A few weeks ago, The New Yorker's business maven, James Surowiecki set off a tremor in the marketing world when he penned a widely circulated essay called "Twilight of the Brands." As its title suggests, this was a broadside against Madison Avenue arguing (convincingly) that the internet has all but obviated modern branding. Here's a taste:
Consumers are supremely well informed and far more likely to investigate the real value of products than to rely on logos...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 percent 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.
Surowiecki, arguably my favorite financial writer, is right. The current buzzword is the "zero moment of truth." This precedes the first moment when somebody hears about the new model, the first time they see it in an ad or the first time they go to the dealership and see it in the flesh. The zero moment of truth, a term coined by the people at Google, is those minutes in the pale glow of your computer screen when you scour Consumer Reports or CNET to read the reviews and compare prices. It evokes a generation of people empowered by technology who are able to do their own research and remain beyond the reach of brand appeals.
But Surowiecki, in my estimation has gotten it wrong at a more fundamental level. First, brands aren't logos. They are much bigger. They are currency. In "Capital in the Twenty-first Century," a magisterial new book by the French economist Thomas Piketty, brands are referred to part of the category of intangible capital (versus physical capital like real estate or financial capital like equities or bonds). Brands in his estimation are like patents and are tradable and have real cash value. A firm's plants and processes don't equate to its market cap because that doesn't take into account the value of its brand. Brands, by this definition are anything but superfluous; they mean something. Aswath Damodaran, professor of finance at New York University's Stern School of Business, assessing the value of the Coke brand, put it at $64.2 billion total worth, or 80 percent of the company's value.
Secondly, while internet due diligence is certainly shifting the buying process in favor of consumers (I'm all about that), it doesn't mean that branding doesn't apply when we research and read reviews. Consider that the iPad can command a price of more than $100 more than the Kindle Fire which is lighter, has better resolution, more RAM and a better camera for the simple reason that the Apple brand has more cachet and the valence of luxury. If anything, reviews create psychological anchoring but don't necessarily vanquish the power of brands. Reviews speak to features and initial experience but brands gather weight over time and they speak to emotion and narrative more than function. Surowiecki misses the fact that branding endures because brands are personal. By definition, they are endowed with the attributes of a person, whether it is ambition, adventurousness, creativity, or warmth. In most consumer categories, that's what motivates buying behavior -- not a list of fact and features. In some ways, the internet extends the power of brands by giving them the capacity to interact. They now converse with customers. That is why 79 percent of Millennials say Amazon is their favorite brand -- because Amazon does not simply project a monolithic image. Amazon is a brand that is a composite of interactions. People come in, they ask questions, they get answers, and that is what constitutes a brand today. I think the nature of a brand is different today by virtue of these changing expectations.