Trading Places: Brand or Commodity?

Wednesday, April 25, 2012

By Adam Kleinberg

In the past decade, two massive shifts have reshaped marketing.

1) For the first time, we're able to measure the effectiveness of our marketing

2) Relentless financial superpressure from the turbulent economy

The result is that there has been a relentless focus on measuring ROI in marketing. Unfortunately, that has led to an unfortunate trend:

Brands are becoming commodities.

What are commodities? They are products that have value, but are completely undifferentiated. Gold. Oil. Pork bellies. Remember Eddie Murphy in Trading Places? Old Mortimer was teaching him to trade commodities.

If we all use the same data to make the same decisions about the same products, we lose the differentiation that allows brands to hold a special place in the consumers mind and we miss out on the opportunity to build relationships with our customers.

The truth is that not everything fits nicely into a spreadsheet. Fifty percent of the things we should be doing for our brands are not predictably quantifiable.

Today many brands, obsessed with the power of digital, are solely focusing on activities they can directly tie to revenue generation. Of course they should pursue activities that tie back to revenue. They should make it their business to get damned good at those activities. But to do so at the expense of their brand is a huge mistake.

In former P&G Global Marketing Officer, Jim Stengel's book, Grow , a simple chart illustrates the increasing importance of brand value to companies.

The chart shows the "Brand Contribution of Selected Stengel 50 Brands" in 2001 and 2010. What are Stengel 50 Brands? They are a list of companies Jim Stengel has put together that have outgrown their competitors by a factor of 3X in the 2000s.

They are the brands that bucking the trend toward commoditization.

The chart shows a consistent trend of increasing brand contribution to the overall value of companies over the past decade for these top-performing companies:

Accenture went from 19% to 47%.

FedEx went from 17% to 55%.

IBM from 34% to 44%.

Samsung from 12% to 42%.

Starbucks from 26% to 57%.

According to Stengel, "The trend is unmistakable. To me, it is an open-and-shut case. If you're not measuring and managing against a brand ideal, you're consigning your business to the middle of the pack or the side of the road."

Toward commodization.

Again, I'm not saying we don't need to be analytical about our marketing. I'm not saying we shouldn't create programs to drive demand, leads, revenue and sales.

But "Business Intelligence" cannot be solely a left-brained affair. Brands need to stand for something. They need to deliver a great brand experience at every point of contact. They need to build relationships with their customers.

Not because it feels good. Because it's the path to breakaway success.

About the author
Adam Kleinberg

Adam Kleinberg is CEO and founding partner of Traction. He has written over 75 articles in publications like to AdAge, Adweek, Fast Company, Forbes, Mashable and Digiday.

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