In the old days, when good information was hard to get, brands served as quality indicators. With not much information around, you felt safer buying a laptop from Sony, booking a room at a Hilton, or getting a Hoover vacuum.
Today, when consumers rely on reviews from experts or other users on sites like Engadget, TripAdvisor, Yelp, or Amazon, brands no longer measure up as meaningful indicators of quality.
To be clear, brands aren't dead. Among other things, brand equity is still valuable—for example, name recognition, emotional attachment, and prestige still play their part. But when consumers rely on reviews from experts or other users, the power of brand as a primary cue for quality diminishes. This is significant because communicating quality—everything from reliability, look and feel, and ease of use to resale value—used to be arguably the most important function of brands.
The shift in consumer behavior is clear, but it raises many questions among branding experts and marketers about what exactly has or hasn't changed about brands. Among these questions are:
Q. Doesn't information overload make brands more important?
Some argue that consumers cannot handle all the information available on the Internet, so instead, they give up and select the brand they like most. But in reality, it’s not "all or nothing." Consumers have many options for figuring out quality without experiencing overload.
Sites such as Amazon, Engadget, and Yelp make it easy for customers to search and sort the available options and perform as much information search as they are comfortable doing. The notion that, time after time, consumers will completely disregard the information available to them and will select blindly based on brand greatly underestimates people's ability to efficiently select the most useful information and their desire to make good decisions.
Q. Aren't brands as powerful as ever in all but a few categories?
Leading branding expert David Aaker recently said our argument only applies to categories like television, computers, cars, restaurants, movies, and hotels. But new sources of information play a significant role in a growing number of industries such as publishing, home appliances, health care, home services, entertainment, toys, and games. And the range of categories is likely to expand over time.
Certainly there are some product categories—for example, many supermarket items—where people currently don’t bother to search for information, but even this can change. There is already a surprising volume of reviews for some products in categories ranging from cosmetics to pet supplies.
Q. Won’t some consumers stick to their habit of relying on brand?
Reliance on new sources of information can vary by segment and category, but the overall trend has been set, and reliance on new information sources will only accelerate as more consumers learn to take advantage of the available information, and as young generations (for whom this is second nature) gain buying power.
Q. But isn’t a brand much more than a mark or a logo?
Of course. Brand equity is created, among other things, by users' experiences and not just by advertising or branding. A big part of Google's or Apple's brand equity has been created by the experience that people have had with many excellent products from these companies. Is that a brand effect or a product performance effect?
Regardless, our point is that this brand equity plays a smaller role when consumers consider the adoption of new products. For example, instead of evaluating Google Wave or Google Buzz based on their experience with other Google products, people relied upon the opinions of users and experts and rejected these new offerings. And the same applies to Apple. Several observers have brought up the example of Apple as proof that brand is important as ever. No doubt, Apple has built significant brand equity and loyalty by consistently providing innovative products of the highest quality. Yet if Apple’s next product will be widely perceived as providing low quality, it won’t perform as well.
When brands play a reduced role in consumers' decision making, this has far reaching implications for everything from market research to communication strategies to diffusion of innovations. Things were simpler for marketers when consumers relied more heavily on brand, but when fundamental conditions change, it's time to revise marketing practices. As the full impact of consumers' new reliance on reviews becomes clear, we all need to re-examine our long-held beliefs about branding and marketing.
—Itamar Simonson and Emanuel Rosen are coauthors of the new book Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information (HarperBusiness). Simonson is a professor of marketing at Stanford University Graduate School of Business. Rosen is a bestselling author (The Anatomy of Buzz) who previously worked in the software and advertising industries. For more information, visit AbsoluteValueBook.com