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Published: May 26, 2009

 
 

The Trouble with Brands

This discrepancy was enormously puzzling. We would expect a positive correlation between brand value and the classical metrics of performance and sales. Instead, we found a significant negative correlation. We looked at other analysts’ brand data to confirm that our measurements and conclusions were sound. Sure enough, we found other market researchers around the world noting some early signs of the same brand meltdown. The Henley Centre, a marketing analysis firm in London, highlighted an erosion of big brands beginning in 1999 in the United Kingdom. In the firm’s annual study of the 17 largest, most iconic British brands, 16 showed a decline in consumer trust. In successive studies between 2000 and 2007, the Carlson Marketing Group, headquartered in Minneapolis, found a decline in consumer loyalty to brands. In 2000, four in 10 consumers showed a genuine preference for or commitment to only one brand in a given category, but that measure dropped all the way to one in 10 by 2007.

The big question, of course, is what’s behind this malaise. Why have consumers lost trust in, and respect for, brands? What should brand marketers do about the drop in performance and sales, the most meaningful indicators for the future of their brands?

Clearly, the issues are complex, with diverse factors dragging down brand perceptions among consumers, and we investigate many of those issues in our book, The Brand Bubble (Jossey-Bass, 2008). But we believe the problem can be summarized by three fundamental causes that are collectively diminishing consumer desire for brands, each of which intensifies the others. Although none of these phenomena are entirely new, they’ve never before operated simultaneously or quite so intensely. And set against the dramatic changes of a new digital landscape, they’re taking a far greater toll on brands than anyone had previously thought.

The first major problem with brands is excess capacity. Every marketer is up against this new reality: The world is overflowing with brands, and consumers are having a hard time assessing the differences among them. In 2006, the U.S. Patent and Trademark Office issued 196,400 trademarks, almost 100,000 more than it had in 1990. The average supermarket today holds 30,000 different brands, up threefold since 30 years ago. Globalization and increased competition compound the number of new brands. According to a Datamonitor report, 58,375 new products were introduced worldwide in 2006, more than double the number from 2002. The report points out that “despite the fact that advertising spending was up from [US]$271 billion in 2005 to $285 billion in 2006, 81% of consumers could not name one of the top 50 new products launched in 2006, an all-time high for lack of recognition and a huge leap up from 57% in the previous year.”

The second major problem is lack of creativity. In a world with Hulu, Yelp, YouTube, and Twitter, consumers are continuously exposed to and able to share brilliant content. Witness how Tina Fey’s characterization of Sarah Palin on Saturday Night Live ricocheted around the globe, or the fact that directors of music videos are now factoring the diminutive screens on mobile phones into their production techniques. The result of this democratization of creativity is that it has raised the consumer’s “creativity quotient.” Consumers expect more big ideas from brands, and they expect to get them faster.

The final major problem with brands is loss of trust. Our data shows that the amount of trust consumers place in a brand today is a ghost of what it was 10 years ago. In 1997, more than half of all brands enjoyed high levels of consumer trust. But society’s faith in institutions, corporations, and leaders has been severely rocked by scandals and betrayals, from misconduct at our investment banks to salmonella in our peanut butter to human growth hormone in our baseball players. One by one, such revelations have battered corporate credibility, leaving few brands immune. By 2008, consumers voted just over one-fifth of brands as trustworthy, more than halving the number of trusted brands in just over one decade. (See Exhibit 1.)

 
 
 
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Resources

  1. Gregor Harter, Edward Landry, and Andrew Tipping, “The New Complete Marketer,” s+b, Autumn 2007: Organizations with strategically focused, broadly responsible CMOs may produce better results than their traditionalist peers.
  2. Leslie H. Moeller and Edward C. Landry, “Measuring Your Way to Market Insight,” s+b, Spring 2009: Marketers can develop their analytical prowess to better understand their customers.
  3. Nick Wreden, “Marketing: By the Numbers,” s+b, Winter 2006: A review of books about marketing’s new accountability.
  4. For more business thought leadership, sign up for s+b’s RSS feed.
 
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