The rising value of industrial brands

In crowded and noisy marketplaces, consumers shopping for everything from antacids to airline tickets turn to the brands they trust again and again. Our new research shows that buyers in industrial sectors tend to behave in similar ways. Of the more than 5,300 industrial brands we studied, the top 5 percent capture 95 percent of share of voice that is, mentions in publications and consumer media in their sectors. As with consumer products, the top industrial brands that get more public attention can charge price premiums of 5 to 10 percent, helping the companies that own them generate significantly higher ROIC.

The trend in purchasing is accelerating. Digital tools give purchasers access to more information about the full array of products available in the global market along with prices, performance specifications, and customer reviews. As product options multiply, a strong brand presence gives shoppers more confidence that they’re making the right choice an advantage for households and procurement departments alike.

Powerful brands also make customers more loyal, more willing to tolerate small missteps, and more likely to promote products and services to colleagues, friends, and family.

Across industries, many senior procurement executives tell us that they rely on just a handful of brands for critical services, equipment, spare parts, and so on. They believe these brands offer high quality and reliability to help users avoid downtime, delays, and accidents; many also cite the brands’ first-rate sales and service.

In this article, we share our findings about the brands of more than 900 companies in ten industrial sectors, from home building to electronic equipment. We explain how brand visibility translates into ROIC, and we conclude with proven recipes and successful case examples for improving brand strength and raising performance in an increasingly competitive marketplace.

Brand visibility drives returns

At many industrial companies, traditional marketing takes a back seat to engineering and other technical expertise. The good news is that industrial firms have far fewer potential customers than consumer-facing companies, so they rarely need vast marketing departments or costly multimedia advertising. According to our research, nearly 80 percent of industrial brands operate in just one or two micro verticals each.

To determine the visibility of the more than 5,300 industrial brands we studied, we tallied their mentions in the media, including industry publications that customers read to learn about new products, systems, and technologies. Because B2B sales are increasingly held to the same standards as B2C sales channels, including the option to purchase online, we also tracked the growth of searches for the brands on major online search engines (see sidebar, “New insights into the industrial branding landscape”).

We found that a strong voice resonates: journalists, editors, and readers tend to focus their attention on just a handful of brands in any segment. On average, the top 5 percent of brands capture 95 percent of share of voice.

Visibility tends to decline over time, however, in part because new products and services catch the attention of customers and journalists. Our research shows that about 60 percent of industrial brands have become less visible in the past five years. Yet 10 percent of the brands we studied grew their visibility by at least 50 percent during the same period. In addition, the brands of the largest companies grew visibility 20 percentage points faster, delivering an average of 14 percent growth compared with a 4 percent decline for small and medium-size companies. Indeed, companies in the top quartile of visibility growth averaged more than three percentage points of ROIC growth above those in the bottom quartile.

Strengthening the brand portfolio

Companies can take a range of strategic actions to group brands into segments and quickly grow their customer base, reduce competitive threats, and capture market share:

Consolidate the portfolio. After identifying their strongest brands, companies can consolidate their market positions by focusing on micro verticals where they already win.
Adjust pricing. Companies may consider value-based pricing, in which a brand’s price aligns with its ability to generate value for customers. This can differentiate the brand’s performance from lower-quality competitors.
Invest in growth. Many companies can wield investment in R&D, product development, or M&A to expand their offerings and meet more customers’ needs.
Consider divestiture. Where visibility and sentiment analyses show that a brand is faltering, senior leaders can conduct an impartial cost analysis of turning the trend around and decide whether to invest or divest.

Raising brand visibility

Since their audiences are relatively small, many industrial marketing teams can raise visibility quickly by taking a range of actions:

Embrace omnichannel marketing and sales. Investing in new online and digital sales channels can expand brand visibility and drive growth while improving margins over those achieved using only traditional channels, such as in-person sales.
Update messaging. Companies can create momentum for their brands by incorporating upgrades and digital offerings into their core messaging to set themselves apart from less innovative competitors.
Launch bold marketing campaigns. To generate interest in their brands, some companies are mounting new marketing campaigns that borrow from B2C best practices. Others are gaining traction by playing larger roles in industry events.
Partner with the best customers. Closer relationships can involve sharing success stories and raising awareness about the value generated by new products.
Invest in digital and analytics. Investments in digital and analytics capabilities can enable industrial companies to reset the perception of their brands and expand their product offerings in the long term. Many are now forging partnerships with tech companies to close skill gaps faster, given the challenges of hiring and retaining top tech talent.

To increase brand visibility in new channels, the manufacturer often appeared in publications for food professionals sharing the latest news and technical and product recommendations. And in an effort to update messaging and create momentum, at recent webinars and online industry events it provided attendees with an immersive experience using virtual reality customers could see new products and explore specs and details remotely.

The striking results of these efforts include an increase in visibility of about 40 percent and an ROIC improvement of roughly five percentage points.

McKinsey