Not long ago, a major focus of marketers was on brand—brand loyalty, brand positioning, the “brand promise.” Numerous books were written on the subject—each claiming to be the “brand bible” for communicating effectively to target markets.
We would argue that brand loyalty and the importance of brand, in general, is diminishing. According to McKinsey Research only 13% of customers are “loyalists” who do not shop around.
Sure, there are Apple aficionados who will never buy a Windows PC. There are folks who continue to drive the same brand of car for decades. And there are businesses with brand preferences due to corporate policy or hardware and software compatibility challenges. However, with the ubiquity of online shopping and buying, brand-based selection is falling, time and again, by the wayside.
Why is this?
When seeking a new product—especially a product with which a buyer has had little previous experience—buyers most often rely on the opinions of family and friends, or complete strangers. In fact, in one study by Signpost, they found that 90% of people consult online reviews when making purchase decisions. With the anonymity afforded by the Internet, purchasers of a product can be completely frank about their opinions and experiences with a product. As a result, buyers frequently trust those opinions more than corporate advertising or “brand communications.”
Not only is UGC an influential factor, but so are third-party reviews. How frequently do you make a major product purchase without consulting Consumer Reports, Edmunds, CNET, or the like? Buyers are relying more and more on the expert evaluations of third-party reviewers for three main reasons: 1) they can be accessed from our desk or mobile phone; and 2) these folks do this for a living and are experts; and 3) it speeds our research and decision processes.
What is also common is for buyers to be surprised by what they read. According to the same McKinsey Research study, nearly 60% of customers switched brands once they began “shopping around.”
Ability to Compare Products
Now that consumers and business buyers can easily shop around and compare products—on price, features, and form factor—at the click of a button, they are not restricted by brand. Online users can find the product that most closely meets their needs—whether the purchase transaction occurs online or in-store. Again, this may mean that they consider or purchase a brand that was not originally top of mind. However, after validating their purchase through user and third-party reviews, this previously unknown brand or product may indeed end up the winner!
What Can You Do?
As a manufacturer or distributor, the most impactful thing that you can do is portray your individual products in the best possible light. If you are no longer able to attract customers based solely on your brand, then you need your products to be able to speak for themselves and tell their own unique stories. This requires compelling, well-crafted product descriptions, accurate and interesting imagery, and insightful product testimonials and reviews. Let inRiver and our extensive PRIME Partner Community help!
Kathryn Zwack, Sr. Content Marketing Manager, inRiver
Digital has evolved from simply enabling the business strategy to actually driving business strategy. One of the reasons is that digitization simplifies the removing of intermediaries from the traditional supply chain—one that typically consists of a manufacturer selling to a distributor that, in turn, sells to a retailer that sells to a consumer. This phenomenon of removing intermediaries in the supply chain—such as manufacturers selling direct to consumers by cutting out distributors and retailers—is called disintermediation. Simply put, disintermediation eliminates intermediaries whose cost to service has become greater than the value they provide.
I believe that disintermediation is, to a large extent, a consequence of the transparency that the vast amount of readily available product information creates. It empowers the end-customer and makes it fast and convenient to compare offerings by product properties and price—regardless of seller. By removing actors from the supply chain, disintermediation decreases cost and allows the manufacturer to both increase margins and, at the same time, create a direct relationship with the end-customer.
However, it is not only the manufacturers that are taking advantage of disintermediation. Retailers like WalMart and marketplaces like Amazon are also working on reducing the number of intermediaries in the supply chain. There are even credible rumors that Amazon plans to launch a global shipping and logistics operation that will compete with UPS and FedEx, thus creating disintermediation in the logistics industry itself.
In some cases, it is more efficient to use a distributor for shipping smaller orders than going direct. The economy of scale makes certain products and order types hard to manage without the services and facilities that a distributor provides. However, in most cases, it works fine to ship direct or use drop shipping, resulting in distributors being bypassed by manufacturers and retailers. However, in the transparent marketplace, brand value is rapidly diminishing, making it easier for a retailer's private labels to compete with the well-known brands from the manufacturers. Diminishing brand value coupled with disintermediation creates a threat for the branded manufacturers that they need to acknowledge and address if they want to earn the consumer’s business.
I think it is safe to say that disintermediation is affecting distributors more than manufacturers and retailers. However, all actors can and will be affected and need to rethink their value proposition and strategy. Disintermediation is eventually inevitable for all intermediaries whose cost becomes greater than the value they provide, and a big part of the value is the customer experience. As one of the key drivers for disintermediation is information transparency, it is crucial to provide more and better information than your competitors in the supply chain. There is, of course, more to it than that, especially with respect to organizational and logistical challenges. But if you are not getting found and providing a stellar product and customer experience, nothing else will matter.
Johan Boström, Co-founder and Evangelist, inRiver
Todays' customers are rapidly changing their buying behavior, and, as a consequence brand loyalty is diminishing quickly. Today's customers place less trust in brands and tend to switch brands more often than they did in the past. For a long time, a company’s brand was seen as its most important asset—sometimes even considered as more valuable than products, patents, and process perfection put together. However, as customers are increasingly becoming empowered buyers, they tend to investigate the real value of products and rely on facts and peer reviews more than on logos and old habits.
When customers relied on printed brochures and catalogs that they could pick up at a retail store or from a sales representative, combined with their previous experience with a company, brands served as proxies for quality. If a TV was made by Sony, or a mobile phone by Nokia, customers typically assumed that it was a good product. Back then, if the first experience was a good one, customers often bought products from the same brand over and over and stuck to that single brand for extended periods of time. In the transparent marketplace that is driven by universal Internet access and constant mobile connectivity, customers now shop around, looking for the best product for the best possible price—regardless of brand.
In the book “Absolute Value,” Itamar Simonson & Emanuel Rosen illustrate that brand used to be an effective tool when information was scarce and hard to come by. In the book, they write: “The new information environment around us allows consumers to predict much more accurately the experienced quality (or absolute value) of products and services they consider getting. The implications for consumers and businesses are enormous. First, reliance on absolute values means that, on average, consumers tend to make better decisions and become less susceptible to context or framing manipulations. For businesses, it means that marketing is changing forever.”
This shift from brand value to absolute value is very positive for the customer as it helps them make better and more educated purchasing decisions. At the same time, it increases competition that raises product quality, while keeping prices down. Upstarts can benefit immensely from this behavioral and technological change as it is now cheaper, faster, and easier to compete with established brands. Social media and data-driven marketing make it quick and cost effective to get the product story out there, if they have a good one. The product is front and center in the new world of commerce.
Without the brand, the product is on its own
When empowered buyers quickly research their way to a buying decision, each product now has to prove itself on its own. It can no longer be marketed and sold based on brand value alone. This means that companies need to focus more on the product and especially on its accompanying product information. This is equally true for B2B as it is for B2C as the modern B2B buyer is inclined to use the same buying behavior at work as they do as consumers. The consumerization of B2B has already happened, and it is continually growing in strength.
Reviews and other types of user-generated content are of course very valuable as customers tend to trust their peers more than the retailer or the manufacturer. Besides building trust for the product, it also is great for SEO (Search Engine Optimization). It also puts pressure on the product itself, as it needs to be satisfactory for the customer and live up to the promise that is being made in the product story. With customers that focus on products rather than brands, it is the product’s promise, not the brand’s. In many cases, the product is completely on its own and needs to be able to tell its story by itself.
Customers + products = business
Customer-centricity is now more important than ever and knowing your customer becomes critical if you want to provide them with the best possible customer experience. If you combine customer intelligence with product intelligence and use that to serve up the right product with the right information to your customers, you are in a good position to win new customers and keep them loyal, regardless of brand.
As a consequence, high quality information about your customers and products is essential to be the winner in the battle of the customer. You have to be great at managing both types of information to succeed. To do that you need the appropriate organization, processes, and systems support to get there and stay there.
Johan Boström, Co-founder and Evangelist, inRiver