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March, 2008

Brand vs. Utility

I've been meaning to upload this presentation I gave a few weeks ago for a while now and just finally got around to it. I've also been meaning to write something to go along with it, but I haven't gotten around to that. So instead I'll include the notes below and hopefully get around to writing some more of my thoughts at some point soon.

And the notes . . .

  • When I ï¬?rst started thinking about this topic I had no idea where to go. So ï¬?nally I started to try to deï¬?ne out the terms ...
  • A brand, if you ask me, is the sum of all parts in a consumer's mind. It's the total of everything they think/feel about your company, products, experience and everything else.
  • Utility, on the other hand . . .
  • Is a measure of the relative satisfaction from consumption of goods.
  • In other words, utility is an emotion, not a hard measure. As satisfaction goes up, so does utility.
  • And what is satisfaction? Well, it turns out it's just the fulï¬?llment of one's expectations or needs. (Both of which weʼll be coming back to.)
  • So going with a bit of 7th grade math, the transitive property tells us that if expectations decide satisfaction and satisfaction decides utility, then to understand how to maximize utility we need to better understand expectations.
  • Expectations are subjective: If I expect a lot out of it and you expect a little out of it our utility can be different.
  • For instance, some people expect performance out of Nike.
  • While others expect fashion.
  • So the question, then, is where those expectations come from?
  • Really they can come from anywhere: Competition, culture, the consumer themselves or your own communication (to name a few places).
  • And what are those expectations? Those, my friends, are your brand.
  • So, it's clear that the question can't possibly be brand vs. utility, since they're interdependent.
  • If thatʼs not the question, then what is it? Well, I think ï¬?rst we need to change the word utility, to function (still not a perfect word, but it gets us closer).
  • So the question is: Online is it more important to set expectations (brand) or deliver results (function) is more or less the question I believe.
  • To answer that we need to look at the differences between online and offline. Let's start with interaction costs: Online they're basically 0. All it takes is a click to try something new.
  • Offline they're much higher, to try something I actually have to buy it (or at least sample it, which is why so many brands are so into sampling/experiential stuff -it lowers interaction costs).
  • The role of a brand and communications in an offline space is to set the expectations/needs so that people overcome the interaction cost barrier and actually purchase.
  • As I said, though, online is a lot different: There is no barrier. So the role of brand becomes expectation setter. When you look at craigslist, what kind of expectations do you have? (Probably not much by the look of things.)
  • In the same vein, thereʼs Google.
  • Now of course we all know both those brands well at this point, so it's not entirely fair. However, neither of them look like much and therefore, I would argue, initially it created much lower expectations in people: Expectations which they overcame by leaps and bounds thanks to amazing functionality. Those exceeded expectations lead to extreme advocacy.
  • Think about this for one minute, in the past you had to set expectations high to get people to purchase. It was hard to exceed those expectations. Online thatʼs different.
  • So let's step back again from this for a minute and talk a bit about why this whole conversation is even happening. Essentially I think it all stems from Google and what I'll call the Google myth.
  • The Google myth goes something like "Google has gotten as far as they have based entirely on the quality of their product."
  • Or it goes "Google worries only about it's function not about it's brand.
  • Or that Google does no marketing.
  • Now let's talk about why these are all wrong. First, nothing happens in a vacuum. Larry & Sergey were two Stanford grad students (Stanford being the center of Silicon Valley) during the internet boom and knew some pretty powerful
  • Anyone know who these two guys are?
  • On the left is David Filo, Founder of Yahoo!, one of the ï¬?rst people they talked to about Google. And on the right is Andy Bechtolsheim, one of the founders of Sun Microsystems, who was also Googleʼs ï¬?rst investor. "We met him very early one morning on the porch of a Stanford faculty member's home in Palo Alto. We gave him a quick demo. He had to run off somewhere, so he said, 'Instead of us discussing all the details, why don't I just write you a check?' It was made out to Google Inc. and was for $100,000."
  • Who is to say that Google would be where it is today without people like this to help spread the word? The Google founders, Larry and Sergey, were in the middle of Silicon Valley, which was the middle of the internet world during the middle of the boom.
  • Now onto the second myth, that Google only worries about it's function. This is ridiculous. The beauty of Google is that functionality and form are aligned. The decision to not bog down the homepage with additional messages is a form decision.
  • Last, "Google does no marketing" is just untrue. Can we agree that advertising is a form of marketing?
  • Well this is a billboard they did in Seattle (with the help of an advertising agency).
  • And they have 100 ofï¬?cial blogs from all around the world, clearly that's a form of marketing (really it's a combination of a bunch of different disciplines: CRM, media outreach, branding, etc.).
  • What's more, the biggest of the blogs, The Ofï¬?cial Google Blog, has 641 thousand subscribers.
  • Think about that. That would put Google at number 14 on the largest circulating newspapers in America. Right behind The Post, Detroit Free Press and Dallas Morning news and ahead of the Minneapolis Star Tribune and the Boston Globe. This actually brings me to another point, though in a slightly roundabout way: Think about this for a minute. Google is competing with some of the biggest newspapers in the world for attention. Now clearly circulation numbers are for the print publication, but this is still fairly monumental: Itʼs a non-media company with the reach only media companies dreamed of in the past.
  • Whatʼs so interesting about this to me is that Google, or any other hybrid media-owner/creator is competing in the space with no care for the business model. Think about it: All those newspapers have a few things in common, the biggest being they canʼt exist if no oneʼs buying ads. Google, on the other hand, can and does, create content and compete in the space with no ads: All 100 blogs are just a minor marketing expense. Probably costs them less than snacks.
  • Iʼm sure some of you have heard of BabyCenter.
  • BabyCenter is the biggest baby site on the web by far, and you know who owns it?
  • Johnson & Johnson: The largest manufacturer of baby products.
  • What fascinates me about this relationship is that while the site is still quite successful on itʼs own, clearly it doesnʼt live and die by itʼs advertising. BabyCenter doesnʼt really need to care about the business model of online media properties because ultimately itʼs serving another master. Even if the advertising economy crashes, BabyCenter will likely still happily skip along, paid for by the people at J&J who want to see people continue to take the best care of their babies as humanly possible (which of course means buying lots of stuff).
  • For lack of a better name Iʼve been calling this crazy guy in the room syndrome. Media companies, long used to only competing against each other, now have to compete with companies like Johnson & Johnson who have a completely different goal. They donʼt care about the old business model, they just care about selling more shampoo and diapers. You guys are all ï¬?ghting the crazy guy, and thatʼs always dangerous because heʼs got nothing to lose. J&J bought BabyCenter in 2001 for $10 million dollars. In the ï¬?rst half of last year they spent $726 million on advertising (or roughly 72 times the amount they bought the site for).
  • What does all this mean? Well, I think it's a few things. Right now most brands aren't very going at getting attention online. The only way they really know how to do it is to buy it.
  • But that's might change. For the most part, brands still think of their websites as an advertisement, as paid for media. But that it is beginning to change. Brands are beginning to think of themselves as media owners, which is actually what they always have been (when they purchase an ad placement they were media owners, competing with the page before it and the page after it, they just never thought of themselves that way). But being a media owner is very valuable (as you guys all know): Engaged audience = dollars. (These images come from a fabulous New Yorker issue that Target bought out entirely and then worked with New Yorker artists to design ads that incorporate their distinct target. This is the only issue of the New Yorker Iʼve ever kept.)
  • Now as more and more brands come to this conclusion they are seeking to build properties that are more than just interstitial advertisements, but instead are destination media properties. Most havenʼt ï¬?gured this out yet, but some smart ones, like J&J have cracked the code. And they're going to be playing by different rules than you are. (I realize MLB is a monopoly as well as a brand, but I still think theyʼve done a damn good job.)

That's it for now. Would love thoughts and feedback. Hope you enjoyed.

Update (3/13/08): Per Piers' recommendation, here is a little disclaimer: Johnson & Johnson is a client of Naked and owns BabyCenter.com. All opinions expressed here are completely my own and in no way reflect on Naked. For the record, I had these thoughts about BabyCenter.com before J&J even became a client of Naked. That is all.

March 12, 2008
Noah Brier | Thanks for reading. | Don't fake the funk on a nasty dunk.