Digitalisation is a game changer when it comes to brand, introducing new threats and opportunities that destroy or create brand value through accelerated product lifecycles, new styles of customer engagement, ongoing commoditisation of products and changing employee/employer relationships.
So what does this mean for the brand purpose, the “reason-to-exist” of the company?
Digital changes everything, especially the customer-brand relationship
Connectivity is ubiquitous. Overall, approximately 65% of the world’s population is expected to be connected through mobile to the internet by 2019. This radically changes day-to-day ways of shopping, interacting with others, learning and choosing suppliers, both online and offline.
Most companies selling products through online and offline channels have been facing this “unstable omnichannel” challenge. In fact, how to deal with the transparency and dilution implied by those digital channels is just the tip of the digital iceberg. Here are some other challenges.
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Increasing customer empowerment
User-generated content and customer comments are everywhere. This makes the relationship between the brand and the customer much more symmetrical, with greater customer power. Social networks such as Facebook, Twitter, Instagram, Pinterest and Periscope are central to the customer relationship, as well as collaborative review apps such as TripAdvisor for hospitality and Vivino for wine consumers.
Itamar Simonson from Stanford University points out that brands are losing their influence because their ability to signal the value of the consumer benefits they offer is being replaced by information available on the internet. This places new importance on the underlying meaning and resilience of the brand – and the need to continually reinforce it.
Threat of faster commoditisation
With this new balance of power between customers and companies, commoditisation is being accelerated. What does it take to make a customer buy a product from within Amazon’s 500 million-product ocean? Typically, comparing prices and calling up information on products is a no-brainer for most customers.
Most companies are now facing the “commoditisation challenge”. The good news for companies is that brand still provides a key pointer in the customer journey. Responding to this challenge requires increasing brand strength in a way that goes beyond just better marketing.
Greater exposure to brand damage
Digital advertising has doubled, according to our estimates. Brands are now facing increased exposure to customers, which can be a powerful opportunity or a major threat.
For example, in 2016 British retailer Tesco launched several new food brands – including “Boswell Farms” for beef and “Redmere Farms” for vegetables. However, these brands were referring to fictional farms, and this generated thousands of negative customer comments on social networks in a short time frame.
Impact of millennials
Millennials are overtaking baby boomers as the largest purchasing generation. Millennials are, by definition, digital natives. They spend 4.5 hours on their mobiles per day (versus 3.5 for baby boomers), and more than three hours on their computers or tablets (compared to one hour for their predecessors). Their consumption habits are not the same either: being connected may mean they still buy the same brands as their parents, but through online channels instead.
Central to their buying behavior is their interest in what they perceive that the brand stands for. It has been shown that more than 80% of millennials relate their purchasing or recommendation decisions to a brand’s purpose, or reason to exist.
How companies can respond – rebuilding brand purpose
Together these challenges are placing a huge premium on the ability of companies to strengthen, adapt and renew their brands. However, in our research we found that many companies, although they recognise the challenges, have not yet grasped the importance of taking a fundamental look at brand purpose.
Instead, companies often respond by launching new products and advertising campaigns, or providing new R&D guidelines. If we look at the most successful global brands today, we can identify a number of key success factors which companies should consider:
Focus on meaning
Firstly, when defining their brands, most companies define their roles through their products – the concrete proof of the business the company is conducting. However, brand is meaning. The supremacy of strong brands lies in their reasons to exist, the fundamental philosophies they embrace, rather than the products they sell. Often this refers to a superior cause the brand legitimately embraces. (See Table 2.)
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While there is no formula for defining a reason to exist, many leading companies have focused on categories of benefit that are seen to be intrinsically beneficial to individuals, society and the global environment, for example:
- Apple builds on personal creativity and progress (socio-societal benefit)
- Danone builds on healthy food for all (physical benefits)
- Red Bull builds on freedom (socio-societal benefit)
- Dove builds on reassurance and confidence (social benefit)
Engage customers in your purpose to create ambassadors
Increasingly, customers are looking for experience and engagement, not just products. Companies need to manage this process carefully. Engagement is an ultimate step that starts with conventional customer relations and builds up through the provision of superior customer experience and development of emotion and sentiment – see Table 3. Engagement implies multiple interactions with the customer as a collaborator, ecosystem partner, and advocate, as well as a purchaser.
The business case for focusing on brand purpose: evaluating brand premium
Our recent research has confirmed that even in commoditised markets, in which customer comparison is the norm, value premiums are still possible with a superior brand purpose. The telecoms market is a typical example. Former public monopolies have been opened up to competition, creating several players in each country, as well as enabling the emergence of European businesses such as Orange, Telefonica and Deutsche Telekom. (See Table 4.)
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How to go about rethinking your Brand Purpose
Rethinking the company’s brand purpose builds on “who” the company is and its strategic challenges, and aims to generate empathy and engagement in the minds of customers and employees. At a high level the process is straightforward, but to be effective it needs to be a profound exercise, identifying and articulating uniqueness and differentiation in a way that is consistent across the business, involving steps of assess and frame, build, and implement. (See Table 5.)
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Digitalisation has radically changed the way companies interact with their customers, providing new threats and opportunities. The brand purpose gives a unique backbone that everyone understands.
It drives strategy, product offering and customer experience and creates customer engagement and loyalty. It enables price premiums, increased customer stickiness, heightened employee motivation, and renewed customer-centricity. It creates value by making the company’s purpose a reality.
Perhaps surprisingly, brand is becoming more than ever a key differentiating asset for companies and top managers.
Aurélia Bettati is a partner in the Paris office of Arthur D. Little within the strategy and organisation practice.
Eytan Koren is manager for strategy consulting, telecom, internet, media practice at Arthur D. Little.