What Are Brands Good For?

Brands are an indispensable part of modern business. This is true in large measure because of their remarkable efficiency in “aggregating” consumers — reaching large numbers of people with a promise to deliver a clearly stated benefit that sets it apart from competitors. “Volvo Is Safety” and “Tide Washes Whiter” are promises that attract consumers, reduce their perceived risk, and make it easier for them to make a purchase decision. Over time, as consumers come to associate a brand with a specific benefit, the brand acts like a stake in the ground, claiming territorial rights over its value proposition. This territorial ownership combined with the ability to influence a mass of consumers is the source of a brand’s market power.1

For many companies, brands are their most valuable assets. And their very success has led companies to burden them with increased responsibilities besides that of establishing differentiated value propositions. At a strategic level, brands are the prime platform for building relationships with the consumer; they also permit companies to charge price premiums over unbranded generics, reduce the risks of new product introduction (through brand and line extensions), and give companies power in dealings with distributors. Tactically, their roles are no less varied. Advertising and promotions of brands drive traffic and sales volume; marketing efforts and outcomes are measured and managed at the brand level; and brands are central to a firm’s responses to short-term competitive moves. In effect, brands have become the focal point of many a company’s marketing efforts and are seen as a source of market power, competitive leverage and higher returns.2

But the information revolution is undermining the logic of aggregation, the very source of brand power. In fact, it is becoming evident that in an information-rich environment, consumer disaggregation is vastly more efficient and profitable than aggregation. Under many guises and labels, such as CRM, direct marketing, one-to-one marketing and information-based marketing, companies are developing means of interacting with consumers at the segment or even individual level. Marketing is becoming more flexible, more adaptive to differences in consumer needs, and more responsive to the changing needs of consumers. Using customized publications, e-mail, direct mail, Web sites and call centers that are based on a common platform of consumer information, companies are demonstrating that they can effectively and efficiently drive consumer behavior through two-way communications.