Branding in a digital economy

Branding in a digital

Given the extraordinary focus on interaction and transactionality, the 21st century marketer can well be bemused and wonder what, or if any, role does branding have in a digital economy. This dilemma is not misplaced since the vast majority of literature, academic as well as general, on digital marketing is obsessively focused on ‘conversion’, often construed as a shorthand for sales.

Indeed, sales is the holy grail for any business. Without sales there is no revenue, and, without revenue there is no business. This, however, misses the point of business, which is profits. A business that has sales but no profit will soon be consigned to the bankruptcy courts. And this is where branding comes in, because, brands are the engines of profitable sales. So, the obsession with sales should, ipso facto, include brands. It is in this context that branding becomes important and the consequent perplexity of marketeers, where conversion is seemingly driven more and more by price, fueled by the likes of Amazon and the Softbank subsidized eCommerce initiatives.

The question this poses is, “Is branding dead, and, with it, the continuing spiral to lowest price and commoditization?”

Relax marketeers, doomsday is not nigh, but, that is not reason for celebration, because the task of branding in a digital economy is far more complex than putting out a television commercial and putting up your feet.

Branding has not changed

First, the good news. The purpose of branding has not changed, but the pinciples have changed with the profusion of consumers and marketers. Thus, in gentler times branding was a mark of ownership, whether by crayons made of charcoal and ochre or singed on cattle by the branding iron. As more producers and consumers came into the economy, these traditional marks of ownership began to acquire the nuance as differentiators of the producer’s reputation and then on to concepts such as unique selling proposition, brand image, brand personality, etc.

In the last century the evolution of the mechanics of branding were in lock-step with the evolution of the socio-economic environment of different eras. Thus, for instance, the immediate post World War I era of Salesmanship drew its inspiration from the profusion of entrepreneurs and the availability of media; Rosser Reeves’ principles of the Unique Selling Proposition was a result of the impact of manufacturer’s differentiating their products through proprietary technology and manufacturing processes; Brand Image and Personality, popularized by David Ogilvy, Al Ries and Jack Trout were a consequence of evolving consumer needs for self-gratification and so on till the 1990s and the era of the Brand Prism of Jean Noel Kapferer. Each of these branding principles were rooted in a socio-economic milieu dictated by affordability of consumers and the diversification of their needs and expectations – physical as well as emotional. Since the phenomenon were discrete, the ability of marketers to come to grips with them and respond gave them a measure of control.
On the face of it the 21st century seems to be different. On the one hand, there seems to be a completely new generation of consumers – the millennials; simultaneously, the advent of technology seems to have changed the rules of marketing, whether it is in manufacturing, communication or consumption. That both, emergence of a consuming cohort with different world views and the means of sating them, have occurred at the same time is only coincidental, but have not changed the underlying drivers of consumer choice and their preparedness of pay a premium for brands.

First the consumers

Two factors have impacted the evolution of consumerism. First has been the increase in overall affluence levels, leading to increased affordability of people. There has been much debate about increasing inequality, concentration of wealth, etc. Notwithstanding these, the absolute number of people who can afford manufactured goods, beyond the basic survival needs have grown manifold in the last thirty or so years.

The second factor has been the general levels of knowledge and access to media have improved, with significant help of the proliferation of media, the onset of which, began with the cable television circa the mid-eighties and has since then only been amplified and democratized with the rise of the Internet and mobile technologies.

These two factors together have given consumer’s confidence in their own abilities to prosper and live well. In the process, anxieties that marketers allayed with brands have become less relevant. For example, one of the first principles that marketers are exhorted to observe is that they do not sell a soap, but the promise of beauty. While this was sound advice in the 70s and 80s, the same advice today sounds anachronistic, since consumers are more sophisticated and nuanced, because of their education and exposure, to respond to such simple propositions.

A second implication of this development is the ability to reach consumers at a micro level, with near individual messaging. In many ways, this has been a long-cherished goal of marketers. Segmentation, or the tailoring of brand propositions and marketing messages, to sub-groups of a larger set, has been a trusted weapon in the marketer’s arsenal. However, it is one thing to be able to fine tune brands to smaller groups of consumers, but altogether a different challenge to be able to reach to such smaller groups efficiently. This has been because, thus far, conventional media has maximized on eyeballs since its business economics depend on it. Digital, though, has demonstrated that it is possible to have the scale of mass media, but deliver messaging to audiences of as few as one. Consider, the parent organization of this publication – its print version requires scale economies for its economic success, consequently, this feature published in the print version will be distributed to all the readers of the print version regardless of whether they want it or not. The same constraint does not apply to its digital version, since in the digital version scale is not limited by the printing cost allowing the digital version to publish features that may attract only one reader, without having to incur the cost of printing the entire paper.

We will come back to these when we consider their implications for branding.

Next the producers

While consumers have undergone a seminal change, changes in the business environment have been seismic affecting all aspects of business. All of this has meant that consumers today have access to nearly any brand at an affordable price. For example, mathematically, the inflation adjusted price for a 55 cm Sony television is negative today compared to 1985. Or consider another example, the street price Maruti 800 when it was launched in 1983 was Rs 52,500. When its production was discontinued, Maruti 800, was estimated to cost Rs 2.10 lakh – an annual price increase of 3.9% per annum, when the average annual inflation rate in the same period was 6.1%. We can see the impact of this on our roads and the quality of our air!

Not only affordability has improved, but the single biggest impact of digital technology has been in allowing access to pretty much anything a consumer would like to have regardless of whether it is available in the consumer’s home country. So, a denizen of Chennai has the same access to designer brands as, say a person living in San Francisco. No more, having to depend on the cousin who is coming home for his or her annual vacation!

Moving on to branding in a digital economy

In its essence branding is the relationship products have with the consumers. Digital, per se, does not impact branding, but only aids consumers being able to acquire brands of their choices regardless of boundaries of time and space.

In establishing this relationship the emerging consumer is the core and brands have to pay heed to this emerging consumer. The key differences in today’s consumer versus the earlier generation are:

  • Brand usership is not a way of keeping scores, but being able to exercise choice. Consider the classical battle of Surf vs Nirma in the 80s and 90s, where the battle was between being smart and being cheap. Today, price is not a barrier to buying a detergent for a majority of detergent buyers – the discriminators would be what resonates with them.
  • With greater awareness of consumers comes greater responsibility for brand owners to resist flummery and be more purposeful. Products have become commoditized and brands that espouse platitudes are destined to join the add to the pile of consumer indifference.
  • Digital branding is not mass-marketing, but, micro-marketing. Today tools are available to present multiple facets of the same core.
  • Consumers engage differently across the digital eco-system. Brands should use each element of the eco-system appropriately rather than the one-shoe-fits-all approach of conventional marketing.
  • Digital is the universe of the emerging consumer and not an alternative. Therefore, digital strategy is not a supplement or a complement, of the ‘mainstream’ – digital is the mainstream.
  • Consumers are not averse to paying well. To avoid the never-ending spiral of unprofitable pricing the mantra of conversion should be ‘profit per conversion’. Conversion by selling cheap can drive volumes, but, every incremental sale made at a loss, will only increase the firm’s losses, rather than be the path to profit . After all, if Apple can sell a phone at USD 1,000, so can Samsung.

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