July 16, 2018
Whenever I spend time around people in publishing, media, or other "New York" businesses, I'm surprised how much I hear about "The Brand". "Brands that trust us". "We love working with that brand". "Brand guidelines". "Brand development".
People in San Francisco don't talk like this. So I've been wondering whether we're ahead of the curve, or a bunch of brand ignoramuses. I think it's a bit of both.
There are some products where the brand is a proxy for quality; I think this is common in consumer packaged goods. I don't really care what name is on the label—Energizer, Pampers, Yoplait—just that it tastes good, or does what it's supposed to do.
I think these types of brands, which I'll call "functional brands", are tremendously vulnerable today. Why trust a proxy (a brand) when I can read reviews and buy based on firsthand knowledge from others? I'll gladly buy a no-name product with tons of positive reviews.
The emergence of reviews is a game-changer for private labeling. Nowadays, if a store sees something flying off its shelves, they can offer the discount version and if people like it, there goes the brand's pricing power. This is precisely Amazon's strategy with Amazon Basics, and they're executing masterfully. "Your margin is my opportunity".
Functional brands aren't the only kind of brand, though; there are other brands like Chanel, where the brand is the product. Buying a Chanel purse is as much about the name on the label as the product attributes. These types of brands are much harder to copy, and convey long-term stable pricing power, even if only in niches.
Maybe the difference is that functional brands appeal to your brain, whereas the other type appeals to your heart, or emotion.
Overall this is an area where I'm really unsure. I know data is a game-changer, and that reviews have the power to change customer behavior. But having so much choice in everything probably strengthens brands, because my time and attention is too limited to compare hundreds of items. Certain brands seem to be losing power (CPG) even as others, like Apple and Harvard, are becoming more important. I haven't figured this out yet.