Wednesday, March 12, 2014

Brands Matter More Not Less

James Surowiecki posits that brands are in decline. There is no doubt an issue that brands are not evergreen, Jordache jeans or a Pierre Cardin suit anyone? But a lot of this is not "death of brands" as much as creative destruction aka business as usual in a capitalist system.

Surowiecki's main example is Lululemon which is 1) a new brand and 2) riding a very specific trend. I am not sure the notion that Lululemon is in decline means that all other brands are toast. In fact, in the course of making his argument, Surowiecki cites many brands - Consumer Reports, JD Power quality rankings, PWC, CNet, and more.

We're not in the industrial age, we're in the Information age and what a brand means is different now, but its still there and you can make a good case that its even more important. Brands are about things like customer loyalty, the ability to charge higher prices, knowing your customer better than your competition (Bezos calls this being customer obsessed).

For the consumer the sources of information that you trust are a brand. Surowiecki writes:

"“In a world where consumers are oftentimes overwhelmed with information, the role a brand plays in people’s lives has become all the more important.” But information overload is largely a myth. “Most consumers learn very quickly how to get a great deal of information efficiently and effectively,”"

Ah but this is precisely the point - the only reason we are not in full time information overload is that we get our information filtered through brands like NY Times, Fox News, HuffPo, Yahoo, Google and the like. Why do you go to one and not the other? There is a customer relationship that the network has established with you. So the brand has not disappeared, its migrated upstream.

So yes brands still matter a great deal. They matter in new ways in advanced economies due to how people interact with networks and what they deem to be authoritative sources of information and better service providers. Why do Verizon and T-Mobile charge different rates? Why do you buy something at Amazon without checking 16 other online services? Brand matters a great deal in an information economy. There are more layers and with layers more trust and trust comes from brand.

Speaking of mobile networks, which one do you use? How did you select it? Did you go out an inspect the towers, did you see if one runs fiber to its towers? Did you ask to see the data center and what servers are in use? No, you bought on which one has supposedly better coverage, which one is 3G or 4G (are you sitting down? Those are marketing terms) or which one has the phone brand you want. Sure it may not be yoga clothes or pet rock flavor of the month brand but its brand all the same. 

Surowiecki writes that all is not lost for brands "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." Agree on both, and Coca Cola has more to teach us about brands. This may come as a surprise to the New Yorker but most people do not live in the developed world. Population centers are in emerging markets. As they come up the curve, they do not have the same "first world problems" as the US. As a tweet posted the other day (cannot remember who) we live in a world where people want music and movies for free but will pay up for organic dog food. But that's not the rest of the world.

The rest of the world has more basic problems like - can I trust this water to drink? Yesterday Unilever announced the purchase in a leading Chinese water purification company - Qinyuan. Why?

China's state-run Xinhua News Agency has reported that 55% of the country's ground water is polluted and 60% of pipes in urban areas are corroded, leading to secondary pollution.

"Consumers are worried about whether they can trust what comes out their tap even for cooking or cleaning," Mr. Stocker said.

As emerging markets develop, brands will play major role in consumer trust just as they have in US and Europe. In networked economies brand plays a role in trust across layers in the system.  And so far from dead, we have a world with both 21st century "networked brands" and industrial age, old school brands still in effect across the globe.

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