Scan Magazine

By Karolina Oestlin

Scandinavian brands H&M and IKEA have been placed first and third respectively on global brand agency Interbrand’s most recent list of the Best European Brands. They and many other Scandinavian brands are clearly getting something right. But what is the secret behind creating such remarkably strong brands? Scan Magazine had a chat with Graham Hales, Managing Director at Interbrand London, to explore the reason behind this success.

Brands are everywhere around us. They have become a natural part of our everyday lives, helping us to make instant and almost instinctive choices about what we eat, wear and practically everything else in life on which you can put a price. The choice is often based on previous experience of a brand’s products or services, or on what a brand represents in terms of attitude or lifestyle.

Graham Hales, Managing Director at global brand consultancy Interbrand, London, describes a brand as “a stamp of value.” The brand promises that by choosing it, you will get a certain quality or experience. When it continuously lives up to the promise, you will begin to expect certain things from that brand and it becomes essential for the business. “Without a brand you don’t have a reputation,” says Hales.

Scandinavian secret

So with two Scandinavian brands topping Interbrand’s Best European Brands list what does Hales think is the secret behind the Scandinavian’s success?

“Scandinavian brands tend to have a cool, clinical, contemporary cleverness attached to them,” Hales says. To a certain extent, he adds, the success is down to this “contemporary style statement that happens to be Scandinavian.

But more importantly, he concludes, “Scandinavian brands have a sense of character about what they are and what they are not,” meaning that they don’t pretend to be something they aren’t. Their brand promise is communicated clearly and the company delivers on that promise.

More than a logo

Interbrand has worked with companies around the world to create strong brands since the 1970s. To Interbrand, a brand is all about business value, it is an essential business asset, which, if you get it right, will serve both your organisation and your customers well.

But it’s about more than getting the logo right. The logo is only one aspect of the brand, representing what the brand promises to deliver to the customer, Hales emphasises. “For example, the IKEA logo on its own may look very simplistic to someone who doesn’t know the concept of the company. Equally, the use of yellow and blue might not make any sense to them.” But of course, the use of simple lines and the choice of colour make perfect sense for IKEA. It conveys the meaning of the brand and what it promises to consumers: Swedish simplicity, quality design for a good price.

Strong brands

But how do you create a strong brand? “You need to think about the bigger picture of your brand and then create a logo that represents all of that,” says Hales. To do this, companies need to follow certain guidelines. “When you create a brand you need to think of who you want to be in the market place and how you can deliver against that.

You need to see yourself as the market and your consumers see you. Around that insight you formulate a ‘credible brand promise’. That is, ‘what we promise to deliver to our customers,’” Hales says, adding: “The brand also needs to be distinctive in the market place. And, finally, the brand needs to be future focused.”

The hugely successful Swedish fashion brand H&M follows this formula. The company understands what their young target group wants: affordable top fashion. Working closely with celebrities and top fashion designers gives H&M the edge over the competition whilst living up to their promise – and their consumers’ expectations. “Clarity, consistency and leadership,” Hales summarises, is the secret to the H&M brand’s success.

Valuating brands

Convinced of the value that branding represents for a business, Interbrand has developed a Brand Valuation tool that measures the asset a brand is to its owner in actual financial terms. “Brand value is the dollar value of a brand.” Over the years, Interbrand’s Brand Valuation has become a significant industry benchmark.

Interbrand calculates brand value in a way similar to how other financial value is determined. The way the current brand owners use the brand is taken into consideration, as is the current value of the earnings that the brand is expected to generate in the future. There are three key elements involved in Brand Valuation: Financial Forecasting (financial forecast used to calculate the Economic Value Added (EVA) of the branded business), Role of Branding (which identifies the earnings of EVA specifically attributable to the brand, depending on the importance of the brand for customers in choosing products or services) and Brand Strength (determination of the risk of future earnings relating to the brand).

Based on its research, Interbrand every year compiles a list of the Best Global Brands which is published in Business Week. Recently, they have also started publishing a list of the Best European Brands. In 2009, H&M topped the list and IKEA was third.

What are they doing right?

Both brands know what their consumers want and deliver on it:

H&M – affordable fashion

Ranges by top fashion designers

Linkage to celebrities

Value for money

Clear and consistent communication

IKEA – affordable home design

Simplicity of design – fits every home

Great retail environment

Value for money

Clear and consistent communication