It makes logical sense that companies with trusted brands should generate more business, which in theory should fuel gains in the stock price. In fact, a new study by consulting firm AlixPartners shows just that.
From January 2004 to January 2007, the stocks of the eight brands that were most trusted according to AlixPartners' Brand Power Index (BPI) returned an average of 116% vs. an increase in the
of 26%. Meanwhile, the seven companies that "clearly did not meet consumer expectations" rose only 15% over the same period.
The brands that wowed consumers included
Procter & Gamble
. Among those that disappointed them were
is the brand that came out on top in terms of winning consumer trust. Fred Crawford, managing director of AlixPartners, was surprised by that particular finding. "It's remarkable that a Japanese brand is the most trusted in America," he says. "Especially when you consider that many of the Japanese cars were not trusted, particularly by the older demographic
in the study."
Crawford contrasts Sony with Apple, which also came out near the top. "Sony has not been on the leading edge of technology, but it builds solid, reliable products." Apple was viewed as a product leader but received bad grades in price and service. "Apple is perceived as an innovative company that charges too much for their products," he suggests.
Apple shares rose nearly 700% between 2004 and 2007, while Sony actually lagged the S&P by about 1%.
Not surprisingly, the retailers who consistently exceed their customers' expectations saw strong performance from their shares.
were the two top performers among retailers in the survey. Their stocks returned 48% and 207% respectively.
Crawford is not surprised by the outperformance of the group. "A stock's valuation is a combination of financial fundamentals and intangibles. Those intangible elements are increasing over time," he explains.
Also interesting to note is that legacy brands such as Levi's, Vick's and
7-Up are doing well, perhaps as consumers attempt to return to simpler times.
The lowest-scoring brand was Ford, which had "good awareness but an abysmal trust score." The authors of the survey suggest that Ford should look for ways to become an aspirational purchase for lower-income shoppers, as that segment gave Ford the highest marks.
The survey declares that the "era of 'I-am-what-I-wear/eat/drive/etc.' is long gone." Today's consumers are more interested in products that get the job done, that are priced fairly and readily available. One only has to point to
Chevrolet as the "most popular automotive brand in America," according to the survey, as evidence of this phenomenon.
The survey broke down customers' experience by five categories -- price, access, product, service and experience. Some 5,000 consumers were asked 60 questions in the fall of 2006 to determine which were the most and least trusted brands in the U.S. Some brands such as
showed up in the top-10 most
least trusted brands.
The top eight brands that exceeded customers' expectations along with the top seven that did not meet expectations are listed below:
In keeping with TSC's editorial policy, Lichtenfeld doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.
Marc Lichtenfeld was previously an analyst at Avalon Research Group and The Weiss Group and a trader at Carlin Equities. He holds NASD 86, 87, 7 and 63 licenses. His prior journalism experience includes being a reporter/anchor for On24 in San Francisco and a managing editor of InvestorsObserver, a personal finance Web site. He is a graduate of the State University of New York at Albany. He appreciates your feedback;
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