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What is Brand EQ and why is important for your brand?

April 29, 2021 By Sean Healy

Emotionally intelligent brands grow up to hundreds of percent faster than their less humane competitors, reveals Carat’s study of the world’s most emotionally intelligent brands. Sean Healy, Global Chief Strategy Officer at Carat, explains why every brand should invest in improving their emotional intelligence.

I am a firm believer that more human understanding builds better relationships and makes the world a better place. That is true for both people and brands. The better they both understand each other, the more value both parties can enjoy from the experiences they share. At Carat, we call this philosophy and approach Designing for People – and it sits at the very centre of our brand. We focus on building experiences out from a position of empathy.

This is a break with lots of the conventions of current thinking about brands and communication. The last decade has seen a move towards more investment in short-term marketing goals, creative formats that are less obviously able to express emotion, and the reduction of the tracking of brand attributes. We believe that this has not represented progress.

In a complex world in which thoughtful design of the entire brand experience is vital, emotional resonance has, if anything, become more crucial. Surely our ability to learn more about our customers and prospects as real people should enable us to relate to them better, not just adjust the specifics of propositions that they are served with increasing precision.

Beyond IQ - What is Brand EQ?

Our recent study, the Brand EQ Report, focuses on emotional intelligence or EQ, a profoundly human attribute, and the models that psychologists have built to explain and measure it.

Psychiatry and literary criticism were the first disciplines to use the term emotional intelligence in the 1960s.  This idea of forms of intelligence beyond IQ developed over the next two decades. The term EQ first appeared in 1987, but emotional intelligence became a mainstream topic only in 1995 through Daniel Goleman’s best-seller, Emotional Intelligence – Why It Can Matter More than IQ.  His ideas suggest that EQ is not a purely innate quality but can be learned and developed. If you were anywhere near a beach in the summer of 1995, you likely saw this book.

We took inspiration from Goleman’s work identifying five key components of EQ. Our idea was to apply this kind of test to brands and to mirror the criteria used to analyse people in a multi-market study of brand behaviour. We sought to understand which brands best mirrored this very human quality and whether there were transferable learnings from these high performers.

Here’s how the elements of EQ translated into claims about brand behaviour.

By asking these questions and exploring the strategies of 48 of the world’s biggest brands, we aimed to find answers to questions such as:

  • Which brands have the highest EQ? (Many tech brands scored high, but Uber and Facebook were poor performers.)
  • What are the behaviours of high EQ brands? (Responsiveness to people’s needs and clear communication are good starting point.)
  • Do different groups of people perceive Brand EQ differently? (Yes, young people’s opinions weigh more than their wallets.)
  • Do Brand EQ scores differ by category and market? (The most emotionally intelligent brand in the USA, Russia, and France is ranked the weakest brand of the study in Japan. Guess what it is?)

The ROI of EQ

However, you may be asking the question, “Does having higher Brand EQ make any difference or does it just sound nice?”  We also asked ourselves this question and were very interested to see our hypothesis that more Brand EQ equals more growth was born out in practice.

We plotted the increase in shareholder value for our Top 20 Brand EQ performers versus major stock market indices: S&P 500, Dow Jones industrial average, FTSE 100, and DAX 30.

We found the most emotionally intelligent brands beat the indices by 574% over the last decade.

We also compared the 20 highest EQ companies' share price performance to the 28 lowest EQ brands in the index. Since 2010, a stock portfolio comprised of the top 20 brands has outperformed the low EQ shares by over 400 percentage points.

Focusing on Brand EQ is not just a ‘nice to.’ It looks like you can do the human thing and build brand value at the same time.

What are the world's most emotionally intelligent brands – and what your company can learn from them? Download Carat Brand EQ Report and learn how to build more emotionally intelligent bonds with your customers.