What is a brand worth? Do you spend a lot of time trying to "protect" your brand? A lot of marketing gurus spent the last 20 years talking about creating brands, and saying there's a lot of value in brands. Some companies have been valued based upon the expected future cash flow of sales attributed to a brand. Folks have heard it so often, often they simply assume a recognized name – a brand – must be worth a lot.
But, according to a Strategy + Business magazine article, "The trouble with brands," brand value isn't what it was cracked up to be. Using a boatload of data, this academic tome says that brand
trustworthiness has fallen 50%, brand quality perceptions are down 24%,
and even brand awareness is down 20%. It turns out, people don't think very highly of brands, in fact – they don't think about brands all that much after all.
And according to Fast Company in the article "The new rules of brand competition" the trend has gotten a lot worse. It seems that over time marketers have kept pumping the same message out about their brands, reinforcing the message again and again. But as time evolved, people gained less and less value from the brand. Pretty soon, the brand didn't mean anything any more. According to the Financial Times, in "Brands left to ponder price of loyalty," brand defection is now extremely common. Where consumer goods marketers came to expect 70% of profits from their most loyal customers, those customers are increasingly buying alternative products.
Hurrumph. This is not good news for brand marketers. When a company spends a lot on advertising, it wants to say that spend has a high ROI because it produces more sales at higher prices yielding more margin. Brand marketers knew how to segment users, then appeal to those users by banging away at some message over and over – with the notion that as long as you reinforced yourself to that segment you'd keep that customer.
But these folks ignore the fact that needs, and markets, shift. When markets shift, a brand that once seemed valuable could overnight be worth almost nothing. For example, I grew up thinking Ovaltine was a great chocolate drink. Have you ever heard of Ovaltine? I drank Tang because it went to the moon, and everyone wanted this "high-tech" food with its vitamin C. When was the last time you heard of Tang? It was once cache to be a "Marlboro Man" – rugged, virile, strong, successful, sexy. Now it stands for "cancer boy." Did the marketers screw up? No, the markets shifted. The world changed, products changed, needs changed and these brands which did exactly what they were supposed to do lost their value.
Lots of analysts get this wrong. Billions of dollars of value were trumped up when Eddie Lambert bought Sears out of his re-organized KMart. But neither company fits consumer needs as well as WalMart or Kohl's for the most part, so both are brands of practically no value. People said Craftsmen tools alone were worth more than Mr. Lampert paid for Sears – but that hasn't worked out as the market for tools has been flooded with different brands having lifetime warranties — and as the do-it-yourselfer market has declined precipitiously from the days when people expected to fix their own stuff. So a lot of money has been lost on those who thought KMart, Sears, Craftsman, Kenmore, Martha Stewart as a brand collection was worth significantly more than it's turned out to be. But that's because the market moved, and people found new solutions, not because you don't recognize the brands and what they used to stand for.
Every market shifts. Longevity requires the ability to adapt. But brand marketers tend to be "purists" who want the brand to live forever. No brand can live forever. Soon you won't even find the GE brand on light bulbs. That's if we even have light bulbs as we've known them in 15 years – what with the advent of LED lights that are much lower cost to operate and last multiples of the life of traditional bulbs. GE has to evolve – as it has with jet engines and a myriad of other products – to survive.
Think for a moment about Harley Davidson. Once, owning a Harley implied you were a true rebel. Someone outside the rules of society. That brand position worked well for attracting motorcycle riders 60 years ago. As people aged, many were re-attracted to the "bad boy" image of Harley, and the brand proliferated. A $50 jacket with a Harley Davidson winged logo might sell for $150 – implying the branding was worth $100/jacket!! But now, the average new Harley buyer is over 50 years old! The market has several loyalists, but unfortuanately they are getting older and dying. Within 20 years Harley will be struggling to survive as the market is dominated by riders who are tied to different brands associated with entirely different products.
If you see that your sales are increasingly to a group of "hard core" loyalists, it's time to seriously rethink your future. Your brand has found itself into a "niche" that will continue shrinking. To succeed long-term, everything has to evolve. You have to be willing to Disrupt the old notions, in order to replace them with new. So you either have to be willing to abandon the old brand – or cut its resources to build a new one. For example, Harley could buy Ducati, stop spending on Harley and put money into Ducati to build it into a brand competitive with Japanese manufacturers. This would dramatically Disrupt Harley – but it might save the company from following GM into bankruptcy.
The marketing lore is filled with myths about getting focused on core customers with a targeted brand. It all sounded so appealing. But it turns out that sort of logic paints you into a corner from which you have almost no hope of survival. To be successful you have to be willing to go toward new markets. You have to be willing to Disrupt "what you stand for" in order to become "what the market wants." Think like Virgin, or Nike. Be a brand that applies itself to future market needs – not spending all its resources trying to defend its old position.
Don't forget to download the new ebook "The Fall of GM" to learn more about why it's so critical to let Disruptions and White Space guide your planning rather than Lock-in to old notions.