America is in the midst of a recession with no end in sight. And while experts analyze what went wrong, there is yet another crisis looming. We discovered the value that brands bring to a company’s total business value is exaggerated. The financial markets attach more value to brands’ worth when compared to the consumers who buy the brands ascribe.
This “brand bubble” represents almost $4 trillion in potential exposure to the S&P 500, where brands account for 30% of its market capitalization. This alone is twice the size of the residential subprime mortgage market.
Working with professors from several leading business schools, we examined over ten years of brand and financial data from BrandAsset Valuator, (BAV) the world’s largest study of brands. By interviewing annually 500,000 consumers in 44 countries through surveys in forty languages, we have measured 40,000 brands while investing almost $115 million dollars in our study since 1993.
In addition, while brand value has increased by more than 80% over the past three decades, the number of high-performing, value-creating brands is diminishing. Among 2,500 brands we analyzed, brand awareness declined 20%, brand esteem was down 12%, perceptions of brand quality eroded by 24%, while trust in brands declined by 50%.
What’s more, 85% of brands are stagnant or eroding in brand differentiation. We also cross-examined Interbrand’s top 100 most valuable brands from 2004 to 2007 with those in our study, and found that 45% actually were declining in consumer perceptions.
But what does the brand bubble have to do with our job as direct marketers?
Traditionally, the worlds of brand and response marketing exist in a parallel universe. Each is viewed as different disciplines with distinct roles, sequenced neatly in a plan to capture a consumer that’s marching in a straight, predictable line. We liken response to simply converting a consumer that’s been exposed to branding and now needs an offer to close the deal.
That’s all changed. Today, marketers face forces in consumerism that have created instant access to search and information gathering through rating sites, social networks and mobility, which accelerates their brand choices and purchase decision-making. As a result of these technologies, consumers assess every facet of a brand on their own terms and in compressed periods of time.
This means there is no longer a linear model of consumer behavior. The concept of AIDA (awareness, interest, desire, action) is now spaghetti. Direct response no longer exists at the end of the purchase funnel. Thanks to the digitization of everything, brand and response are now intertwined.
Consumers can now act immediately to a brand messages. So, rather than closing the deal that branding arranged, direct marketing contributes to the imagery creation of a brand by instantly assessing the consumer’s needs and reacting in real time, through Web site orders, e-mail responses or mobile purchases.
What was once sales is now enhancing the brand experience, because through direct marketing technology and strategies, a brand can reinforce its ability to listen, customize and learn from the consumer. This is not just direct marketing, its direct engagement with every potential customer, sometimes at the moment they’re introduced to the brand.
In fact, in a world of compressed consumer decision-making, direct response is now a potent form of branding. Our ability to act in concert with the consumer not only reinforces the relevance of an offer; it enhances the brand itself.
After all, just think of all the great brands that began as great direct marketers. American Express is essentially a response business where people pay significant premiums to be card members. Zappos created an Internet juggernaut through a customer call center that is at the heart of its brand.
In other examples, ING now commands almost $70 billion of assets under management, and is the most discriminating financial services brand in BAV. Victoria’s Secret became a world-class retailer after first being a world-class catalog.
To rebuild brand value, direct response can play a vital role. Brands are coming under attack because they’re not fast enough in this new world. However, we have the tools, technology, data and knowledge to learn, adapt, customize and respond to stimulate not only sales, but contribute in building loyalty and affinity for the brand.
