James Surowieck recently published an article in The New Yorker entitled “Twilight of the Brands,” in which he suggests that brands are losing their ability to influence consumers. His logic was based on a book by my friend Itamar Simonson and Emanual Rosen,Absolute Value in which the authors argue that customers are now able to behave much more rationally than in the past in light of increased access to objective information about products and services through the Internet. Users of products and services share their experiences, experts share their opinions, and price information is readily available all with the tap of a button. Relevant product and service information can be conveniently accessed on Amazon and any number of specialized informative websites such as gdgt.com, Zagat, and CNET. As a result, people no longer have to rely on brands to imply quality. And as a result, Surowieck thinks that brands are losing their power.
I disagree. I think the role of brand equity and the nature of brand building are changing as a result of the social web, but they’re not fading. Here’s why:
Absolute Value only applies to a limited number of categories.
The scope of Simonson and Rosen’s ideas is limited. In general, it applies only to some consumer durables and service brands in categories like television, computers, cars, restaurants, movies and hotels. The authors suggest both directly and indirectly that their theories generally do not apply to packaged goods or BtoB brand settings.
One of their core frameworks is the Influence Mix. There are three sources of influence: An individual’s prior preferences, beliefs and experiences (P), marketers input (M), and other people including information services (O). Only those products and services which are “O” dependent will be subject to the “world is now rational” argument for a given customer. The authors suggest that “O” influence will require an important decision, implies quality differentiation, is high risk, and is a dynamic category. “O” information is useful and accessible and is for public consumption. Most categories and contexts even within consumer durables and services would not qualify.
Further, “P” is created by prior “O” and “M” influences. So even when “O” is important, it may not continue to stay important over time as its impact is codified into “P.”
Even within the affected categories, many consumers will not change.
As the authors admit, some customers will resist seeking information from Internet sources because they lack the ability or the interest in doing so. It might not be part of their DNA, and/or they might take pride in not needing recommendations to influence their purchasing decisions.
Or, maybe they simply don’t have the time to do their research and don’t believe that time spent searching for information is worth it given the confusing array of product choices. Maybe they get overwhelmed. Do a quick search for tennis rackets, golf clubs or ski boots - the hundreds of options are easily overwhelming. At the end of the day, many will go back to the brand as a ‘shortcut’ for information on key elements such as quality and innovation. Even the best software cannot reduce the fundamental complexity of a fully informed choice.
This isn’t to say that consumers don’t listen to each other. Of course the reality is that consumer durables and service brands have always been influenced by WofM communication. We’ve always used the recommendations of others to pick restaurants and movies. Today, “first-hand” WofM can be much more influential than Internet-based information. It’s questionable as to whether there is really a qualitatively different “O” even for the affected categories.
Internet information sources can be oversold.
The premise that the information “O” explosion is only going to continue to advance, that past trends can be projected into the future should be questioned. This is a honeymoon period for information websites. There is eventually going to be a time when Internet based recommendations are going to be challenged because they come from a source that is biased, are not representative of the interests of the consumer, or because they are just wrong in a visible way. Many forecasters have been burned by extrapolating from past trends.
Branding is more than the Simonson/Rosen model suggests.
The authors posit that consumers have information about “absolute value” that is the “experienced quality of the product.” Their definition and the surrounding discussion suggests a heavy weight on objective functional benefits and much less on reactions to emotional and self-expressive benefits, relationship ties driven by respect for higher purpose programs, or the appeal of sharing common values. Yet much of brand equity is based on such considerations.
The creation and destruction of brand equity will accelerate, not change.
It is true that negative facts about brands can do damage much faster than before. But that only means that the cycle is compressed. The news comes, the brand responds and the market goes on. It may be that a faster-acting news event will be easier to deal with than a rumor that emerges over a longer time period.
Brands are about substance, and relationships build on values and programs. To the extent that the Internet accelerates the dispersion of information, the brands that deserve high brand equity will be able to create it faster. The brands that are not authentic or are not delivering will lose their equity quicker, and that is a good thing. But it doesn’t reduce the overall value of brand equity. For those contexts that Internet information dispersal touches, it is about the speed of change rather than the type of change. Hyundai is a great brand building case study; the brand was built on product, programs and flare. Because of the Internet, Hyundai had an easier and faster time creating a new brand than Toyota did a nearly a half century earlier.
Advertising and other brand building efforts will not decline
The authors suggest that advertising and other brand building efforts will continue to be used at the same level, but that their role should change. They now should be charged with creating interest in the brand so that people will include it in the consideration set and seek information as opposed to creating awareness, preference or purchase. That is compatible with my extensive writing on Brand Relevance, where I argue that becoming relevant is often a more effective objective than to engage in “my brand is better than your brand” programs.
I would add that advertising can now also play the role of amplifying the results of “O” information, as it did as part of the success of the Hyundai brand building.
Simonson and Rosen used one of my past blog posts to support their theories. I wrote that I bought an ASUS computer even though I was a historic Dell user, a brand specialist and believer and had never heard of ASUS. They point to that as evidence that brand equity no longer matters. My interpretation is different. First, Dell for me was always a functional brand and had little emotional or self-expressive benefits. Second, ASUS had enormous brand equity and substance based on the fact that it was ASUS’ mother board that powered Dell and other brands. This equity was in the hands of computer specialists, computer influentials and computer retailers. In my case and in the case of many buyers of ASUS computers, this equity was transferred to their computers. It was not that the computer was bought in spite of lacking brand equity, rather that the purchase was actually driven by ASUS brand equity.
It’s ironic that a group of academic researchers, including Simonson, have spent several decades conducting clever and persuasive studies that have rather dramatically shown that consumers make demonstratively irrational decisions in part because they misapply objective information. It now turns out that these experiments should be taken with a grain of salt, because their setting and context was too artificial. We should have been warned sooner.
Despite the above exceptions to their findings, I do recommend Absolute Value.Brand teams should consider the level of “O” influence and adapt according to it. The emphasis of advertising on brand building should change for some consumer durables and service brands. Brands should focus more on gaining credibility and interest rather than on gaining preference and purchase.
But the book should not be used to defend the idea that brand equity is becoming less valuable.
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