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Has Amazon made brands irrelevant?

Lindsay Says

Quite the opposite: the democratizing nature of the web makes brands even more crucial.

These days, it’s deep merit, not deep pockets, that drives business success. Old-school media outlets and brick-and-mortar stores were built on scarcity, so the advertising and shelf space went to businesses with the highest budgets. There is no such scarcity on the internet. A business does not need a large budget to be on social media or have an e-commerce platform.

This means competition has changed too. With offline advertising and shelf space, a business faces off against a few others’ mindshare and distribution. Online, a business vies with every other product in the entire world for that customer attention.

In a time of ever-increasing choice and ever-decreasing attention, customers rely on mental shortcuts like brand more than ever. Executed well, brand gains people’s attention. A sharp brand strategy helps a business put a laser focus on its differentiation, where it has the most right to win against its competitors. As a result, brand cuts through the clutter and helps its business stand out among all the options.

“The Internet Hurts Brands” – A Wobbly Argument

It is fashionable to question whether brands are dying because of the internet. Amazon is often named as the primary villain in this seemingly new world order. The online retailer offers infinite virtual shelf space and an abundance of information in the form of customer reviews, which can stretch into the thousands on one product alone. Because of these two factors – a plethora of always in-stock products and plenty of opinions to back them up – the argument is that brands are no longer necessary.

Before Amazon, TripAdvisor, Yelp, and countless other review sites (all of which, by the way, are their own brands), customers bought based on brand recognition and loyalty. They heard about the offering through a friend or through a print, radio, or television spot. They chose it because their trusted retailer chose to carry it. They stuck with brands that earned their loyalty by delivering on their promises.

In the digital age, some claim, people may not even notice brand names as they click through web pages, instead comparison shopping by price, delivery time, and customer reviews. The idea is that product could call itself X and have no label and, if it’s priced right and reviewed positively enough, win the customer’s attention and purchase.

Following this dubious logic, if people rely on price and reviews alone, brand doesn’t matter: if a different product has improved its reviews by the time a customer returns to buy again, she will buy the new product, even if she was happy with the one she purchased previously.

But the internet, and Amazon in particular, haven’t actually introduced a new world order. They have simply added a new frontier to the landscape that brands are already skilled in traversing. The shelf may hold everything, and the ad space might be infinite, but neither of those lessen brand’s necessity or power. They just make meaningful differentiation more necessary.

The Web Is a Democratizer

The web, and particularly e-commerce sites like Amazon, are shifting the decision-making process. They are concentrating a lot of our purchases and providing more access to information, including customer reviews.

Customer reviews do not displace the brand, though. They can enhance a brand, and they can shed light on the flaws of a brand. I bought HP printers until I learned from online customer reviews that Brother is better, more reliable, and although not perfect, an all-around better deal than HP. My switch from HP to Brother was because of the democratization of information and reviews, not because Amazon killed the HP brand. Transparency around millions of customers’ product preferences is a new occurrence – but brand played a role in whether those customers found those products compelling, as it always has.

Most businesses can benefit from the tectonic shift from scarce media and shelf space to limitless media and shelf space. Scarcities and hierarchies have given way to a new challenge. Rather than striving to have the biggest budget, businesses must now break through the clutter that disperses customers’ attention, and earn the right to a customer’s business. This mandate is precisely the role of brand.

Business Builders Care About Brand as a Risk Mitigator

Economists say that the role of brand for a customer is to reduce risk and save time (which is a component of risk). Brand is a relationship between a business and a customer. Good brands, like good relationships, confer trust and therefore offset risk. When you ask your close friend to help you with something high stakes, like picking your child up from school when you have a work emergency, there is trust – so the risk that that person will let you down is low.

Friends earn trust by repeatedly keeping promises and by “being there” in good times and in bad. Brands, similarly, earn trust by repeatedly keeping promises, by delivering what they say they are going to deliver, with the big things and the small things. If there is no chance of repeated interactions – if the purchase is a “one-night stand” between the business and the customer – there is less need for a relationship, and therefore less need for a brand.

Consider this very large and risk-laden purchase: buying a used car. Do you know the brands of any used car dealerships? Neither do I. Buying a used car feels super risky to customers because the used car dealerships lack brands, and they lack good brands because they have not earned them through repeatedly making and delivering on a promise.

Brands put people at ease before they hand over their hard-earned money. If I buy a carton of milk that says “Horizon” on its label, I believe it is less likely to be bad milk. It is less likely that I have risked wasting my money on that item. The Horizon dairy brand has earned my trust, thereby reducing my risk. To be sure, there are other signals that reduce risk too, most of which overlap with brand. Recommendations from friends, good experience with customer service, and, yes, a high number of stars on Amazon – all work together to make buying that gallon of milk an even lower risk.

Brand Mitigates Risky Purchases

I am experiencing the power of brand as a risk mitigator right now. I am in the middle of investing in something that will be impossible to return and has a high price point. There is both a high financial and a high emotional cost to getting the decision wrong. Brand is absolutely playing a factor – in fact, I’m relying on my relationship with businesses to help me make this purchase the best it can be.

I am planning a two-week family vacation to Italy. The price of airfare for five people, hotels, food, museum fees, car rentals, and souvenirs is high. There is also is the use of precious vacation days for both my husband and me. Heightening all of this is the likelihood that soon my kids will be too old to want to travel with us, or they’ll have their own schedules that can’t adjust. This will probably be our only family vacation to Italy.

I started my planning by visiting TripAdvisor. But booking a hotel room using reviews from strangers was not very helpful. What I consider a gem of a hotel is different from what a friend looks for in a hotel, let alone what a stranger who has no skin in the game appreciates.

So, after spending a great deal of time reading customer reviews on TripAdvisor, I bought old-school paper travel guides. (I even found a brick-and-mortar Barnes & Noble to make my purchase – I wanted to see the books in person and be reminded of guidebook brands I had forgotten.) I wanted to know what Frommer’s and Fodors and Rick Steves said about the Cavalier Astoria in Rome – not what two thousand random people I didn’t know said about it. These brands have skin in the game. They give a detailed, truly helpful review: the good, the bad, and the ugly. They compare it to other hotels. They offer specific pointers. By reading the thoughts of trusted brands, I felt better about zeroing in on what mattered to me.

Notice all the brands I engaged for this trip (so far): Barnes & Noble, Frommer’s, Fodors, Rick Steves, yes, even TripAdvisor. Together, they made me trust that I was spending my family’s precious money and time on something of huge value – that I would not be throwing away my resources. The economists are right. A successful brand does reduce customers’ risk.

As risk mitigators go, as both a customer and as a business builder, I will always privilege the ones that are most enduring, the least fickle, the least prone to being copied, and the ones most likely to enhance all the other risk mitigators combined. I will always bet on brand.

Brand as Mitigator Even During the Riskiest of Times

Even during recessions, branded products often outperform unbranded ones – if businesses have put the effort into brand strategy before the tough economic times.

When cash is tight, people are more risk conscious and will pay more to ensure that the money they do spend is not wasted. I saw this personally during my time as a Brand Manager at Clorox. If the choice is between a box of $5, private-label garbage bags and a box of $7, trusted Glad bags, more customers will pay the extra $2 to know they did not jeopardize their floors and clothes, if the unbranded garbage bags leak or split. During the recession, Glad (owned by Clorox) held share despite a 30 percent price premium. People would rather spend $7 for a guaranteed $7 of value than spend $5 and fear they might get $0 of value or even negative value.

Strong branding also saves a customer time, an important subset of risk. Bombarded with options, many people breathe a sigh of relief to be able to choose a brand they know and trust. They don’t want to perform a cost-benefit calculation every time they make a purchase.

That’s the power of brand for reducing risk.

To Brand is Human

When someone asks me if Amazon is killing brands I smile, knowing that, no, Amazon is doing nothing of the sort. Are they changing the purchasing tree and the decision dynamics? Yes. Are they providing buyers with more information than people have ever had access to before? Yes. Will there be winners and losers? Yes.

But brands, as old as civilization, are very much alive. As long as humans are humans, we will want to offset our downside and improve our probability of upside, of transcendence. We want the people and businesses in our lives to earn our trust.

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