Why consumers no longer care about brands

You don’t have to work at a Charlotte marketing agency to understand the power of a strong consumer brand, right? We’ve all learned in Marketing 101 how effective branding elevates a product or organization from being just one commodity among many identical commodities to being something with a unique character and promise.  Strong brands create emotional resonance in the minds of consumers. Think Coke. Think Apple. Right?

Wrong.

How people buy things has changed profoundly – yet the fundamental thinking about consumer decision-making and marketing has not. Most marketers still believe they can shape consumers’ perception and drive their behavior. In Absolute Value a new, provocative book by Stanford professor Itamar Simonson, he demonstrates in very convincing fashion how products today are being evaluated more on their absolute value and quality and less on the brand name.

Both clients and agencies still like to blather on about how a company’s brand is its most important asset, but brands have never been more fragile.

And the reason is simple: consumers are supremely well informed and far more likely to investigate the real value of products than to rely on logos and abstract brand attributes. 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 G.M., 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 nineteen-eighties, nearly four-fifths of American car buyers stayed loyal to a brand.

Today, consumers can read reams of research about whatever they want to buy. This started back with Consumer Reports, which did objective studies of products, and with J. D. Power’s quality rankings, which revealed what ordinary customers thought of the cars they’d bought. But what’s really weakened the power of brands is the Internet, which has given ordinary consumers easy access to expert reviews, user reviews, and detailed product data, in an array of categories. A recent PricewaterhouseCoopers study found that eighty per cent of consumers look at online reviews before making major purchases, and a host of studies have logged the strong influence those reviews have on the decisions people make. The rise of social media has accelerated the trend to an astonishing degree: a dud product can become a laughingstock in a matter of hours. In the old days, you might buy a Sony television set because you’d owned one before, or because you trusted the brand. Today, such considerations matter much less than reviews on Amazon and Engadget and CNET

Only twenty-five per cent of American respondents in a recent Ernst & Young study said that brand loyalty affected how they shopped.

For established brands, this is a nightmare. You can never coast on past performance – the percentage of brand-loyal car buyers has plummeted in the past twenty years – and the price premium that a recognized brand can charge has shrunk. If you’re making a better product, you can still charge more, but, if your product is much like that of your competitors, your price needs to be similar, too. That’s the clearest indication that the economic value of brands – traditionally assessed by the premium a company could charge – is waning. This isn’t true across the board: brands retain value where the brand association is integral to the experience of a product (Coca-Cola, say), or where they confer status, as with luxury goods. But even here the information deluge is transformative; luxury travel, for instance, has been profoundly affected by sites like TripAdvisor.

For consumers this is ideal: they’re making better choices, and heightened competition has raised quality and held down prices. And they’re not the only beneficiaries; upstarts now find it easier to compete with the big boys. If you build a better mousetrap, people will soon know about it.

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