The most successful companies spend considerable time, energy, and money managing their brands. Would nations’ prosperity improve if they adopted similar brand strategies? The goal of the Best Countries study, a collaboration between the Wharton School, U.S. News & World Report, and WPP’s BAV Consulting, is to help the world understand the value of nation brands – and how nations are perceived around the world.

We have become quite accustomed to brands in our lives. Companies such as Apple, Google, Coca Cola, and Toyota have four of the most valuable brands in the world. The most successful companies spend considerable time, energy, and money managing their brands. Why do they do so? Because it is economically beneficial for them to do so. As they build their brand image in customers’ minds, they are able to have a more loyal customer base willing to pay extra for their products and/ or buy more of their products. They recognize that to maintain and grow their customer bases most effectively they should carefully nurture positive consumer perceptions of their products or services and correct negative misperceptions.

For many years, Google knew they had a great internet search engine, yet never tried to manage their brand. Only later did they realize that their brand was one of the most valuable assets. Users would opt to do web searches on Google over other search engines, simple because it was Google, never even exploring whether the searches on Bing or Yahoo or Baidu would yield better or faster results. They had become brand loyal. This provides value for Google as they are able to very successfully sell their traffic to advertisers.

Similar to companies, nations have brand images of their own. Would nations’ economies similarly prosper if they adopted similar “brand” strategies?

Some people, however, may be resistant to the idea that nations are also brands. They might be concerned that applying the term “brand” to a nation diminishes its dignity or reduces the nation and its people to the level of a corporate product. But the basic concept of a brand is not complicated and should not be threatening to patriotic sensitivities. 1n business, a brand is the collection of perceptions that consumers have about a company and its products or services. Those perceptions may be based on feelings as well as concrete facts, and those perceptions may or may not be objectively accurate. Regardless, those perceptions affect prices and volume of sales. Similarly, a nation’s brand is the collection of perceptions people have about the nation-perceptions about what people can expect if they visit the nation, buy goods from the nation, or invest capital there.

Branding consultancies have developed meth­ods to estimate the value of global product brands and regularly publish rankings based on those esti­mates. I teamed with U.S. News & World Report and WPP’s BAY Consulting on the “Best Countries” study to measure nation brands-and how nations’ brands affect their economies.

Why do companies care about their brands?

The most successful companies invest in long-term product branding strategies. Through development of good products and services cou­pled with focused and coordinated advertising and public relations campaigns, these companies create awareness and positive perceptions of their prod­ucts or services. They do so because there is good return to the company if consumers are aware of the company’s products or services and have posi­tive associations with them. This return is reflected in the company’s ability to charge a premium price for the product or service and/or to create greater volume of sales.

As the brand improves, it shifts the demand curve outward. The figure below depicts a shift in a product’s demand curve because of an increase in the brand perception. The result of effective prod­uct branding depicted in the chart is an increase in pricing and sales. The shaded areas indicate the increase in revenue.

Shift in demand curve of a product due to increase in brand perception, leading to increase in price & sales

It cannot be overemphasized that a brand is a perception by others. Perception, however, is not always an accurate reflection of reality. In the realm of commercial products, a brand may be “misper­ceived” -that is, the view of the product rates lower than what an objective measure might indicate. This calls for the seller of the product to work to make sure the product is better understood. On the other hand, if the perception of a commercial product is poor and the perception is relatively accurate, the best way to improve the product’s brand is by directly improving the product-and making sure that consumers actually perceive these improvements.

What is a “Nation Brand”?

Like perceptions of a company’s products or services, individuals’ perceptions of nations are based on their experiences as consumers, investors, tourists, and followers of global news and social media. Their perceptions are also based 0111 experi­ences communicated to them by others, including family, friends, and colleagues-even casual acquaintances. Based on these experiences, people learn and develop generalizations about various nations of the world.

For example, people might develop generalizations that products from Italy are stylish, that French wine is superior to all other wines, or that German cars are well engineered. There are some nations that are perceived to have unique capabil­ities, such as Israel for its cyber security, or China and India for their low-cost manufacturing capa­bilities. The extent to which these generalizations correlate with objective facts may vary. What is crit­ical for the study of nation branding is perception. Positive perceptions of a nation lead to commerce in a variety of forms. Similarly, negative perceptions of a nation may reduce national commerce.

Some companies take explicit advantage of their nation’s positive brand image by promoting the country of origin along with their brands and products. For example, Swiss Army Knives take advantage of the perception that Swiss products are superior in precision. Sin1ilarly, the subscrip­tion shaving-products company Harry’s promotes its razors as “German-engineered” to capitalize on worldwide perception of German precision, whether or not German engineering makes any difference in the smoothness of a shave.

If, however, a nation is not particularly known for being good in certain areas, or if the nation is disliked for geopolitical reasons that may even be totally unrelated to a product, product-brand­ing efforts might seek to avoid those negative nation-brand associations. The personal technology company Lenovo may have increased its profitability because its name sounds very non-Chinese, obscuring the fact that Lenovo manufactures in China. Lenovo probably made a wise choice of names because China is known for low-cost man­ufacturing but not for reliability or technological innovation. Similarly, Intel does not advertise that Israeli engineers designed its laptop chips, perhaps because Intel does not want its products to be asso­ciated with Israel’s geopolitical struggles.

On the flip side, some businesses might take advantage of the positive brand image of a nation or region by creating an undeserved or attenuated association. Haagen-Dazs ice cream is a brand name that most associate with being from Scan­dinavia, which carries a positive wholesome dairy association. But Haagen-Dazs originated in the Bronx, a borough of New York City that is not well known for its dairy products.

Return on Nation Branding

The effect of a nation’s brand on its economy cannot be understated. While a nation’s brand cer­tainly affects its tourism industry, the brand also has powerful effects on the value and volume of the nation’s product exports and foreign direct investment, which have a direct effect on the nation’s GDP.

Just as businesses use methods such as adver­tising to influence consumers’ perceptions of their brands, nations may invest in campaigns to try to shape global views. Branding of geographical regions is not a new practice. Various regions have famously employed branding techniques to boost their economies. Notable examples from the United States include the municipal branding campaign, “What Happens in Vegas, Stays in Vegas;’ and state branding campaigns like “I Love New York” and “Virginia is for Lovers.”

On the world stage, major nation branding campaigns include “Come Back to Jamaica,” an effective campaign to boost tourism, and more recently “Make in India” aimed at encouraging businesses to manufacture in India. The campaign promotes the opening of India’s formerly protec­tionist economy to foreign business. Dubai, one of the emirates of the UAE, has used innovative nation branding strategies to increase foreign domestic investment, including promotion of its free-trade zones, as well as tourism.

Not all nation-branding efforts are immedi­ately obvious to the general population. Less visible efforts may target specific sectors of the business community to encourage investment or trade. These behind-the-scenes nation-branding efforts are similar to the direct marketing of consumer products to individual consumers-efforts that are not readily visible to the general public but which are highly effective. For these campaigns, a nation might make use of tourist bureaus, chambers of commerce, foreign trade administrators, foreign exchange programs, public diplomacy and cultural affairs officers, and even foreign aid and disaster relief programs.

The Best Countries Study

As with a business and its brands, marketing metrics can help a nation, manage its brand. Survey research can provide valuable feedback to nations about how they are actua11y perceived globally. The goal of the Best Countries study is to provide nations with a data-driven model that demonstrates the direct and indirect impact of nation brands on econ­omies and offers prescriptive measures for change.

You can find details of our methods in a book co-authored with BAV’s CEO John Gerzema, Best Countries: Defining Success and Leadership in the Twenty-First Century. You can also access the fuJI Best Countries study on the U.S. News website at www.usnews.com/ news/best-countries.

Our criteria for the inclusion of the 60 nations in the Best Countries study were GDP, tourist arriv­als, foreign direct investment inflows, and human development. For the 60 top-scoring nations in these criteria, we surveyed more than 16,000 global participants (including business decision-makers and educated elites along with the general public), asking about 65 core brand attributes such as bureaucracy, strength of international alliances, education levels, economic stability, religious free­dom, gender equality, and richness of history, just for example.

We grouped the 65 attributes into 9 general sub-rankings that reflect how the nations were per­ceived in terms of (1) Adventure, (2) Citizenship, (3) Cultural Influence, (4) Entrepreneurship, (5) Heritage, (6) Movers (up-and-coming economies), (7) Open for Business, (8) Power, and (9) Quality of Life. To arrive at the final country rankings, we applied statistical weighting based on the relative correlation between the sub-rankings and the coun­tries’ per capita GDP (at purchasing power parity).

Top-ranked Countries

We released the results at the 2016 World Economic Forum in Davos, Switzerland. The top ­ranked countries were as follows:

Sub-rankings of Countries

The sub-rankings of nations in the Best Coun­tries study are also instructive. The following tables provide the rankings of the top five nations in each of the nine sub-rankings, along with (1) the relative percentage correlation of the sub-ranking to GDP PPP per capita and (2) the survey attributes that formed the basis of the sub-ranking.

As you might expect, it is possible for a nation to be perceived as strong in one sub-ranking and weak in another. Brazil might be viewed as strong in Adventure, but not necessarily strong in Entrepreneurship. Sweden might be viewed as one of the best nations in terms of Quality of Life, yet not necessarily dominant in terms of Power.

In addition, the nine perceptional sub-rankings correspond more to certain parts of a nation’s econ­omy than to others. For example, being perceived high in Adventure clearly supports greater tourism. A high perception of Entrepreneurship correlates with high foreign direct investment. Differentiation and Cultural Influence are both positively associ­ated with foreign trade.

The top five countries in each of the nine sub-rankings of the Best Countries Study (2016)

A comparison of the detailed rankings of two countries-in this case, the U.S. and Japan-may also be useful. As can be seen in the table on the following page, there are a number of areas where the U.S. and Japan rank high in the Best Countries study and a number of areas where they rank low, even unexpectedly low:

Although the U.S. ranks high for Power (No. 1), for Cultural Influence (No. 3), and Entrepreneur­ship (No. 3), it is out of the top ten for Citizenship (No. 11) and Quality of Life (No. 14), and out of the top third for Heritage (No. 22), Movers (No. 22), Openness for Business (No. 23), and Adventure (No. 27). In comparison, Japan ranks in middle of the pack for Adventure (No. 32) and Openness for Business (No. 22), just out of the top ten for Citi­zenship (No. 14) and Quality of Life (No. 11), and in the top ten for Cultural Influence (No. 6), Entre­preneurship (No. 2), Heritage (No. 7), Movers (No. 5), and Power (No. 7). However, although Japan ranks in the top ten for more sub-rankings than the U.S., Japan ranks lower overall, in part due to the weighting of the sub-rankings according to their correlation to GDP per capita.

A comparison of the individual country rankings of Japan and the U.S. on each of the measured attributes

Some people may not agree with their nation’s rankings, but the rankings are not a reflection of objective facts. Rather, the rankings reflect how a large sample of residents, business decision makers, and educated elites worldwide subjectively per­ceive the nation. Whether or not the perceptions are accurate, they exist. To the extent the people of a nation believe they are misperceived, they must work to change those misperceptions by improving reality.

Which nations had the highest self-evaluations relative to how the rest of the world views them? Israel and India. That is, the people of these nations perceived their nations to rank higher than the rest of the world would rank them. Are the people of these nations wrong or is the rest of the world wrong? Are these cases of self-deception or lack of external understanding? Regardless, the gap between self-perception and external perception suggests that these nations would benefit from well-designed and well-executed long-term brand­ing campaigns.

Conclusion

Whether they like it or not, nations have brands. The value of their brands has a direct influ­ence on their economies-most specifically on tourism, exports, and foreign direct investment.

Like the most successful corpo­rations, nations would benefit economically from creating effec­tive nation branding campaigns to improve their brands.

However, for a nation to alter perceptions-i.e., to reposition its nation brand-it must make a focused effort to change the perception that other people have of the nation. If negative percep­tions accurately reflect reality, the nation should change its policies. If negative perceptions are inac­curate, the nation should change the minds of the world about these misperceptions.

Which are the important attributes for a nation to change? The ones that affect the nation’s economy the most: Entrepre­neurship {17.42% correlation to GDP per capita); Citizenship {16.95% correlation to GDP per capita); and Quality of Life (16.89% correlation to GDP per capita).

For a nation to understand how its nation brand is viewed globally, surveying perceptions by participants in the global economy is a first step and an opportunity for nations to more actively manage their image. However, no matter how great the repositioning campaign, change will not happen overnight. Fortunately, we are committed to con­tinuing this nation branding survey on an annual basis. The point of the Best Countries study is to emphasize the economic importance of how others view nations. It is an issue beyond national pride. A nation’s brand affects its economy. What other people in the world think about us matters to our everyday lives. Our actions, visible on a global scale, have economic consequences far beyond the direct cost of those actions.

David J. Reibstein is the William S. Woodside Professor and Professor of Marketing at The Wharton School, University of Pennsylvania, USA. Acknowledgment: Special thanks to Tom Lincoln and Anna Blender for their support in this work.