One of my childhood memories is seeing my grandfather checking out the teletext for the Stock Market. I found that funny, because it reminded me of those American executives from the movies, and my grandfather knew about a lot of things, but he was certainly not a financial expert. 

Maria Lara – Superunion/WPP

During these uncertain times, many small savers are looking for a solution to manage their equity in such a way that it is not impacted by inflation. With long-term investment horizons, Stock Market investments are a common choice, either as investment funds or by buying stocks from specific companies.   

In general, these small investors, like my grandfather, don’t have any deep understanding of the market. They know nothing about trends, cycles, multiples, or resistance. However, there are two things that are particularly relevant for them: dividends and brand.

Dividends –especially at this stage of market uncertainty we are going through– are a return policy that provides stability to portfolios, therefore, small savers not looking for vulnerability try to put their capital into companies that deliver annual yields, aiming at businesses in good financial shape and with a good position in the market. But we are back to the previous point: Do these small shareholders really know the financial standing of their companies? Or is it just their brand perception what makes them guess if the company is “doing good” or “not so good”?

Brands are key for shareholders

For years, one of the charts most used by people who do branding shows how brands with bigger brand equity are constantly beating the stock indexes. But how do small investors’ perceptions impact the evolution of listings?

According to the paper “Background Noise? TV Advertising Affects Real Time Investor Behavior” by Jura Liaukonyte y Alminas Zaldokas, the average TV ad increases in 3% the number of inquiries made to the SEC and in 8% the number of Google searches related with financial information made within 15 minutes after the ad is broadcasted. These searches increased the volume of trading of the advertiser’s shares, which was mainly boosted by small investors. 

And if we take a step further, can a change in brand perception impact the evolution of market values? Based on data collected using our BAV (WPP’s Brand Asset Valuator), we confirmed that brand realities that are often forgotten are related with the evolution of share listings. 

The BAV –which in Spain has surveyed more than 13,000 consumers and covered 1,300 brands– serves to analyze brands belonging to different industries using with the same criteria, in a way similar to what consumers do in real life. This paradigm shift is a reality that has been established for years in the portfolios of shareholders: people with limited resources to choose where to invest and for whom industries are not relevant, a scenario where investments in energy, financial or FMCG coexist and are compared without any type of inhibition. 

If we link the evolution of share price of IBEX35 companies in recent years and the evolution of their brand perception, we can come up with an easy regression model that shows us which brand attributes weigh heaviest on the evolution of a share price. Out of the 47 brand attributes that the BAV assesses, four explain very accurately how they have an impact on the evolution of shares: arrogant, strong, direct, and creative. The first two attributes result in a negative correlation, while the other two show a positive correlation. 

Of particular interest is the fact that attributes such as arrogant and strong have negative correlations (i.e., the higher the perception of these attributes, the stronger the impact on the share), because the perception of being superior while also being strikingly strong and tenacious constitute leadership traits. A type of leadership that is separated by a fine line from arrogance –so typical of companies from the 90s and 2000s– and which is clearly in decline. Audiences look for companies that speak directly to them, with a human touch. Something that is clear with positive correlations: today, more than ever, audiences reward brands that are honest and transparent at all stages of contact, from assembly instructions to ESG reporting.

But, without a doubt, what is most interesting is that creativity is the brand attribute that has the strongest impact on this model. We understand that a brand is creative if it is imaginative and innovative, and such creativity may be displayed both artistically (advertising campaigns) and in terms of problem-solving (product and service innovation).

In a world of growing expectations, more competition, commoditized knowledge, and less barriers to entry, creative companies have an advantage over their competitors. 

And that is what shareholders grasp. Because when they see that a brand is capable of materializing original thinking across all touchpoints while maintaining a transparent and non-arrogant attitude, they implicitly perceive that such company has a clear direction that promotes growth which makes it an audience favorite. In short, they perceive that the company is “doing good” and, therefore, buy its shares, ultimately increasing its value.