Is the Internet Killing Brands?

Posted on February 1st 2014

Is the Internet Killing Brands?

internet and brandingFor generations, brands have successfully generated demand for goods and services. However, some are now questioning whether the disruptive power of the Internet may disrupt even this, perhaps one day rendering brands irrelevant. We think this is an over-simplification: brands are being disrupted, yes, but they are not being destroyed. While the theory and practice of brand management is changing fast, brands will endure, even if many of the tactics used to build them will not.

Nothing to see here?

For those who believe all of this talk of change is overblown, there’s no shortage of data to suggest business-as-usual for brand advertising. Americans have never watched more TV, and the market for TV advertising has not collapsed. A recent study in the journal of advertising research (Hu, Lodish, Krieger & Hayatithi) showed that TV advertising ROI remains within 15-year norms, returning, on average, 10% over and above the investment made.

Of course, the story is not quite that simple: as Nielsen’s 2012 “Global trust in advertising” survey showed, trust-in-advertising in the developed world is in long-term decline. Nor is this a simple linear swap, with traditional advertising being replaced by digital and mobile formats. As the same study shows, all-media advertising trust is eroding, with TV bearing the brunt and digital only partially filling the gap left in its wake. Between 2009 and 2011, global trust in TV advertising declined from a respectable 71% to just 47% worldwide.

Everybody’s talking

Fuelled by social media, trust in peer opinions is rising at precisely the same time that trust in advertising is falling. Nielsen reports that the most trusted source of recommendations (hovering between 86-90%) is a recommendation from somebody a customer knows personally. While this number has always been high, it’s never been higher on an absolute or relative basis. A recent McKinsey study also noted that, unlike advertising, word-of-mouth is the only source of influence that remains critical at all stages of the sales cycle for most goods and services.

The brand is dead?

Despite these challenges, it’s wrong to view these data as supporting the inevitable decline of brands. While brand advertising may be in trouble, brands are not. Quite the reverse, in fact: in the most recent editions of Millward Brown’s annual brand valuation study, we find that brand value as a % of total stock market value continues to rise. In other words, the % of large companies’ total valuations accounted for by their brand assets is getting larger, not smaller.

So what’s a marketer to do? While many in the industry may recognize the increasing importance of word-of-mouth intellectually, more work is required to figure it out operationally. In our experience, the wholesale application of the assumptions and practices of the “golden age of advertising” to the age of social media are inadequate to the task.

Less focus on talking; more focus on being talk-worthy?

Based on our experience with clients who are responding successfully to this challenge, we see tremendous potential upside for those who are re-orienting branding efforts around the design and delivery of exceptional and talk-worthy customer experiences. In the word-of-mouth era, customers do not always repeat what you say to them, but they do talk about the experiences that they are having with your brand. Brands that are at the heart of experiences that matter to their customers can earn their loyalty, their trust, and critically, their recommendations.

In fact, this “customer experience effect” is now so powerful that recent research by Forrester’s Harley Manning and Kelly Bodine showed that customer’s perceived “quality of the customer experience” was the single best predictor of future purchase intent (0.71 correlation) and of likelihood to recommend (0.65 correlation). As Manning and Bodine put it “that’s about as high as correlations get in the real world”.

What’s required here is not just a minor adjustment to how brands talk, but wholesale changes to how brands behave. In the coming years, the companies that succeed best at managing brand value will be those that learn to work cross-functionally to deliver better (and more interesting) experiences; working at the intersection of marketing, operations, customer service, human resource management and, of course, technology. At the most successful companies the “brand” is not just something that marketers worry about in their ivory towers, it’s a design blueprint for the whole company to collaborate on.

At Fabric Branding, we believe that the shift from “brands that talk” to “brands that connect” is well underway. We work with our clients to help them build brands that seize this opportunity. We do this by integrating digital tools into a broader set of brand experiences and “moments of truth”; enriching relationships and creating happier, more loyal customers.

For further reading, including case studies showing how the best companies go about creating experiences worth talking about, please feel free to read the slideshow that accompanies this article

(shutterstock)

Simon Pearce

Simon Pearce

Founder, Fabric Branding

Simon has over 14 years experience in brand strategy and brand experience design. He works with his clients to help define and execute brands for the digital age. Simon believes in taking a practical and cross-disciplinary approach to defining and implementing brand strategy. Over the years, Simon has worked with a wide variety of clients, across industries, to define and develop their brands. Past clients include Verizon Wireless, AT&T, Intel, 3M, Stanley, Red Robin Gourmet Burgers, The Weather Channel, Samsung, ITT Corporation, Alcoa, The Vitamin Shoppe, Student Achievement Partners and Transitions Optical Inc.
 

 

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Comments

hailley
Posted on January 31st 2014 at 6:04PM

Great article, Simon! Whether or not the internet is killing brands is a discussion that I've seen a lot. I believe so long as brands are adapting to social media, there will never be a problem. For example, brands that consistently self-promote are less likely to succeed than the brand that gives it's audience value.

Simon Pearce
Posted on January 31st 2014 at 8:33PM

Thanks Hailley. I agree that adaptation is required. One of the points I was trying to make in the article is that brands sometimes under-estimate the amount of adaptation required. For example, I think it's wrong to conclude that this is just something that can be taken care of by marketing, in isolation from other groups including technology, operations, customer service, R&D etc. 

coryedwards
Posted on February 3rd 2014 at 10:05PM

I think the other interesting research to consider is what has just come out of Edelman's Trust Barometer a week or two ago. It struck me as significant that for the first time ever, Brands have overtaken the Media as a more trusted source. To me it means that more than ever brands have an opportunity to connect with their customers and build relationships...but perhaps more specifically, for the brands' employees to connect with customers and be the kind of 'real person' and ambassador that customers are looking to talk to.