|
|
"Is the Internet really killing
Brands?"
©
By Jacques Chevron
Partner - JRC&A
Many prophets of the Internet have predicted the demise of the Brand.
According to their views, brands cannot survive because of the all-objective
way the Internet allows for comparison of product attributes. After all, it is
true that anyone wishing to buy a product can now almost instantly find a
plethora of willing sellers all conveniently listed on one's computer's
screen. In theory, the only remaining task for the buyer is to compare
products on the basis of price and possibly service and delivery.
But, to the prophets' surprise, that prediction seems to have gone the way of
so many other predictions involving high tech, like that of the "paper-less
office." Brands are alive and well and living on the Internet. Why is that?
One of the key reasons for the healthy status of brands can be related to the
way that a brand is supposed to work. Brands were born from the needs created
by the packaged goods industry. When a housewife goes on a trip to the grocery
store, she may be faced with approximately 100 purchase decisions, each
involving a relatively small amount of money. If she were to ponder over each
one of those decisions, reading labels, comparing prices, any trip to the
supermarket would take all day. Our housewife therefore comes to the store
armed with a series of acceptable choices for each of the products she plans
to buy. Those choices may be based on past experience with one or more
products, on familiarity with or recognition of some brand names, and on her
understanding of the values that she perceives to be attached to those brands.
To avoid having to make time consuming decisions painstakingly in the store,
she is willing pay a small premium for those products that have a brand she
trusts. That is what branding is all about. A brand is but predigested sales
information to facilitate a purchase decision. The more decisions one has to
make the stronger the effect of branding. Herbert Simon, the 1978 Nobel Prize
winner in economics, once said "What information consumes is rather obvious:
it consumes the attention of its recipients. Hence a wealth of information
creates a poverty of attention and a need to allocate that attention
efficiently among the overabundance of information sources that might consume
it." To me, this statement is one of the best justifications given for the
power of branding.
It also explains the strength of branding in the face of the Internet. The
Internet provides lots of information. It can drown you in information. And,
because we do not like to drown, brands become our attention management
devices, our lifesavers or at least our time savers when we shop. What is true
when shopping in a department store becomes even truer when shopping on the
Internet.
But branded industrial products face a different challenge. For one thing,
transactions in the business to business world are fewer in number while at
the same time larger in their amount. So, while the industrial buyer may also
be subject to a large amount of information, he may not feel the need to take
the branding decision short cut. Furthermore, many industrial products are
standardized and/or immediately comparable based on their specifications.
Industrial buyers may be more sensitive to small pricing differences and may
be less inclined to accept even a small price premium for the branded product.
As a result, while the branding effect also exists in the business to business
world, its importance is somewhat reduced.
The Internet offers other dangers to the industrial brand. Consider the
problem of reverse auctions. A reverse auction is one in which the buyer
rather than the seller is in control of the auction process. It goes like
this: the company which desires to purchase, for example, a thousand tons of
calcium chloride will call for bids on a specialized website like http://www.chemconnect.com.
The buyer can provide additional information such as the desired product
specifications, where and when the product should be delivered, a target
purchase price, payment conditions, etc. The identity of the buyer remains
hidden from the sellers until the transaction is completed. The buyer knows
which companies are competing for his business. In that context a company with
a strong brand may still have a small advantage, particularly if the brand is
associated with values such as reliability or customer service.
Some reverse auctioneers, like http://chem-etrade.com for one, also hide the
identity of the seller until the very end of the process. In this case the
brand will not interact with the transaction until it is complete. The brand
is thus dissociated from its product, which becomes a mere commodity. In this
process, the brand becomes meaningless and comes out weakened for not being
able to command its usual premium price.
This subject came up during a recent conference on Branding in the Chemical
Industry, which I had the honor to chair. Participants wondered how they could
be involved in reverse auctions without weakening their brands.
To me, the answer is very clear: Brands should stay away from anonymous
reverse auctions. A product should never be dissociated from its brand so as
not to become a commodity and reveal the pricing premium that it associates
with its brand. Participation in an anonymous reverse auction places the brand
at its lowest common product denominator - price.
Yes. The venues in which your brands are sold directly impact how they are
perceived. This is true whether your brand name is Dow Chemicals or Pierre
Cardin. If incremental sales coming from otherwise undesirable venues are
really important to your company, consider buying or setting up a subsidiary
and participate in the auction under the name of the subsidiary.
But protect your brand, always! Look at the lost profits of potential sales as
an investment in your brand.
And let it be known loudly that your brand doesn't participate in anonymous
reverse auctions. Your willingness to avoid them will demonstrate your
commitment to your brand values and can only strengthen your brand.
Jacques Chevron
Partner - JRC&A
2016 West 55th Place
La Grange, IL 60525
(708) 784 -0730
© Copyright 2000 Jacques Chevron, La Grange, IL 60525
###
