Will social media destroy brands?

The rise and rise of digital media, and social networking in particular, has brand owners quaking in their designer loafers. Yet the rampant change taking place in our media landscape presents opportunities as well as threats – wasn’t it ever thus?

Branding has a long history. Appending recognisable marks to mass-market goods and services began at least a hundred years ago. By the 1940s manufacturers and their agents were developing a deepening understanding of consumers’ psychological relationship with brands. In the decades since, brand identities and personalities have been carefully built and cleverly exploited. Demand for branding services supports a huge number of companies (including V-On) and industry leaders can attain massive valuations: $66,667 million for Coca-Cola, according to Interbrand.

It follows that anything that may undermine the value of branding is serious. A salient example is Marlboro Friday, a day in 1993 which saw the stock of Philip Morris (now Altria Group) fall 26% - wiping out $10bn of market capitalisation – after an announcement that the price of Marlboro cigarettes would be cut 20% to compete with cheaper generic cigarettes.

Investors were terrified that such a brand-reliant product was being forced to compete on price. The sentiment was that Philip Morris had signalled a serious decline in the power of brand. Share prices of many other major brand owners also saw dramatic falls that day.

Fears proved to be unfounded. The years since have shown brands gaining in strength. Smart owners demonstrated that reputation and consumer experience continue to drive preference far more than price or even the product itself. Armed with such a sophisticated and multi-layered knowledge of how to manipulate consumer decision-making, why has social media scared brand owners so much?

It’s all due to user-generated content. All of a sudden, consumers can answer back! Perhaps the most famous recent example is United Breaks Guitars, Dave Carroll’s musical rebuke to appalling customer service by United Airlines after the company damaged his guitar. YouTube hits of his music video reached the millions, causing TV networks around the world to pick up on the story. The tracks are even available on iTunes.

This stuff scares the heck out of those charged with managing brand value. For those who fail to listen and respond appropriately to their customers, worse is to come.

Today we increasingly evaluate purchasing decisions based on online scores and comments made by (hopefully) genuine consumers. That seductive brand promise is no longer enough. When a majority of recent customers report disappointment, sales are affected. In the future, this effect will be multiplied. The Open Web, an online standards movement championed by Facebook, Google and MySpace among others, could offer us the option to view only the opinions of trusted family and friends. Thus the impact of user generated content and valued personal relationships will be combined. What use is a brand in the face of such powerfully influential data?

Digital and social media may have provided us with richer ways to understand and manage relationships – including those with brands – but they haven’t changed our fundamental nature. We still need to quickly identify products and services that we trust. We will continue displaying (or self-verifying) our taste and identity through purchase choices. We will want to try the new, or the historic, and use the shorthand of brand to decipher the options available to us.

Brands will continue to wield great power, but owners need to learn new ways to deploy it. V-On’s work with Volkswagen was prescient in its approach to consumer engagement. We successfully built online platforms for social engagement, and related those to brand value, years before Facebook et al were even thought of.

Do not interpret my words as conceit: we were part of a pioneering, big-budget initiative that put the consumer at the centre of VW’s world. Social media has democratised many aspects of what we delivered – and that’s a good thing. Consider Blendtec, a manufacturer of domestic food blenders. Will It Blend? – a low cost video campaign – has been a massive YouTube hit. The company claims a five-fold increase in sales.

My view is that social media, far from destroying brands, will add to the sophistication of branding. Some brand owners, like United Airlines, will have to learn some tough lessons along the way. Those who adapt to the digital age – realising that consumers will expect information, the ability to interact, and to be better understood – will rise to the top. Those who carry on as before will falter – wasn’t it ever thus?

Gerrie Villon, Managing Director, V-On.

Further Reading

How Marlboro Friday Changed the World

The Next Twitter or Facebook is the Open Web

Will it Blend? - iPhone3G

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