People 'n' Issues

Biggest challenge for brands

September 8th, 2016
Today, technology and fashion brands have become more prominent than the brands most of us grew up with or still use every day – how has this become the case? THOMAS OOSTHUIZEN, Global Consulting Director at Acceleration, delves into the theory behind this.
brand-building

We know strong and differentiated brands drive revenue, profit margin and shareholder value growth. Apple, Google and Facebook are three recent examples of this.

Yet, overall, brands have declined in stature over the years. At least many brands are under threat. Just consider how traditional brands are now lagging in the annual BrandZ (WPP) survey of top global brands. Today, technology and fashion brands have become more prominent than the brands most of us grew up with or still use every day.

There are several reasons for this:

Low growth in many industries which led to the consolidation and rationalisation of brands. Brand efficiencies across manufacturing, logistics, technology and marketing have become key drivers for success. This means differentiation and consumer value proposition discussions now often take the back seat.

The commoditisation of many industries and brands. This is evident in the decline of margins in many industries and an increase in the number of price sensitive consumers. Consumers knowing they can get a “good deal” if they shop around online, which reduces the impact of brands. Also, because social media make brand comparisons between friends easy, it further reduces the impact of brands.

The result is that consumers are no longer that loyal to brands. Even within emerging markets – once seen as (new) positive momentum for brand stature – the consumers go through a fast learning curve enabled by technology.

The empowerment of the consumer – and the availability of information on brands as well as endorsements (or criticism) by other consumers or trusted independent advisors. This undermines simplistic and “un-true”/ “half-true” statements by brands, further eroding differentiation. Outside of brands that are very emotional, like watches and fashion, it is not easy for brands to justify margins if they are the same as other brands.

Perceptually, a decline in brand differentiation in many industries, notably in financial services, telecommunications, retailers, media, ISP’s, automotive, energy, utilities and airlines. Whilst there are exceptions, the vast majority are perceived as “so-so”. Consumer research has seen this decline over a period of years: consumers view these brands as more and more similar.

Parity of product and service quality. Most brands are simply similar in how they deliver to consumers. This may partly be as a result the notion of benchmarking – pursued by most corporates at some point – which essentially made the business foundation of brands the same within the same product or service category. The same technologies being available to all have also played a role in this, i.e. telecommunications companies.

Yet, one of the key issues that face brands – it has started very subtly but is about to accelerate, is the issue of dis-intermediation. Largely enabled by digital technology.

In more and more instances, the interface between consumers and brands has declined to a level where it will be hard to regain the high ground.

The most obvious place for this is comparative websites that compare offers from various brands to select the one most suitable for a given consumer. This is rife in banks, insurance, travel, consumer goods, etc.

Another example, the bank account and the bank that is debited at the end of an Amazon transaction, is less evident than when we physically took our cheque books out to pay accounts, do online banking or use a credit card in a store. We may not even remember what account is linked to what transaction anymore.

Similarly, the telecommunications service provider is far less salient when I use Facebook, LinkedIn, WhatsApp, Messenger, iTunes and any one of a given number of brand applications. Or when I use an independent retailer to top-up airtime. Whereas with voice and sms the service provider was clear, it is no longer as clear in the sheer number of hours spent on a device doing other things. This is until such time as the brand does not deliver (bad call quality, slow data speeds, coverage issues) – and then the trigger is negative.

Even in entertainment media and content per se, parity has started. We will be watching a program not knowing whether it was produced; aired or streamed through Sky, the BBC, Amazon Prime or Netflix.

The airline I may eventually use when booking through Xpedia; the hotel through Booking.com; the brand of fridge I buy through Amazon.com, even the backpack or shirt I buy online.

We know that new brands that offer simple, direct solutions (Uber, Airbnb) are – contextualising the competitive space for consumers. Hence in salience, they define different solutions amongst new groups of consumers. This may mean for younger consumers, some older brands will never take-on the significance they once had. To change this will require hard work by brands. Some industries – as a result – are under enormous threat, notably telecommunications, retailers and banks.

Yet, there is hope!

Simply considering the recent launch of the new Tesla smaller and cheaper electric car, differentiation still works if it is substantiated and credible. Yet, there is a window within which a brand needs to either redefine itself or create a new brand that will cannibalise it.

Bottom-line, don’t wait too long! Once a brand decline starts to accelerate beyond a certain level, it takes serious executive time and resources to correct – and the outcome is not guaranteed

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