Branding is no longer what you do to cows

November 8th, 2004

Wired Magazine published an article this month about brands and marketing communications. The Decline of Brands
The author is James Surowiecki. Surowiecki says:

The world, it seems, is disappearing beneath a deluge of logos. In the past decade, corporations looking to navigate an ever more competitive marketplace have embraced the gospel of branding with newfound fervor. The brand value of companies like Coca-Cola and IBM is routinely calculated at tens of billions of dollars, and brands have come to be seen as the ultimate long-term asset – economic engines capable of withstanding turbulence and generating profits for decades. So companies spend billions on brand campaigns and try to indelibly mark everything in sight, from the ING New York City Marathon to the Diamond Nuts cup holders at SBC Park.

Apparently since 1991, the number of brands in grocery stores in the US has tripled and the average American sees 60% more advertising than 15 years ago. In the UK the stats are not much different, and with the homegenisation of the high street customers are are facing potentially the myth of choice

Marketers may consider the explosion of new brands to be evidence of branding's importance, but in fact the opposite is true. It would be a waste of money to launch a clever logo into a world of durable brands and loyal customers. But because consumers are more promiscuous and fickle than ever, established brands are vulnerable, and new ones have a real chance of succeeding – for at least a little while. The obsession with brands, paradoxically, demonstrates their weakness.
The single biggest explanation for fragile brands is the swelling strength of the consumer. We've seen a pronounced jump in the amount of information available about goods and services. It's not just bellwethers like Consumers Union and J.D. Power, established authorities that unquestionably shape people's buying decisions, but also the crush of magazines, Web sites, and message boards scrutinizing products. Consumers have also become more demanding: Even as the quality and reliability of products have generally risen, satisfaction ratings have not budged, and in some cases they've actually fallen. Businesses are now dealing with buyers who are armed with both information and harsh expectations. In this environment, companies that slip up – even if it's simply failing to match customer tastes – can no longer count on their good names to carry them through. And consumers have become far more willing to experiment with products, because the amount of information out there makes taking a chance far less risky. By the time you think about buying that digital altimeter barometer, chances are the bleeding edge has already weighed in at Epinions. This gives nascent brands an opportunity to succeed, but it also makes staying power a lot harder to come by. Welcome to the What Have You Done for Me Lately? economy.

Many people it seems, still believe in the myth of the brand, but within the context of yesteryear. Today successful businesses and their brands must become more 'service orientated' if they want to achieve significant sales growth.
The article shows via Sony that price premiums for strong brands are diminishing. TiVo revolutionised the television industry but Wired claims they have never made any profit. Yet many business models are ripe for innovation as the old model collapses.
It seems to me that the segmentation of who does what in a business process, in conceiving and bringing to market new business propositions and how they are marketed needs to be rethought. Leaps of the imagination are required without the loss of traditional business rigour. I guess one might say it is a more entrepreneurial approach embedded within a corporation.
Wired says brands used to be a haven from the competition, that is no longer true. James Surowiecki sums up

Over time, certain brands came to connote quality. They did provide a measure of insurance – which in turn made firms less innovative and less rigorous. (Think of the abominable cars General Motors, Ford, and Chrysler made in the late 1960s through the 1970s – remember the Pinto? – in part because they assumed that they had customers for life.) That sense of protection is eroding in industry after industry, and instead of a consumer economy in which success is determined in large part by name, it's now being determined by performance. The aristocracy of brand is dead. Long live the meritocracy of product.

Business 2.0 one might argue.

Sorry, comments for this entry are closed at this time.

Follow SMLXL