Brand equity is simply not as valuable as it used to be

Posted by Anthony Gunn and Tim Bearup

In an article appearing in The New Yorker entitled “Twilight of the Brands”, it was proposed that because consumers are so well informed and much more likely to investigate as to the true value of a product, that there is a reducing reliance on logo’s and brands. The article concludes that brands are at best fragile, and at worst becoming completely irrelevant.

Authors of a recent book, “Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information”, Itamar Simonson and Emanuel Rosen, argue that consumers are becoming more rational and that brands are less needed as a mental shortcut due to review websites such as TripAdvisor and the many shopping websites available.

Yet market-research company, Millward Brown, stated that in 2013 Brands account for more than 30% of the stockmarket value of the companies in the S&P 500 index. Depending on the method used to calculate the value of a brand, the value of the Google brand is somewhere between USD65bn and USD160bn, Apple between USD100bn and USD145bn,and IBM between USD40bn and USD105bn.

BrandValues

Just last month Brand Finance released their report detailing the most valuable Australian brands. Woolworths remains in the top spot with a value of USD9bn, QANTAS up to 15th position with a value of USD1.3bn, and Commonwealth Bank the largest of our banks, up to position 3, with a value of USD7.5bn.

Brand Lovers

Brands such as Apple, Harley and Coca-Cola have fans that are loyal beyond what others may consider normal. This brand love can stimulate consumers’ positive word of mouth, repurchase intentions and create resistance to negative information. Nick Cooper of Millward Brown says that the “emotional bond puts credit in the bank”.

Whilst some brands have ‘fanatics’ that have such an emotional attachment that may drive them to tattoo their body with a logo, not all companies will have customers like Mike Fontaine who has collected over 75,000 pieces of McDonalds merchandise and memorabilia. But all companies want customers that have a level of love and affection for their brand that they may not fully understand. Those that have emotional associations to a brand that causes them to pay a premium for the products.

Fontaine           tatoos

In the recently released corporate reputation index, which surveyed 12,700 consumers and measuring consumer-facing companies by products and services, innovation, workplace, citizenship, governance, leadership and financial performance, produced by research consultants AMR, Toyota Australia was voted the most reputable company in Australia. This is in light of Toyota making thousands of workers redundant when it decided to shut down its Australian manufacturing sites.

So, in a modern world with enormous amounts of information at our fingertips and where anyone can share their views and reviews of a product with a large audience, will we see the decline in the value of brands or like Toyota, should companies double their efforts to build brand equity in the good times, so that the credits are there to see them through the not so good?

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5 thoughts on “Brand equity is simply not as valuable as it used to be

  1. I’ll be the first person to admit that it is brands that attract me to products. I think it’s the old adage that cost equals quality which unfortunately, in this day and age is not the case!
    With this in mind, I am definitely guilty of letting reviews guide my decisions. Whether it be deciding on which new phone to buy or which restaurant to go to dinner to, for me, reviews play a pinnacle role. More so than simply good branding. There is nothing that will put me off a business or product quicker than multiple ordinary or bad reviews. I believe that for survival during the bad and the good times companies must not only build their brand equity and integrity but, they must also be able to actively manage the reviews that are so readily available to consumers, and brand alone won’t cut it alone anymore.

    Liked by 1 person

  2. I struggle to be convinced by an argument that as consumers we have access to near perfect information and therefore brands have a declining influence in purchase decisions. That sounds to much like the economic theory of the rational consumer that always makes the perfect market decision based on self interest. People are not always (or even mostly) rational and make decisions on a range of matters informed by emotion and other factors. This is why marketing and advertising works. At the very least Branding puts a good or service the initial consideration set that lesser brands cant guarantee. Another consideration is the type of purchase – how involved is the customer. Whilst I could probably spend a good deal of time researching milk and dairies that produce it and the companies that sell it – I don’t -and buy milk from the brand I trust whether based on fact or not. Sure some people may have an ethical or other issue that may drive their milk purchase but I (like most people) really just want it for my coffee.

    Liked by 1 person

  3. I think the stronger the brand, the less important the review.

    Think about if you owned a number of apple products and loved them all, and you read a few bad reviews from people hating the iPhone… would that stop you upgrading to the next model? Probably not.
    If you were about to purchase something in/from a new market for the first time and none of the brands were particularly strong in the public eye… then the reviews would then weigh heavily on your decision making process.

    people have found disgusting things in their KFC and McDonalds nuggets – but it seems that no one really bats an eye to it. If your local restaurant on the order did the same, would they survive??

    I think a strong brand can overcome bad reviews, but it takes good review to build a strong brand!

    Liked by 1 person

  4. Interesting article… I think even with the volume of data available to consumers company’s still need to focus on building strong brands. I agree with Victoria in that it I often make purchase decions based on brands and rarely make decisions based solely on product reviews. I don’t think company’s can afford to simply rely on developing a great product that would get good reviews and also have a strong brand to back it.

    Liked by 1 person

  5. interesting post. Brand equity has been defined in a number of different ways for many different purposes, no matter how it is used or measured, however, the value of a brand is its equity and it must ultimately be derived in the marketplace from the words and actions of consumers. That is, consumers decide with their purchases, based on whatever factors they deem important, which brands have more equity than other brands. Thus, although the details of the approaches to brand equity may sometimes differ, they tend to share a common core: all definitions either implicitly or explicitly rely on brand knowledge structures in the mind of the consumers. therefore, companies who want to possess a unique market position should focus on consumers’ thoughts about their brand and building brand equity according.

    Liked by 1 person

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