At one point last year, and for the first time in history, the five largest companies by market capitalization were all technology companies: 1) Apple 2) Alphabet (parent company of Google) 3) Microsoft 4) Amazon and 5) Facebook.
This is a staggering shift from a few short years ago, when the top five list was inhabited by oil companies and the odd retailer or financial firm.
So how did this massive wealth creation in tech happen? The most important factor is probably how tech companies are able to scale and develop new products and services in ways that traditional brick and mortar firms can not. Visual Capitalist puts it very clearly:
“Scale has always been in style, but now it is achievable in ways like never before. To reach more people, Walmart had to build more stores, expand complex supply chains, and hire new employees. This takes a lot of capital and manpower, and the stakes are high for each new expansion.
Amazon on the other hand, can bring in more revenues with less of the work or risk involved. Scale allows tech companies to get bigger without getting bogged down by many of the problems that companies with millions of employees can run into.”
These tech companies can all create and take to market new products and services at a speed and cost never before possible. But creating a new product or service quickly and cheaply isn’t enough by itself. When you look closely at the top companies on this list, they all have an amazing branding advantage that you and your company can learn from too.
Part of the reason why Apple, Google, Microsoft, and Amazon have the chance to become the world’s first trillion-dollar companies is because they can not only create new offerings more quickly and cheaply, but have built the brand infrastructure to ensure they have a set of customers waiting in the wings to purchase these new offerings as soon as they come out.
The branding terms for this are “awareness and consideration,” and I can best illustrate how they work to the advantage of mega tech firms with a quick story.
The mega brand halo
Over the years I’ve done many brand tracking surveys in the technology industry. Typically, one of the things our customers are looking to understand is who their top competitors are in the market, and how strong each competitor is in the minds of potential customers.
So we’ll often ask an open-ended question like “When it comes to the *hotwidget* space, what companies come to mind?” to see what brands people can name, unaided.
In the business-to-business technology space, I’ve found an amazing and consistent trend over the years:
Regardless of the technology category, the same big companies (historically Microsoft, IBM, and Oracle, but more recently including Google, and in some categories Apple and Amazon) almost always show up high on or at the top of the list.
What’s more, it often doesn’t even matter whether these companies have a strong offering in the space, or even if they have any product or service at all. They still show up, and often show up above the companies considered to be the leaders in the space.
When I first saw this effect, my initial reaction was to blame it on crappy data. Surely seeing a company like Microsoft at the top of the list in a category they weren’t even competitive in means that the supposed “IT decision makers” on the list we purchased don’t know anything about the space, right? Maybe they are professional survey takers that just want to stock up on a lot of complimentary Starbucks gift cards or whatever they get for taking surveys.
But as I saw the same thing over and over again it became clear that the broad awareness of these mega brands was translating into instant consideration as well. To put it more simply:
Potential customers in a category will often assume leading brands have a product or service and will consider it before they consider brands they do not already know.
This mega brand halo makes it very easy for big companies like Microsoft, IBM, and Google to enter new markets if they can manage to string together a serviceable offering or acquire a leading company in the space. And if they pair their brand advantage with a great product or service, they can quickly take over a nascent market.
Trusted brand + competent product = domination.
How to make awareness and consideration work for you
Now unless you are one of these big mega brands, you won’t be able to elbow your way into any category based on the strength of your brand. But you can take the same concept and make it work for you where you are today.
Say you’ve already developed a leading reputation in the *hotwidget* space over the past few years and sales are strong. Your *hotwidget* product is winning awards, getting named in magic quadrants and all that mess.
It’s time to double down on your success, and expand into a very closely associated market, the *firewidget* space. So you develop a new product, and start work on your brand and launch strategy.
One of your colleagues suggests that you hire a brand naming firm to develop a new brand name for this new product. After all, we don’t want it to get confused with our *hotwidget* product, right?
STOP RIGHT THERE TIGER…
One of the biggest brand mistakes I see young technology companies (and companies in other industries too) make is diluting the power of their corporate brands by creating a new sub-brand for every product they make.
Similarly, one of the biggest mistakes I see larger technology companies make is acquiring companies and not doing the hard work to transfer brand equity back to the mothership over time. Many of these companies become a patchwork quilt of unassociated brands with a very weak corporate brand holding them loosely together.
Each new brand you create or acquire takes time and resources to support. These brands each take space (or don’t) in the minds of your potential customers. And they limit your opportunity to ever have one strong core brand with a solid industry reputation that lets you cross into new categories easily the way the big boys do.
While it is often hard to achieve 100% purity (there are lots of exceptions), the general strategy I recommend for most companies is this: feed as much energy as you can into building a strong corporate brand, and force product brands to be subservient to the corporate brand.
In many cases, I even recommend forgoing creating distinct brand names altogether for new products, and instead moving toward a descriptive naming strategy that feeds brand equity to the corporate brand.
Oracle has been a ruthless master of this over the years. They acquire a company, then after a few years of parasitic transference of existing brand equity, they rename the product to a purely descriptive name that points back to the core Oracle brand. Take one look at the Oracle product page and you’ll see what I mean.
But Oracle isn’t the only leading tech company doing this. Google, while building more products than it acquires, does the same thing. The place where you store your documents is called Google Drive. Mail is Google Mail. Google Docs. Google Slides. Google Voice. Google Adwords. Google Analytics. All pure descriptors that push power back to the core Google brand.
Apple does it too: Apple Watch, Apple TV, iPhone, iTunes, etc.
IBM has not been a pure follower of this naming strategy, but they do make a massive investment in the corporate brand to keep it front and center, and have very strict rules about how product brands bow down to the 8-bar corporate logo.
So if you are a small company and your first product is also your company brand, consider expanding into new spaces by using a descriptor versus creating a new product brand. Think very carefully before trying to break ground with a new brand if you could get an easy boost by using your existing brand to enter the new space.
If you are a larger company and already have multiple brands competing for internal resources and diluting your brand power in the marketplace, consider an un-naming strategy, where you retire product names over time and replace them with descriptors that push brand equity back towards your core company brand.
Either way, you’ll begin to take advantage of branding economies of scale and increase your ability to enter new adjacent markets with potential customers who already know your brand and would consider you in a new category because of it.
Eventually you might even find yourself in the enviable position of the mega brands, where potential customers assume you have products in markets you haven’t even entered yet.