Edwin L. Artzt recently asked rhetorically, “Is brand loyalty disappearing?” The Procter & Gamble chairman then answered his own question with a demonstrative, “Hell no. Bra" data-categories = "" data-popup = "" data-ads = "Yes" data-company = "[]" data-outstream = "yes" data-auth = "" >

Reinventing the wheel By Michael Schrag

Edwin L. Artzt recently asked rhetorically, “Is brand loyalty disappearing?” The Procter & Gamble chairman then answered his own question with a demonstrative, “Hell no. Bra

Of course, by Artzt’s measure, brands like the late, great Marlboro and Pampers are the ones that have been actively disloyal–not the consumers who are supposed to buy them. The real marketplace traitors have been the brand managers and the companies who employ them. It’s refreshing that P&G’s chairman now publicly acknowledges that.
With their plethora of line extensions, price increases and promotional gimmickry, most brands over the past decade have been managed more to maximize shareholder equity than customer value. Brand equity has become the justification and rationale for exacting higher prices–not the crucial image-making ingredient for product quality. Why else are the generics rapidly nibbling away market share in categories from cola to cigarettes to toilet paper? Isn’t it ironic that retail chains like Wal-Mart are doing a nifty job–with minimal advertising–of expanding the market share of their generic offerings?
Sure, consumers can be fickle cheapskates in down economies. But, as Artzt knows, that’s not the problem. What brand advertisers are witnessing today isn’t a temporary reflection of the times, but a fundamental market discontinuity. Brand management itself isn’t dying, but the traditional concept of brand advertising is. Instead of defining brand value, “brandvertising” has been reduced to merely describing it.
The simple reality is that brandvertising investments by companies like P&G, Colgate-Palmolive and General Motors in brand equity now yield diminishing returns. You see it in the declining market shares; you see it in the promotional deals cut with retailers; and you see it in the erosion of premium pricing.
As surely as the electronic media have redefmed the role of print, the emergence of quality, low-cost generics and the rise of promotional technologies have radically redemed the importance of brandvertising. Recent events effectively confirm that brand advertising has lost its claim on the brand equity dollar.
You would think brandvertising would matter more and more in an increasingly commoditized and genericized marketplace. But the reality is that brand image now matters less and less. Why? Because brandvertising itself has become commoditized. Traditional advertising has effectively devolved into just another generic product in the mass consumer marketplace. This isn’t simply due to the relentless glut, clutter and questionable quality of so much creativity. What’s really happened is that brand advertising has effectively been decoupled from the way brands are now managed.
Brandvertising obviously has to be reinvented if it is to have any hope of recapturing a pre-eminent role in the brand management arsenal. The cherished belief that quality advertising makes it easier to extract a premium price for a product must be discarded. For most product categories, those days are gone. Price/performance–not advertising imagery-is now what creates the perception of value. Imagery has to give way to interconnection.
Brandvertising’s future will be more as a mechanism to lure customers into a company’s marketing web than as an investment in brand equity. It will be a way for advertisers to shepherd customers into their direct-response corrals. In other words, brandvertising is no longer the party–it’s merely the invitation.
Of course, there will always be big bucks put into brandvertising (nifty invitations still matter). But brandvertising must be managed as a marginal cost rather than a capital investment in brand equity. But mark these words–you’ll soon see the WalMarts and K marts building brand advertising into their generic management, just as Sears once did with its Kenmore washers and Craftsman tool labels. They may even hire an agency or two. Why? Because these generics need to establish themselves in consumer mindshare. Shelf space and price isn’t enough.
But you can be darn sure that, with all their customer lists and point-of-sale data and retailer “advertising,” they will also build their brands around direct-mail and frequent-purchaser plans. There’s a struggle for a new equilibrium between brandvertising and the infrastructures of interaction. Companies that depend on brandvertising to build their own equity will wake up to discover they have become niche players.
Copyright Adweek L.P. (1993)