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What Digital Means for the Future of Brands (Thinks Out Loud Episode 206)

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What Digital Means for the Future of Brands – Thinks Out Loud Episode 206 (December 14, 2017) Transcript

What Digital Means for the Future of Brands – Introduction

Well, hello again everyone and welcome back to Thinks Out Loud, your source for all the digital marketing expertise your business needs. My name is Tim Peter, today is Thursday, December 14, 2017 and this is episode 206 of the big show. Thank you so much for tuning in. I really do appreciate you hanging with me during the last handful of weeks. The show's been a little bit more irregular, but I will be back next week, then will be off the week after that — I’ll be taking a break for Christmas — and then starting up again full-time in the New Year with weekly episodes coming to you, so I appreciate you hanging around. I appreciate you coming back and listening to the show; I’m just really happy that you're here.

What Digital Means for the Future of Brands – Overview

Now I think we’ve got a really interesting show this week. There's some really cool stuff to talk about. And I want to start by talking about a bunch of random companies that have something in common. You may not have realized it, maybe you did, but you know if you haven’t, just think this through for second. Think about companies like eBay or Etsy or Yelp or Uber or Airbnb. What they all share in common is that they’re all ratings platform. They allowed people to post ratings and reviews and the like that makes it clear whether you want to do business with the person on the other side of that market. And I think that's critically important to understand in terms of how you're going to market your brand and how you market your business as you go forward into 2018 and beyond because, fundamentally, what were seeing from people like eBay, Easy, Yelp, Uber, Airbnb, and others is that they're going to destroy brands, at least in the traditional sense. At their most basic they’re challenging what the purpose of the brand is, what brands do for customers. And that's really important understand.

Now you've probably heard David Ogilvy's famous quote, “a brand is a promise.” You may even have heard it here; it's one that I’ve referred to many times. It’s such a crucial insight about why brands exist. Brands served as a proxy for trust. If you go back to some idyllic, 1950’s holiday with the family driving along Route 66 wouldn’t know where to eat, sleep, or get gasoline once they ventured too far from home. They only knew the products and the services in their local area. But if you put a McDonald's or Ramada or a Phillips 66 along the highway, the family was quite literally good to go.

Today? Your brand is only as good as your last review.

Were those products or those services luxurious? No. But that wasn't the point. They were consistent. The brand provided a proxy for trust. You didn't need to care about the individual restaurant, or the individual hotel, or the individual gas station. You could trust the brand. Again in Ogilvy’s terms, “a brand is a promise.”

Today? Well your brand is only as good as your last review.

What Digital Means for the Future of Brands – The Importance of Reviews

A generation ago, would you have willingly gotten into a stranger's car when he pulled up in front of you at the airport, or slept in someone else's home who you had never met, or — and credit where due to eBay here — bought someone’s used junk over the Internet? How could you be sure you’d receive the goods or the seller wouldn’t just take off of with your money or, God forbid, with the car or the house, something really terrible wouldn't have happened to you? If you think about things like classified ads or even Craigslist, they really just served a local area and depended on face-to-face interactions to complete the transaction.

Yes, you could get a lot of details, but once it was time to buy, you typically met with somebody face-to-face. And to be fair, things like vacation rentals have existed for years, but they really only represented a sliver of the market.

But now there are companies like Airbnb, companies like Uber, companies like Yelp and they’re becoming the dominant players in their respective industries. And if you think about the larger players the AGFAM folks (or, if you prefer, the “Frightful Five,”) Apple, Google, Facebook, Amazon, Microsoft, a lot of their success depends on that same thing.

If you think about Amazon, first as a bookstore and now as this complete e-commerce platform with independent sellers, fundamentally it depends on its ratings and reviews. eBay may have laid the groundwork but Amazon undoubtedly owns that space today. If you think about the Apple App Store or Google Play store, they serve very much the same function for apps or, oh I don't know, podcasts and things along those lines. You know, if you're like most people, if you're looking for a new utility to improve your productivity or or you're looking for something to provide you entertainment and information, I suspect you venture to the appropriate app store, you conduct a quick search, and then you choose the highest-rated app, or the highest-rated podcast, or the highest-rated movie or TV show that meets your needs. And we’re seeing this start to completely upend the traditional brand landscape that we've known for years.

For instance, take a look at McDonald’s. Now they’ve been having some troubles lately, and it's certainly true that healthier eating habits have taken a toll on the restaurant giant. But there's also no question that Yelp also did a number on Mickey D’s. Why would you choose the same old burger and fries when you have other healthier, tastier options and support some local business as well? To McDonald's credit they’re working really hard to revitalize their offerings and to make them more attractive to diners. And they’re starting to see some positive results. But there's little doubt in my mind that the local review scene has absolutely caused them some issues.

We talked about some of this a few weeks back in the episode “Customer Experience is Queen, What Does That Mean?” because it really impacts how people perceive your products and services and brings others to the fore who might have been seen as a competitor before.

What Digital Means for the Future of Brands – Impacts to Business Models

It's also changing business models dramatically. Now I think most longtime listeners know I do a fair bit of work in the hospitality industry and there's a very stark example there. In the hospitality industry we’re seeing a lot of what are called soft brands, where hotel owners use the platform provided by major chains but not the brand itself.

So most of these hotels tend to be franchised and instead of opening a new Marriott Hotel a real estate investor would open an independent hotel, call it whatever they want — the New York City Excelsior, right? — but they receive some support from Marriott behind the scenes. Almost every major hotel hotel chain has launched one or more of these over the last few years. Hilton with its Curio Collection and The Tapestry Collection, and Marriott with the Autograph Collection, the Luxury Collection, and the Tribute Portfolio have five between the two of them. Why? Because hotel owners demanded the ability to create a distinct experience in their local markets while still having access to the rewards programs that are so prominent and so powerful within the hospitality and lodging industries.

The question is how long will it be before that's all Marriott, Hilton, and their competitors provide to hotel owners at all — or worse find that technology platforms like Expedia, Airbnb, and others have taken their place?

You know, years ago these two authors, Carl Shapiro and Hal Varian, a couple of economists, wrote this wonderful and extraordinary book called Information Rules: A Strategic Guide to the Network Economy and they explained that digital only provides two avenues for success:

  1. You can either become the dominant firm in an industry or,
  2. You can become a differentiated product

But anything else is gonna hurt you. Ben Thompson at Stratechery calls it aggregation theory, it really leads to the dominant firm. They're all saying similar things and all the data that we've seen in the two decades since Shapiro and Varian wrote the book seriously suggests they were right. Though if you think about it that probably shouldn't come as a surprise. Shapiro holds an economics chair at Berkeley and Varian is the chief economist for a small firm you might've heard of called Google. So maybe these two guys were onto something.

But it comes back to something we've talked about in past episodes like “Customer Experience is Queen,” that you must differentiate yourself — especially if you're not in a position to be the dominant firm. And when we think about the folks who are the dominant firms, what they're doing is providing that platform that says these are the trusted reviews, these are the people you can trust, to say yes you can buy through us to get the product or the service that you're looking for. And that's why people like Amazon and Apple and Etsy and Yelp and Airbnb and Uber and Expedia and all the rest have positioned themselves so well. Because customers know they can trust the reviews there and then they can buy through those channels.

What Digital Means for the Future of Brands – What You Can Do

For you to succeed you have to be the kind of place that people want to write reviews about. You have to differentiate yourself. You have to say why is it someone would choose you in the first place and why would they would choose to tell their friends and family and fans and followers on social. Because if you don't do that, you’ll fall into that gray area in the middle and let me tell you that gray area in the middle is not a good place to be.

So when we think about the future of brands, when we think about the future of your brand, it really can come down to are you remarkable? Are you a brand worth telling others about? If you are, you’re going to be fine regardless of who the dominant firms are because customers will see that in the ratings and reviews that they see. They may buy the first time through a third-party, but you can convert them to a direct customer on a subsequent purchase. But if you're not they're going to choose you in the first place and that's going to put you in a very very ugly position. So I can't say for hundred percent sure that these these platforms, these trust proxies will kill all brands. But if you don't provide your customers with an experience that is truly remarkable and truly differentiated, it's a real safe bet that they will kill yours.

What Digital Means for the Future of Brands – Conclusion

Now looking at the clock on the wall we are out of time for this week. I will remind you that you can find the show notes for today's episode as well as an archive of all episodes by going to TimPeter.com/podcast again that's TimPeter.com/podcast. Just look for Episode 206. And while you're there, you can click on the subscribe link in any of the episodes you find there to have this delivered to your favorite podcatcher every single week. You can also subscribe in iTunes or the Google Play Music Store or Stitcher Radio or whatever your favorite podcatcher happens to be. Just search for Tim Peter Thinks, Tim Peter Thinks Out Loud, or plain old Thinks Out Loud, we should show up for any of those. And especially given the topic we've been talking about today, if you could provide a positive rating on iTunes or the Google Play Store while you're there I would really really appreciate it. You can also contact me by going to Facebook.com/Tim PeterAssociates, on Twitter using the Twitter handle @tcpeter, or via email by emailing podcast@TimPeter.com, again that's podcast@TimPeter.com. With that I want to say thanks again for tuning in, I very, very much appreciate it. I hope you have a fantastic weekend, a great week ahead, and I look forward to catching up with you here on Thinks Out Loud again next week. Until then, take care everybody.

Tim Peter is the founder and president of Tim Peter & Associates. You can learn more about our company's strategy and digital marketing consulting services here or about Tim here.

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