As the Web becomes ubiquitous and consumers grow accustomed to using it for purchasing, how are long-established product and service brands going to fare?
In the early days, disintermediation was the big buzz. Brands would do away with middlemen and establish direct relationships with their customers, it was said. Today, we can see this is a highly prized but rare outcome. Direct relationships have to clear too many hurdles of superior, incremental value.
Dell Computers, for example, is a success because it offers both lower prices (by cutting out the middleman) and customised products. If you can’t offer either of these (or better, both), there is little point in customers “going direct”. Direct relationships also have to offer value for time. Building a direct relationship with the 40 manufacturers in my weekly grocery shopping basket by visiting 40 different Websites is obviously crazy. Much better to have an intermediary do it for me.
Brands which cannot add value by going direct will have to find different strategies. British Airways is a good example. This time last year it was talking of selling 50 per cent of its tickets direct on its Website, thereby saving enormous sums in terms of travel agency commission while gathering valuable information about customers. But why should travellers choose to go to a British Airways-only site when they could go to e-booker or Expedia and get more choice and perhaps a better price? Very few travellers are so BA brand loyal that they insist on flying BA, so now the airline is proposing a joint approach with other European airlines. In effect, it is establishing its own intermediary.
The question then arises: how do such intermediaries compete? In bricks and mortar-land they compete on such things as price, convenience, range and service. The Internet will be no different. But Web intermediaries can also offer something else. As Philip Evans, a Boston Consulting Group consultant and co-author of Blown to Bits, points out, one of the Net’s key effects is “the collapse of traditional asymmetries of information”. Marketers usually know a lot more about their own products than consumers. But the Net changes the economics of information so that nowadays, for example, car buyers in the US can use the Web to find out what the car dealer’s commission is and what discounts other dealers are offering. As Evans notes, the Web creates “a far more level playing field”.
This is fast becoming a key information-age acid test for brand robustness.
New breeds of Internet navigators, as Evans calls them, are creating new consumer services which deconstruct brands’ key attributes, and find the lowest prices to help buyers make the best purchasing decisions. Navigators are software driven. For their intelligent search agents to work, they need to know which attributes (for example price, functions or features) are most important (which is achieved easily by ranking them) and how to make judgements about these attributes.
Evans gives the example of the Sony brand which, he suggests, can be broken down into a number of attributes such as good quality, elegant design, miniaturisation, state of the art technology. But within its categories, attributes such as price and miniaturisation are often the most important, so “if Sony wins the competition, it is because the navigator has endorsed the product, not because of Sony’s branding budget”.
In such cases, warns Evans, if the navigator becomes “an alternative way of learning about propositions, it makes brands irrelevant”. Navigators rapidly accelerate the forces of commoditisation, driving brands to compete for navigator recommendations in attribute wars over price, functions or features, for example.
But there’s an important point here. Judging attributes is relatively easy when it comes to price, for example, but not so easy in areas such as quality, and difficult in areas such as design, which you either like or not. If a brand’s most important attributes lie in design, for instance – matters of subjective preference rather than objective evaluation – they become “unnavigable”, says Evans.
Faced with a choice between Coke and Pepsi, for example, a typical search agent is paralysed. There are few objective attributes it can use to make comparisons. You either like Coke, or you like Pepsi. In “unnavigable” cases such as this “the brand itself is a navigational function”, suggests Evans.
Becoming “unnavigable” isn’t necessarily all roses. Knowing that I want Coke as opposed to Pepsi doesn’t stop me from wanting Coke at the cheapest price possible. In today’s environment, brand preference doesn’t necessarily translate into superior margins. It may, or may not, be preferable to being commoditised by navigators.
But it does mean that brands can opt for a range of strategies. One is to establish direct relationships with customers, to become a destination site in your own right, like Dell. Another is to make yourself a navigator, as British Airways is now trying to do with its European peers – though both these strategies are fraught with difficulty.
A further alternative is to submit yourself to being navigated by navigators and to end up fighting attribute wars. Some strong players may positively relish this. And those which want to avoid this will need to render themselves “unnavigable” – the big question being how?
Marketers have become used to thinking of brands as bundles of functional and emotional attributes. The Net forces us to revisit this formulation.
Navigators bent on “collapsing asymmetries of information” are challenging the power of traditional emotion-building mechanisms such as the 30-second TV spot. And their search agents are automating the rational, analytical side of decision-making.
On the other hand, there are areas of life which agent software still can’t grasp – such as personality, humour, irony, sympathy, belief, taste and aesthetics. Pretty massive areas of life, in fact. The result is that the more “virtual” commerce becomes, the more real-life human experience moves centre stage. As US academic Bernd Schmidt puts it, brands won’t be “bundles of functional characteristics, but means to provide and enhance customer experiences”.