How safe is your brand?

How safe is your brand?

“In OUR country,” said Alice, “you’d generally get to somewhere else – if you ran very fast for a long time, as we’ve been doing.” “A slow sort of country!” said the Queen. “Now, HERE, you see, it takes all the running you can do to keep in the same place.”

Executive Director Innovation

KPMG in the U.S.

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Like Alice and the Red Queen in Lewis Carroll’s Through The Looking Glass, today’s consumer brands must move very fast to stay where they are.

Globalization has encouraged competition – in many markets, the big brands are not fighting for market share with traditional rivals but with emerging local players. Digital technology is eroding the barriers to entry that protected many sectors – and making it easier or new entrants to reach consumers. Having lost faith in institutions – especially governments and banks – consumers are becoming more skeptical about brands. A survey by marketing agency Havas found that only one in five North American consumers – and one in three European shoppers – trusted brands.

Kes Sampanthar, Executive Director of Research at KPMG’s Innovation Labs, says: “The disruption in the marketplace wrought by changing demographics, exponential technologies, and rapidly evolving business models is affecting some of the largest brands. Companies need to understand the signals of change and develop strategies to ensure they remain relevant.” 

If they don’t, they may become victims of what industry expert Robert Tercek calls ‘Vaporization’. Digital technologies are vaporizing the likes of Circuit City,Tower Records, and Borders. Although many best brands rankings suggest their value is rising year after year, research into the prices brands have been sold for paints a different picture. Studying 6,000 M&A deals between 2003 and 2013, researchers Dominique M. Hanssens and Christof Binder found that brand valuations had declined by nearly half in that period.

The traditional theory of brand equity, created in the 1980s by marketing consultant David A. Aaker, says it has three main components: awareness, qualities associated with a brand and loyalty. 

Awareness used to be straightforward, if expensive. The right TV commercial could reach from a third to 60 percent of the target audience. Not anymore. Digital technology has seemingly made it easier to connect to customers, but in reality the very nature of the connection has changed. Digital media makes it easier for consumers to validate the authenticity of companies. With a Western consumer typically exposed to more than 3,000 logos a day, brands face a different struggle: cutting through the clutter, and making an authentic connection. 

As Steve Jobs famously told the marketing team at Apple: “This is a very noisy world and we’re not going to get the chance to get people to remember much about us, so we have to be really clear what we want them to know about us.”

Ensuring your brand is associated with the right qualities is harder too. The old-school conversation between brand and consumer as a monologue. Social media has democratized that and changed the nature of the conversation; consumers are part of multi-way conversation not only with the brand but with each other. Some brands have engaged actively in the new media but sometimes ceding control to their followers on Facebook, who suggest ingredients and recommend improvements. Embracing transparent and open dialogues with customers is not in itself a solution; it is table stakes. 

Advertising agencies have used stunts, humor and talking animals to make their pitch, but these after-the-fact campaign gimmicks are often disconnected from the values the company stands for. Yet some brands that have the strongest associations have dared to innovate. Apple’s Think Different campaign positioned the company on the side of those “crazy enough to think they could change the world”; what most miss about the campaign is it captured the essence of Apple’s brand – Thinking differently was in Apple’s DNA. More recently, Dove’s Campaign For Real Beauty was the highlight of a brand-building strategy that, according to Aaker, helped multiply the value of the brand by a factor of 20 since the early 1990s.

Even though Budweiser’s Wassup? Campaign reached a younger audience when it launched, would it be as effective today, when it is no longer competing in a me-too marketplace? The craft beer movement that taps into the values of the younger generation has left some traditional companies flat-footed.

Loyalty is even more problematic. One of the historic purposes of a brand was to guarantee quality: you knew you were getting the real thing if you bought Coke. Now, in the digital area shoppers are far more sophisticated about how they find brands to trust. They turn to friends through social media for that assurance and today there is a plethora of tools to enable this kind of authentic word-of-mouth conversation. There is also conflicting evidence about how deeply consumers want to engage with brands. One senior marketing executive at a drinks company said: “People don’t want to engage with brands because they don’t care about them.” Caring is the important point. It’s true consumers don’t want to engage with brands they don’t care about, but just because something is a commodity doesn’t mean consumers can’t care. Dollar Shave Club and Uber are examples of previously commodity experiences (razors and taxis) that mean something to customers.

Yet is loyalty as important as Aakers suggests? In his book How Brands Grow, Australian academic Byron Sharp argues that the chief function of a brand is to ensure the shopper remembers them at the point of purchase. He argued that, for big brands, the best way to grow market share was to target the casual buyer, not the loyalist. The idea of the casual buyer is changing. Where we are moving from weekly grocery store visits to delivery and subscription services, the construct of casual vs. loyalist is no longer enough. We are getting at the nature of brands being a short-cut heuristic to build trust. If the product and company don’t match the brand values being espoused, no amount of marketing is going to convince clued-up consumers.

Every market – from razors to footwear – is vulnerable to a savvy start-up in the vein of Uber or Airbnb with an innovative product or service and authentic messaging.

“Companies need to look at their business from an ‘outside in’ perspective,” says Sampanthar. “You need to understand how yourbrand and company are perceived. Looking at changing customer behaviors and demographics, exponential technology, what start-ups and venture capitalists are focusing on, you can develop strategies that are effective.” 

In a marketplace where companies can reach customers through platforms like Apple and Google, and capital is used to design authentic customer experience, this trumps disconnected marketing, product development and customer satisfaction.

Key learnings

  1. Consumer goods companies need to sense the signals of change and look past the standard ways of assessing the market. They need to pay attention to changing demographics, behaviors, expectations, and values. Plus, they must look at start-ups and VC investments to know where the smart money is going.
  2. Branding and marketing need to be authentic and tied to the company’s and customers’ values. Products and services must come first, and marketing needs to augment the message through the disparate media and social channels.
  3. Don’t assume you’re safe. The market is now so volatile – and consumer preferences so hard to read – that even iconic brands are vulnerable if they don’t adapt. The technology industry has shown how swiftly brands can fail. This disruption is unprecedented in our lifetimes.

 

ConsumerCurrents

ConsumerCurrents provides senior executives and consumer companies insights on topical industry issues, global trends and business planning.

 
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