Death of the Brands: The Move from Brand Value to Intrinsic Value

By Ram Badrinathan

brandsThe Origin of Public Relations or Public Manipulation
The idea of manipulating public opinion using the sub consciousness was pioneered by Sigmund Freud’s nephew, Edward Bernays, who is also regarded as the father of public relations. In the 1920s, working for the American Tobacco Company, he sent a group of young models to march in the New York City parade. He then told the press that a group of women’s rights marchers would light “Torches of Freedom”. On his signal, the models lit Lucky Strike cigarettes in front of the eager photographers. The New York Times (April 1st, 1929) printed: “Group of Girls Puff at Cigarettes as a Gesture of ‘Freedom’”. This helped to break the taboo against women smoking in public (Source: Wikipedia).

Industrial Revolution and the Emergence of the Brand
The emergence of brands was a result of the Industrial Revolution, when centralization of manufacturing resulted in mass production. My initial professional experience was in advertising and, while working at JWT and Grey, account management had to generate creative briefs for ad campaigns. One of the questions that had to be tackled was “What was the functional discriminator?” or USP. But most products didn’t really have one, so then we had to generate an emotional discriminator, which was basically a psychological motivator we had to induce or manipulate to get consumers to purchase the product.

As products emerged in various categories which couldn’t compete on real discriminators, increasingly branding focused on human emotional drives. Fast moving consumer goods were masters in the game and categories like Tobacco, Soap, Beverages, Snacks invested heavily in advertising campaigns to build ‘brands’. In the offline world, the brands started having enormous value and Coca-Cola, the brand built on its mystique of the secret formula, acquired billions of dollars in brand value. Brand management was perpetuated by professionals focused on the brand rather than product and spurred on by mass manufacturing and the concentration of capital, resources and wealth. The notion of the intrinsic value of a product was never asked, it was about brand value.

What is Intrinsic Value
So what is intrinsic value? I don’t have an empirical definition, but in general, it is the argument that the value of a product is intrinsic within the product rather than dependent on the buyer’s perception. My personal opinion is that the intrinsic value of carbonated water, cigarettes and many other consumer products is far lower than what the buyer’s perception is. Brand value amplifies the value of products with low intrinsic value.
Internet Emerges as the Game Changer
How does the Internet change all this and what does the battle of brand value vs. intrinsic value have to do with e-commerce? The emergence of Internet and online travel companies like Amazon, Ebay, Expedia and Priceline actually changed the paradigm of how consumers search, shop and buy all products, services by making each step completely interactive, immersive and experiential. In the travel vertical which I cover, one might argue that Priceline’s advertising campaign with William Shatner is a great brand effort, but if the Priceline online experience, features, response time, product inventory depth, customer service, and usability were not behind it, the marketing campaign would be useless. Conversely, Marlboro can sell its cigarettes based on the Marlboro man myth for years without changing a thing, since it is primarily selling an image.

Coming back to online brands, no amount of brand marketing can offset the intensive consumer experience in which consumers interact with a travel product and its features. Competitors are just a click away. Big brands and mass media feed off each other but on the Internet, a level playing field has emerged due to Google. The concept of the “Long Tail” epitomizes that ideal; travel is a category that allows smaller players that provide consumer value to compete with larger brands.

On the Internet, there is only so much that a single brand can do as demand is getting increasingly fragmented across multiple points of influence and sale. The key is to control, aggregate and empower supply. In Expedia’s case, Hotels.com, Expedia.com and other white label businesses all compete aggressively for the same customer. In addition another group company, Tripadvisor, actually drives traffic to Expedia’s direct competitors (traditionally this would be seen as a brand disaster). It’s like Coca-Cola selling the same product under 10 different names, it would never happen in conventional marketing.

Yahoo faces the same problem. The centralized single brand portal is dead and content is all over the place, so there is little point in maintaining the walled-garden single brand approach to content, whether in travel or any other category.

Finally, Interbrand’s annual audit of most valuable brands in 2008 included in the 10th spot a company we all might know – Google.

The firm’s top 10 global brands are:
1. Coca-Cola
2. IBM
3. Microsoft
4. GE
5. Nokia
6. Toyota
7. Intel
8. McDonald’s
9. Disney
10. Google

How much does Google spend on brand building? Literally zero, because Google’s continued success will be dependent on delivering relevant search results, not image. The consumer is a click away in either direction – towards or away. Google realizes that advertising campaigns will do nothing if the product’s intrinsic value doesn’t hold up every second of the day. Negative word of mouth can spread globally in milliseconds. One of the key tenets of the long tail is: size of the reputation matters more than the size of the marketing budget.

Ram Badrinathan is the co-founder of Soulitudes. Soulitudes’ hope is bring together some of India’s finest creative minds in different fields ranging from visual arts, cinema, Indian classical music, folk music, photography, conscious travel, heritage conservation, Indology, spirituality, ecology and wildlife, theatre, literature, politics and social entrepreneurship.

Photograph by mleak under Creative Commons License.

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