The Rising Value Of Brands In The Digital Age

Many believe that brands will become less important as digital technology marches onward. They will surely be disappointed.

In fact, it is likely that branding will become more important in the digital age. With more media and more brands, consumers have to more to filter out. In order to cut through the clutter, marketers will have to work harder to build brands that inspire loyalty.

To understand why, let’s start at the beginning…

Creative Kings In A Consumer Age

After World War II, most of the globe went through several decades of seemingly boundless economic expansion. Consumers had ever more money to spend and business expanded to meet the demand. It was the dawn of the branding age and marketers strove to make their products popular with consumers hungry to join the consumer culture.

It was also an era of mass media. There was a limited amount of TV stations and programming was geared to mass audiences. Popular broadcasts like The Ed Sullivan Show in the US could reach more than 50% of the population.

In this environment, creativity was king. Advertising pioneers such as David Ogilvy and Leo Burnett developed powerful brand images that transformed the landscape of commerce. Great creative work combined with mass audiences proved to be a powerful combination. Brands evolved into consumer icons and built enormous profitability for the companies that owned them.

The Media Revolution

Cable and satellite technologies transformed media in the 80’s and 90’s. New, thematic channels chipped away at mass media, making it harder to reach audiences and increasing clutter. With the exception of special events like the World Cup and the Super Bowl, advertisers had to cobble together mass audiences by aggregating smaller ones.

In the new media environment, brand messages became harder to get across. Media fragmentation emerged as the new reality.

Advertisers started to look for alternatives to mass communication. New techniques such as Guerilla Marketing and Communication Planning vied with upgraded forms of direct response marketing.

In this new environment, creative strategy became just part of the picture. You had to present the right message, to the right person at the right time for the right price. Brand promotion evolved into an exponentially more complex animal.

Computer technology had a major role to play in the media revolution. Much like the financial revolution that preceded it, the media revolution involved greater access to data and sophisticated analytical techniques that were enabled by cheap computing power. Expenditure databases and ratings optimizers replaced “gut feel” as marketers struggled to adapt.

A New Analytical Age

The revolution continues today as digital technology fragments audiences further and creates even more data to be parsed. Analytical rigor has become a core competency for any marketer.

One of the pitfalls of analytical rigor is that you can lose sight of the subject of the analysis. With so many numbers flying around, it’s easy to forget that essentially marketing communication is about how people interact with products emotionally.

People love some brands, hate some others and don’t think much at all about most. How the consumer feels about a brand will determine whether she is willing to buy it and what price she will pay.

Marketers know this and invest millions of dollars every year to track how consumers feel about their brands. For instance, a fast food company would track factors such as value, taste quality, etc.

Brands And Direct Response

Heavy investment into brand image is confusing for many direct response marketers. Why wouldn’t a business want to see a direct relationship between investment in marketing actions and sales? Surely smart business people must value suppliers who can deliver definitive results?

Well, not exactly…

A typical scenario is encapsulated in an experience I had with planning for a fast food restaurant brand some years ago. The operations people loved sales promotions.  Every time they ran sales oriented campaigns, business performance would improve. They made money and achieved measurable sales ROI.

However, as perception of their brand attributes in tracking research declined, so did the efficacy of sales promotions. In effect, each sales promotion was stealing from the next one.

While brand campaigns lacked the direct response jolt of sales promotions, they increased the performance of future sales promotions. While ROI was harder to measure directly, long term sales increased.

In reality, direct response is highly dependent on brand equity.

The ROI Trap

Many people in the digital world believe that advertisers will eventually see the folly of traditional media and enter a new era of Digital ROI. They expect to offer quantitative proof that their media is effective, something they feel that the marketing world sorely lacks. They are bound to be disappointed for several reasons.

Firstly, for many products, immediate response isn’t feasible. People who just bought an iPod, a car or a new TV aren’t very likely to buy a new one soon no matter how much they might like it. Maintaining brand equity over a long product cycle is a major concern for many marketers and how Digital Media affects perception isn’t very well understood.

A second point is that many marketers are reluctant to spend more in Digital Media is because they have less access to audience data and measurement. While there is literally decades of demographic and psychographic data about TV, Radio and Print, nobody really knows who watches a web video.

Finally, as Digital Media grows in importance and improves its ability to deliver content, it will become more like traditional media. In order to take on a bigger role in marketing products, Digital Media will have to be able to demonstrate that it can build brand equity effectively, not just produce direct response.

Brands In The Digital Age

In the years to come, we can expect the basic trends to continue. There will be more media channels and more brands vying for attention on them. Clutter will increase and consumers will continue to filter out more brands than they take in.

Therefore, we can reasonably expect brands to become more important, not less. As consumers are offered more choice, their preferences will become more important.  Some brands, like Apple and Google will enjoy strong loyalty, low acquisition costs and high margins. Others are going to struggle and pay more to make each sale.

If digital media is ever going to become a profitable industry, it will have to learn how to build brands, not just produce direct response. Ironically, to build the consumer brands of the future, today’s digital marketers will probably have to learn a lot from the ad giants of the past.

Contributed to Branding Strategy Insider by: Greg Satell, a recognized authority on digital strategy and innovation. He is a speaker, consultant, and writes the Digital Tonto blog. Follow him on Twitter @DigitalTonto.

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