New Report Explores Role of Branding in Global Economy & Within Innovation Ecosystem
19 Nov, 2013
Companies around the globe have spent nearly a half-trillion US dollars (USD) annually on branding, exceeding outlays on research and development and design while accounting in some countries for up to a quarter of firms’ overall investments in intangible assets.1
WIPO’s second “World Intellectual Property Report” entitled “Brands: Reputation and Image in the Global Marketplace” offers fresh data, analysis and insight into how companies use brands to differentiate their products from those of their rivals – and what the growing use of brands means for consumers, market competition, and innovation.
WIPO Director General Francis Gurry said: “A brand incarnates an enterprise’s reputation and image and so is one of an enterprise’s most valuable assets. As markets have become more distributed and virtual, the protection provided by trademarks for reputation and image has also become increasingly important.”
According to the report, companies invested some USD $466 billion globally on branding in 2011, the latest year for which there are reliable data. This figure would be even higher if spending on strategic marketing, corporate communications, other bought-in services that contribute to brand perception, as well as company-internal expenditures on branding were also considered. Fuller data for the US, which accounts for all branding expenditures, show that investment in branding stands at USD $340 billion in 2010 for the US alone – twice as much as previous incomplete estimates. This exceeds US companies’ investments in R&D or design, and accounts for a quarter of their intangible asset investments.
While branding investments correlate closely with the level of economic development around the world, rapidly growing middle-income economies such as China and India today invest more in branding than high-income economies did when they were at a comparable development stage.
The report shows that the average brand value of companies based in middle-income economies has grown faster than that of companies in high-income economies. In fact, the share of middle-income economies in the total value of the top 500 brands increased from 6 percent to 9 percent between 2009 and 2013.
The report also explores the role of the trademark system in supporting the branding activities of firms. Trademarks are the most widely used form of registered intellectual property (IP) throughout the world. Many low- and middle-income countries see companies intensively file for trademarks, even if they make comparatively less use of other IP forms.
Trademark demand quadrupled between 1985 and 2011, from just under 1 million applications per year in 1985to 4.2 million by 2011. While high-income economies for which data are available increased their trademark filing intensity relative to GDP by a factor of 1.6 between 1985 and 2011, middle-income economies increased it by a factor of 2.6 during this period. Indeed, in 2001, China’s trademark office had become the top recipient of trademark filings – a position China gained in patent filings ten years later, in 2011.
Looking at trademark institutions, the report argues for policies that promote accessibility to the trademark system, while balancing the interests of right holders and those of third parties. In addition, it highlights the risk of “trademark cluttering” – the registries of national trademark offices growing to the point where there’s a diminished availability of names and other signs for new trademarks.
The report looked at other other policy matters, including whether registration of a trademark should be conditional on the applicant usage of a trademark. Also, to what degree offices should examine whether new applications pose a conflict with earlier trademarks in different ownership.
In a wider perspective, the report explores how companies’ branding strategies interact with their overall innovation strategies. Through branding, companies can increase the demand for their products and enhance the willingness of consumers to pay for them. Evidence shows that branding is one of the most important mechanisms for firms to secure returns on product innovation.
Finally, the report looks at situations where strong brands create barriers to market entry, highlighting the role of brands in assessing the competitive effects of mergers and acquisitions, as well as “vertical” arrangements between manufacturers and distributors.
Picture source: WIPO