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Why Brands Aren’t Going Anywhere

This morning Felix Salmon tweeted James Surowiecki’s latest article about brands at me to see what I thought. Basically Surowiecki makes the case that brands are less meaningful in a world of information efficiency thanks to the web. His thesis, roughly:

It’s a truism of business-book thinking that a company’s brand is its “most important asset,” more valuable than technology or patents or manufacturing prowess. But brands have never been more fragile. The reason is simple: consumers are supremely well informed and far more likely to investigate the real value of products than to rely on logos. “Absolute Value,” a new book by Itamar Simonson, a marketing professor at Stanford, and Emanuel Rosen, a former software executive, shows that, historically, the rise of brands was a response to an information-poor environment. When consumers had to rely on advertisements and their past experience with a company, brands served as proxies for quality; if a car was made by G.M., or a ketchup by Heinz, you assumed that it was pretty good. It was hard to figure out if a new product from an unfamiliar company was reliable or not, so brand loyalty was a way of reducing risk. As recently as the nineteen-eighties, nearly four-fifths of American car buyers stayed loyal to a brand.

He then goes in to talk about cars and travel and a lot of other stuff that people spend a lot of time researching. In response I shot off four quick Tweets that I thought were worth sharing here:

1. Using a luxury brand (Lululemon) is fundamentally flawed. Luxury is all brand. You can fall as fast as you rise. I understand calling Lululemon luxury is a bit of a stretch, but I think it’s pretty accurate. But the second part is really the point: However fast a company rises it can fall at the same speed. We’ve seen lots of businesses reach saturation and struggle and this isn’t necessarily what happened to Lululemon, but it could be a part of the picture. To solely say that it was based on consumer’s ability to do research seems odd. Seems like a classic story of a brand growing really quickly and then struggling to maintain it’s growth. Often those brands come back quickly and continue to grow, though, so the story is far from over.

2. Where is the evidence that suggests buying on non-research products has changed? He touches on this a bit towards the end by writing, “This isn’t true across the board: brands retain value where the brand association is integral to the experience of a product (Coca-Cola, say), or where they confer status, as with luxury goods. But even here the information deluge is transformative; luxury travel, for instance, has been profoundly affected by sites like TripAdvisor.” But again, travel has always been a category that a lot of research goes in to. Anywhere people research, that research will move to the web. The fundamental truth of most products is they’re not research-driven. This is why CPG is always near the top of the largest ad spenders.

3. Research-heavy products (TVs, cars) have become much more price-efficient. Duh. Not sure there’s much to say here, but he specifically hits on how cars have been squeezed to be much more efficient. This is not rocket science and is a good thing for consumers. No debate here, just not a very interesting point.
4. Consumers have always been in control. There is more efficiency in the market now, but fundamentals are the same. This is the big piece. I’ve argued this often. Word of mouth always drove purchasing decisions. Certainly this is much more efficient, but I’m not sure I’d say it’s a sea change.

February 10, 2014 // This post is about: , , ,

Comments

  • Sandra Pickering says:

    Completely agree.
    Brands (and marketing) are based on fundamentals of consumer psychology and twas ever thus.

  • Alastair says:

    Simonson may have a point where brands have focused on function. Vehicles, mobile phones, laptops…Yet all of these sectors have stand out brands. You know them. But even those commoditised brands are essentially a result of poor brand management. That means they’ve been run by people who don’t understand underlying emotional motivations and how these fit into a competitive environment. That environment is changing faster because digitisation is scaling word of mouth, creating new business models and new brands. If brand managers don’t have a grip on these basics their brand becomes irrelevant – but there’s always another brand stepping into the gap.

  • One More Note on Why Brands Aren’t Going Anywhere | Noah Brier dot Com says:

    […] I posted a few points in response to James Surowiecki’s New Yorker piece on the role of brand’s in a world of better […]

  • Tom Woodnutt says:

    Hi Noah. . . thanks for your analysis of this and for sharing it. . .

    …For me JS is using the word ‘brand’ quite loosely, as if it means ‘an image that a company projects of itself that may or may not be true’. It’s as if he’s treating ‘brand’ as a proxy for ‘marketing fluff’ or false advertising. But is that really what a brand means?

    To me ‘brand’ refers to the associations and relationships that a company builds around itself. So when someone is very well informed about a brand through related content on the web, whether they are more or less loyal to that brand as a result is irrelevant. . .in both cases they still have a brand relationship (albeit one is more positive than the other). ‘Brands’ don’t disappear as people get more informed, they just get built up even further (for better or worse).

    Also, he’s certainly over-estimating how rational people are. Countless studies tell us that people do not have time to process everything and so use short-cuts. . . clearly brands still have a role to play in such a hectic world brimming with choice….

  • Steve Poppe says:

    Hey, it’s Noah. The point “the rise of brands was a response to an information-poor environment. When consumers had to rely on advertisements and their past experience with a company, brands served as proxies for quality” was accurate back in the 70s, 80s and early 90s, but marketing and branding have evolved. That was when AIDA (awareness, et al.) was a stair step thing; today one can move from unaware to purchase in a few clicks.

    Brands still need to be managed to be successful, it’s just that the tools and media are different. I agree with you, I agree with you, I agree with you.
    .

  • On Word Of Mouth | circulate says:

    […] Noah Brier. “Why Brands Aren’t Going Anywhere” […]

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