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The Power of Brands

2010 April 11

Many digital marketers proclaim that they offer superior value than traditional media by delivering direct response metrics.  No touchy-feely image talk, but concrete results.  Just the facts ma’am.

That’s a mistake.  The world’s premier marketers spend billions every year on brand image campaigns because they make money doing so.  Anybody who believes that the profit oriented companies continue to invest because they are subject to some kind of mass delusion is just not thinking clearly.

The bulk of marketing budgets will continue to go toward building brand perceptions because brands are incredibly powerful.

Brand Identity

A few years ago, I got some great first hand experience with how influential brands can be when we commissioned a series of focus groups for our market leading portal and received very interesting responses regarding our news section.

While we got high marks for usability and consumers said they appreciated the convenience of having news on the home page of a general interest portal, we got low marks for quality of the content.

Many said that we didn’t offer serious journalism and the quality of the writing could be improved.  They also said that they preferred to read the leading news portal, which offered hard hitting, well written stories.  They would read news on our site, but for important issues they preferred the news leader.

What the readers didn’t know was that we also owned the leading news site and were, in fact, simply syndicating the stories from our news brand onto our portal.  Both sites featured the same stories written by the same journalists.

It wasn’t the reality that differed, it was the perception.

Brand Promises

The difference in perceptions can be traced to a difference in brand promises.

Our news site was cobranded with a serious news magazine.  In addition to the news wire, it offered lots of other news features, including commentary, news video, blogs, etc.  Although the newswire made up over 90% of the activity on the site, the extra features and the focus on news created a more weighty environment.

Our portal, on the other hand, featured lots of entertainment oriented services, including dating, funny videos and games as well as e-commerce, sex and career advice, and so on.  It promised convenience, fun and a threshold level of quality.  People could expect everything on the site to be “good enough,” but not exceptional in any one area.

So while the actual offer of both sites overlapped, the propositions differed and consumers reacted accordingly.

The Tangible Value of Intangibles

Much of the skepticism about brand advertising stems from the fact that you can easily measure direct response to a sales promotion, but brands are intangible.  What business wouldn’t want simple metrics with which to evaluate return on marketing investment?

The fact is that business don’t run on metrics, they run on profits and while measuring brand value isn’t straightforward, the value is real nonetheless.  Interbrand regularly evaluates financial value for brands and finds that many are worth tens of billions of dollars.

They’re not the only ones.  This paper from the Marketing Science Institute estimates that “a one-unit change in the Brand Asset Index is associated with a 4% change in the market value of a firm.”   In study after study, brands are shown to be one of the most valuable assets a company can have.

Many marketers monitor brand performance as closely as they do sales performance and spend millions of dollars every year for brand tracking studies.  While the math isn’t as straightforward as with direct response, they are more than aware of how brand perceptions affect sales.

Despite what some tech bloggers seem to believe, otherwise astute businesspeople do not throw around billions of dollars of investment every year based on abstract theories.

Digital Media’s Expensive Mistake

By ignoring the power of brands, digital media have missed a valuable opportunity.  While direct response is important, it’s only part of the story.  Just because some results are more easily quantified doesn’t mean that they’re any more relevant.

The evidence becomes clear when you start to look at the numbers.  While the internet and related technologies have seen the fastest adoption rates in history, disrupting powerful industries such as retail, communications and others, the impact on advertising has been underwhelming.

In the fifteen years since the web exploded onto the scene, digital media has earned only 14% of the global ad market.  Moreover, virtually all of that has come from the fall in newspaper classified advertising.  TV, Magazines, Outdoor and Radio have largely maintained their share of the expanding ad market.

Meanwhile, although marketers continue to experiment with digital media, they struggle to find ways to measurably alter brand perceptions with online campaigns with anything approaching the efficacy of traditional media.

The Way Forward

The debate over brand image vs. direct response is a false one.  Competent marketers know that the two are hopelessly intertwined.  TV campaigns raise CTR’s, social media campaigns deliver value above and beyond direct response and nobody denies that in the end you have to close the sale.

What’s missing is the concept of service.  The desire to help clients achieve their goals rather than to assume you know what their goals should be.  Talk about direct response metrics won’t help a client whose brand awareness is trailing by ten points.

Interestingly, top digital players like Yahoo! and Google do understand this.  However, many in the industry are still the same arrogant bunch that went down in the first dotcom boom and will surely will go down again, screaming “nobody  gets it!” along the way.

And I don’t see the ROI in that.

– Greg

6 Responses leave one →
  1. Ajoy permalink
    April 11, 2010

    Hi Greg

    Interesting post. However, I have some thoughts that I’d like to share…

    There is safety – and also comfort – in numbers. So the more people you touch through advertising, the better off you are.

    As a Direct Marketer – I have always spoken to a tightly targeted, narrowly defined audience. And what has it resulted in? Small audiences have got me small numbers! Sure – the responses coming in give you a different kind of a high – but they pale in comparison to the muscle of high budget advertising.

    I remember doing a traffic generation exercise for the branch of an international bank – they had many branches in this country. We focused on one branch – did an intensive exercise in that locality and drove traffic into the branch. How many people? Around 100 in one month. The branch people were thrilled. And just a month later – the bank launched a new product/brand – and spent millions in advertising that brand throughout the country. The sheer muscle of those dollars spent – the number of insertions etc. made our entire Direct Marketing (Traffic Generation) activity seem to pale in comparison. No wonder we, the Direct Marketing arm of a large agency, would always refer to the parent company as Big Brother.

    To quote another example, albeit different, I remember helping a company revive some of its dormant retailers/customers. And I asked the Sales Manager to allocate a team of 5 tele-callers to call these dormant retailers and revive them into transacting. The Sales Manager- quite new to this company said just one thing – if you want to show results – hire 20 tele-callers – show 4 times the response – and then you will get noticed! In hindsight he was right! People notice waves – not ripples.

    In fact the one word that I always come across is “scalability” – which means that people are saying to me – the margin you earn does not matter as much as how scalable you are and therefore what numbers you can bring in.

    I have to therefore, grudgingly accept the fact that advertising will get you the visibility – not because of the medium or the message alone – but also because of the money/muscle that has goes into it .

    I cant recollect who said it – but he said it right – “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”.

    Ajoy

    [Reply]

    Greg Reply:

    Ajoy,

    Great story. Thanks.

    Btw. Just to be clear, I don’t in any way mean to knock direct marketing. It’s absolutely essential.

    – Greg

    [Reply]

  2. Ajoy permalink
    April 12, 2010

    Hi Greg

    Thanks for your reply. Of course I know that you don’t mean to knock Direct Marketing 🙂

    Ajoy

    [Reply]

  3. April 13, 2010

    Your concept of service idea touched a nerve in me. I have assumed that everyone wants to change and grow. From now on, I will place more emphasis on helping people who come to my website define what they want
    instead of what I think they want. Thanks. Beth

    [Reply]

    Greg Reply:

    Beth,

    Thanks. I’m glad ıt was helpful.

    Good luck!

    – Greg

    [Reply]

  4. Patrick permalink
    April 27, 2010

    I concur.
    You get it!
    Thanks for Sharing.

    [Reply]

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