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Is the Information Age Causing the Decline of the Super-Brand?

Is the Information Age Causing the Decline of the Super-Brand?

by John Larkin

John runs the blog here at eCommerceLift and is a verified Shopify Expert. Interested in an initial growth consultation? Click here

4 years ago


Is the Information Age Causing the Decline of the Super-Brand?

Anyone who works in marketing knows about the value of your brand. It’s one of the first things you learn about in any marketing lecture or textbook. Brands are an unavoidable part of everyday life. In his book Fast Food Nation, Eric Schlosser revealed that Ronald McDonald is more widely recognised around the world than Jesus.

Every year Millward Brown carries out a survey which values the world’s top 100 brands. The combined value of these brands came out at $2.6 trillion last year (2013 – Apple topped the survey with a brand value of $158 billion). To put that figure in context, if the top 100 brands were a country, it would be the sixth largest economy in the world (ahead of Russia, Brazil and the UK).

But there is a growing consensus building that the very idea of a brand having value may well be a thing of the past. James Surowiecki had a great article recently in the New Yorker entitled “The Death of the Brand” arguing that the days of the super-brand are probably numbered.  

His central thesis, heavily influenced by Absolute Value,  a book by Itamar Simonson and Emanuel Rosen, states 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 GM, 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 1980s, nearly four-fifths of American car buyers stayed loyal to a brand.”

Suroweicki argues that the value of brands is lessening in this information-rich age. Nowadays, consumers are far more savvy when it comes to researching their purchases. In the 1980s and 90s, this was primarily a niche area, dominated by the likes of Which? And Consumer Reports which were publications that rated all sorts of products, from televisions to refrigerators.

Although they can be credited with starting the trend of informing the consumer, it still took an inordinate amount of effort for the average consumer to fully inform themselves about a product. They had to trek all the way into their nearest library or specialist-newsagent to even get their hands on these niche publications.

These days though, it’s a different story. A quick Google search is all even the most uninformed customer needs to become an instant expert on whatever it is they want to buy. TripAdvisor, Yelp and even Amazon give customers instant access to the reviews and ratings they want. And this has lead to a lessening in the importance of brands.

Even the big consulting firms, who in all actuality derive a lot of business advising companies on how to manage their brands, are starting to see that brands are losing their lustre. PWC got off the mark with a report showing that 88 percent of Americans research any major purchase online before buying and this was quickly followed by a report by Ernst and Young  which showed that 75 percent of people under the age of 30 didn’t consider branding to be an important factor in their purchases.

The implication for marketers is clear. The product is key. It’s not enough anymore to just churn out any old product and think that brand loyalty will see it through. Just look at the likes of Windows Vista, Tesco’s venture into the US or Wal-Mart’s entry into the UK as cautionary tales of what happens when the product is not good enough.

There are companies that have got the idea just right though and we will look at two of those in detail.

HTC:

Only founded in 1997, HTC initially made middle-of-the-road laptops and was a fairly anonymous player on the world market. In the early 2000s the Taiwanese company branched into the world of making mobile phones, initially making phones under licence for other companies. Indeed, the company built up an expertise in the early stages of smartphone development and was the first company to make a Windows-enabled smartphone as well as becoming the first manufacturer to make an Android-enabled device.

In 2004, the company decided to start manufacturing phones under its own brand name. By the end of 2006, the company was muddling along, making around $50million dollars a year – a far cry behind the market leader at the time, Nokia, who were making upward of $5.8 billion in profits. (Apple didn’t even release the iPhone until mid-2007)

But HTC decided to concentrate on their product offering, tweaking and developing their product until it became a beloved by tech-heads, who became evangelical over the latest offerings from HTC.

Right now, HTC is competing against Apple and Samsung for a share of the hyper-competitive smartphone market. Globally, it is estimated to be the world’s third-largest smartphone manafacturer with  nine percent of the market, behind Apple (40 percent) and Samsung (24 percent). This is quite a stunning achievement considering its advertising spend is less than 20 percent of what Samsung or Apple spends.

Instead, HTC concentrates on making what are generally accepted as the best phones in the world (Techradar, which rates the world’s best smartphones, has named a HTC phone as the world’s best handset for four of the last five years, and the company tops the current list with the HTC One M8).

Indeed, in 2009, when the company decided to launch its first global advertising campaign, it acknowledged its position as the company that didn’t blow its own trumpet with the slogan “Quietly Brilliant”. (Though it has to be said that the company made somewhat of an about-turn last year when it decided to push the brand by hiring Robert Downey Jr to a $12 million, two-year deal to raise the profile of the company with the letters HTC now standing for Here’s To Change.)

Skoda:

For anyone growing up in the 1980s or 1990s, Skoda was a brand to be made fun of.  As far back as 1989, Top Gear were making fun of the Czech-based company.

“Why do Skodas have heated rear windscreens?” asked the presenter.  
“To keep your hands warm while your pushing it.”
Coming out of communist Czechoslovakia in the 1980s, the company was churning out cars based on 1960s technology for a market of customers who had no real choice in their home market. Skoda was even beholden to the wishes of the Czech authorities, who made some inane rules, including one prohibiting rear-windshields to be too slanted as this was viewed as ‘Western decedance’.

But things began to change for the company in the early 1990s. In 1991, following the Velvet Revolution in Czechoslovakia, the company joined the Volkswagen group. This allowed them access to Western technologies and processes and soon the company’s cars began to improve.

A managerial decision was taken to demonstrate Skoda’s technical prowess in the mid-90s and the company began to make a big-splash in the World Rally Championships. This niche sport was not targeted because it would lead to wide coverage for the company.

The World Rally Championships rarely recieve any coverage in the widespread media and are mainly followed by die-hard motoring experts. But Skoda’s performance in the area of rallying was noticed by mechanics and technicians, a disproportionate amount of whom are also rallying fans. This lead to a marked increase in word-of-mouth recommendations by mechanics to their customers and by 2000, Skoda had began to win awards from the likes of What Car, Auto Trader and Diesel Car.

Again, like HTC, Skoda took a tongue-in-cheek attitude when it came to advertising. In 2001, with modest sales hovering around the 30,000 per year mark in Europe, they decided to market their new and improved cars with the tagline, “It’s a Skoda... Honest” and “It’s a Skoda. Which to some, is still a problem”.

Nowadays, Skoda is firmly ensconced as one of Europe’s leading car manufacturers and is firmly on track to become one of the 10 leading companies in terms of sales in the next few years. The company realised that their product had to improve and that there was no point in marketing a brand until the core product was worth it.

Top Gear aren't making fun of it any more:


Overall, Surowiecki’s point that brands are dying has some semblance of truth to it. The Mad Men-style image of building a brand is something that is out of date. Indeed, some of the social media campaigns still cling to the notion that “any publicity is good publicity” and concentrate on amassing “likes” and “follows” as though they were an end unto themselves. 

The truth of it is that lacklustre products just won’t cut it anymore. Each and every customer is two clicks away from finding independent and unbiased reviews of products before they ever reach into their wallet.  Simply put, a brand is no longer what a marketer tells a customer it is... it’s what customers tell each other it is.

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