, two of the world's most valuable retail brands now are the purely online players, Amazon and eBay. They know how to connect with their customers.

Real brand management is about delivering on your promise. That takes time and awareness of the broader community and the market.

Studies like the one put out by Brand Finance suggest we have some way to go to making our brands stand out locally, and perhaps for some, on the global stage. If Australian managers want to compete globally, they need to look at their total offerings and deliver on their promise, including the systems that support those offerings, their relations with staff, suppliers and the community. Real brand management is a lot more challenging than running slick ads.