TECHNOLOGY IS DIMINISHING THE POWER OF BRANDS

Technology is not challenging the power of brands but it is disrupting markets, transforming business and profoundly changing the practice of brand building.

It is often argued that technology is rapidly diminishing the power of brands. The thesis is that technology is undermining the need for us to connect or identify with the brands we prefer and that as technology continues to accelerate there will be little space or need for a brand to exist. We no longer need choice to be simplified by brands; technology can do that for us.

It is easy to see why this argument has captured attention. Brands after all are there to make choice easier. Historically brands have acted as shorthand, a proxy for a much-trusted product or service. Now that it is possible to use technology, or more specifically the internet, to make almost instantaneous comparisons between products and services, what function is a brand really serving? We don’t need a brand to simplify choice any more; customers can do that in just a few clicks.

In a situation where customers can seamlessly compare price, features, quality, performance and reliability then surely brands are fundamentally weakened? After all, look at what’s happening to the high street. Well-established and often much-loved retail brands are disappearing almost overnight. A decade ago it would have been unthinkable to imagine a global brand like Toys R Us just disappearing, seemingly unable to find a way of making its business profitable and floundering in the face of a new wave of digital arrivistes.

Those that believe in the demise of brands welcome what they see as the re-emergence of the product as king. Now that customers are truly empowered, the thesis goes, all that really matters is the integrity of the product and the willingness (or otherwise) of a customer to advocate for it.

As interesting as all this may sound, it is fundamentally wrong.

Brands as a form of self-expression

As we have already pointed out in previous chapters, brands exist because people like and fundamentally identify with them. Buying something in a modern economy remains a form of self-expression; like it or not, when you buy a product or service you are discriminating, you are exercising choice in favour of one thing over another, you are making your personal preferences known to others and people will (like it or not) be making assumptions about who they think you are. As a consequence our relationship with brands is emotional. Their power vests in their ability to occupy a unique space in our minds. That space might be smaller than it once was but it is still incredibly valuable. A clear set of positive associations residing solely in the mind of the customer is both difficult to displace and difficult to copy.

The continuing need for relevance and distinctiveness

There can be little doubt that technology is making markets more competitive and disrupting many established business models, but there is little evidence that technology is destroying brands. Those evidencing the demise of once-revered names as evidence of the rapidly diminishing power of brands are really just highlighting that a brand (however strong or illustrious its past) is unable to save a struggling business. Businesses like Woolworths, Toys R Us, BHS and Maplin are all examples of businesses that struggled to change fast enough in the face of rapid disruption and a plethora of new competitors. Brands, in contrast, are as important and as relevant as they have always been. The naysayers will argue that, as the role of a brand is to differentiate one company’s product or service from that of its competitors, technology is eroding the very basis on which brands are built. The ease with which brands can be compared, combined with the huge demands on our time that technology requires of us, leaves little time for brands to assert their uniqueness. The best a brand can hope for now is to be distinctive. In this age of brand promiscuity, where brands are continually incentivizing us to swap, all a brand can do is try to be easy to find and easy to do business with.

As logical as all this sounds, it doesn’t really hold up to greater scrutiny. Across many types of product or service, it is arguable whether customers have ever spent a lot of time in deep contemplation about the relative differences between brands – when buying a can of beans, a chocolate bar or deciding where to buy a coffee, customers have always tended to gravitate towards brands they find distinctive and familiar. Conversely when customers are considering a high-ticket item or planned purchase, such as a car or an expensive piece of audio equipment, then they are naturally more invested in the process (as the consequences are more painful if they make a wrong decision); hence they will often take the time to consider the real points of differentiation between brands.

There is no doubt that technology has made markets more competitive and the role of the marketer more complex, but there is little evidence that the practice of branding is being abandoned or that brands themselves are reducing in number. In fact, as we shall see, the reverse seems to be true.

Meaningful brands generate greater returns

For the past few years the Havas Group have been conducting their ‘Meaningful Brands Survey’. This survey looks at the performance of brands that are considered by customers to be more meaningful than other brands operating in the same category. Havas assert that: ‘A meaningful brand is defined by its impact on our personal and collective wellbeing, plus its functional benefits.’

The annualized survey has revealed that brands considered to be more meaningful than their competitors generate on average a nine times increase in share of wallet and outperform the stock market average by 206 per cent. Contrary to the naysayers’ thesis it seems that customers place a higher value on those brands that have actively sought to build meaning and integrity into the way that they do business, not just given them something more efficiently or cheaply.

Technology is catalysing the creation of new brands

Rather than diminishing brands, technology seems to have heralded a new generation of exciting and disruptive branded entrants. Interestingly, many of the celebrated technology businesses – Google, Amazon, Apple, Samsung, Facebook and Twitter – all seem to have invested heavily in brand building. Indeed, one of the first pieces of advice given to any new tech brand seeking early investment is to make sure they have got their ‘story’ right. A compelling and pithy expression of their purpose and end benefit is seen as key for those seeking new investment opportunities.

In many instances technology has reduced the traditional barriers to entry and helped new entrants completely reimagine the customer model. This disruption has occurred equally across both business and consumer markets. A huge number of brands have been created and taken hold in the customer psyche.

We have seen the rise of the intermediary brands, that is, those businesses that have grown fast by aggregating the content or output of others. Across categories such as financial services, insurance, air travel, holidays, transportation and entertainment we have seen the arrival of brands like moneysavingexpert.com, comparethemarket.com, expedia.com, opodo.com, trivago.com, trainline.com and stubhub.com. These brands are helping customers to make sense of the huge plethora of choice that exists in the market; they represent a combination of trusted adviser and specialist search aggregator.

Other businesses have completely reimagined whole sectors. Netaporter.com, lyst.com and asos.com are examples of businesses that have transformed premium and mainstream fashion, making the process highly personalized and friction free. Farfetch.com has completely transformed access to couture fashion, acting as a conduit for hundreds of individual boutiques, providing customers with the ability to shop any boutique anywhere in the world.

The same revolution is underway in the business sector. Even professional services, a sector that had until recently proved stubbornly resistant to disruption, is now seeing a plethora of new brands enter the market. The London law firm Lewis Silkin recently launched a new low-cost employment advisory business, Rockhopper, which utilizes technology to offer large businesses high-quality employment advice at highly competitive rates. Market Invoice is a Fintech business that specializes in factoring invoices for businesses struggling with cash flow. Once accepted by Market Invoice a business can use its services (unlike those provided by a traditional bank) in a highly flexible manner. If you type ‘crowdfunding’ into Google you will immediately be presented not only with a list of the top ten crowdfunding brands but also crowdfunding.com, a business aggregating the best fundraising platforms!

Almost without exception, each of these brands (and these are just a few among many thousands) takes the practice of branding very seriously. Each is taking steps to both broaden and deepen the relationships it has with its customers. None of these businesses see themselves as ‘websites’; they are all fully realized brands competing on a daily basis for customers’ interest and money.

Technology is providing new opportunities for brand owners

Far from diminishing brands, technology is often helping to promote them. A few years ago McKinsey published its much-vaunted ‘loyalty loop’ model, describing the sales journey any customer makes from awareness to purchase and then to re-purchase of any product or service. This model asserted that one of the biggest impacts of technology on brands was on the traditional view of the ‘purchase funnel’. Prior to the digital transformation of the last ten years, larger businesses tended to structure their marketing activity around a purchase funnel. The initial task was to create significant levels of general awareness, then to persuade the customer to consider your brand, then to get them to prefer you and then ultimately to persuade them to purchase your brand. Different businesses had different versions of the funnel but the main point is that the process was most definitely a funnel; a process that was linear and predicated on the average customer being able to hold (for most categories) five or six brands in their memories. With the impact of digital, McKinsey argued that this funnel had now become in effect a loop.

While a customer may start off (in any given category) being aware of just a few brands, as soon as he or she starts searching the web, the consideration set is almost certain to immediately double. The customer will now be factoring in a new set of brands and will most likely use a combination of rankings and third-party endorsements as a way of reaching their preferred list. At this point the preferred brands should be working hard to incentivize and convert the potential customer. Once the customer has bought the brand, the brand should then provide a mix of emotional and functional attributes to enable the customer to re-purchase and to advocate their purchase to others, thereby closing the loop.

It turns out that technology is in fact increasing the opportunity for more brands to enter the consideration set and in some ways it is asking the brand to tell a deeper and richer story than before. Yes, the product needs to be fit for purpose and the pricing competitive, but discovery, enhanced features and opportunities for advocacy need to be factored into the overall customer experience. All of this adds up to the increasing importance of being able to ‘tell’ your story. Technology is changing business and asking more of the marketer but it is also providing fertile ground for the creation of new and exciting brands.

If it looks like a brand…

Perhaps it could be argued that many of the largest tech brands aren’t really brands at all? Brands like Google and Facebook might ‘look’ like brands but in reality they are just operating as attractively presented monopolistic entities, working hard to distract your attention away from the fact that you have no real perceived choice. In reality this is inaccurate. Google, Facebook and many other tech brands have acquired their positions through hard work and strong customer appeal. Google became the biggest search engine in the world because it was a much better algorithm than all that had gone before. Facebook went through much iteration before it became the all-encompassing platform that we see today. Both brands do in fact have a host of competitor brands fighting for your attention and more enlightened (or younger) users will deliberately seek alternatives to Google and Facebook. What both these brands have done, however, is use the data they have collected to build impressive revenues and almost insurmountable market dominance.

Brands are used to hold corporations to account

For those that still believe the unstoppable forces of technology are weakening brands, we’d assert that it might actually be the brands themselves that help us strike a new bargain with the technology companies. The thing about highly successful global brands is that they are rarely ignored. In fact we often finish up holding the big brands to a higher level of account than their less well-known competitors. Perhaps that is what we are beginning to witness now. Customers and regulators are beginning to realize the power of these brands and the power that they currently wield. Google and Facebook together receive 75 per cent of all new online advertising revenues. Facebook has allowed third parties access to enormous quantities of customers’ data, with profound implications for what we see and interact with while on the platform. These brands will argue that they have done nothing wrong, and they are probably acting under regulatory or legalistic cover, but they need to tread carefully around customer sentiment. As we learn how to navigate this new world, Google and Facebook will undoubtedly be held up to an increased level of public scrutiny, but this is also the power that brands afford; they are a mirror to ourselves.

Technology is not diminishing the power of brands but it is certainly changing the way brands are managed. Branding (as opposed to marketing) has moved from a passive sphere to an active one. The CEO is now best viewed as the most senior brand manager – an editor-in-chief – with the board something more akin to an editorial panel.

Brands are powerful because they help to generate demand and create loyalty. Brands work because they are intimately linked to self-expression. Technology has not changed this. Technology is not challenging the power of brands but it is disrupting markets, transforming business and profoundly changing the practice of brand building.