Maintaining Optimism in the Face of Reality. Occasional observations on the state of the world, society, business and politics. Usually anchored by facts, always augmented by opinion.
Although in some respects, I can agree with Surowiecki's analysis, I think the hyperinformed superconsumer, while clearly a factor, is hardly solely responsible. Some other thoughts:
- There is a legitimate question of how brand value is computed, and what really is a legitimate brand. Often, the concepts of "brand strength" and "fashionability" are in some ways conflated. I am not just talking about the article, but in general. Apple is a brand, the iPod is a product from Apple. While the iPod name has a certain cachet, I question calling it a brand in its own right. This is all the more true for clothing brands. My point being: a fashion doesn't really have enduring value, it is by nature ephemeral
- Prices have been pressured by a relentlessly consumptive population whose acquisitive desires expand at a rate faster than their incomes. While consumer credit has certainly been used to bridge the gap between "I want" and "I can afford," the willingness to buy less expensive but superficially fungible products has been the next stage. (Of course, this is the same problem that has people more than happy to buy goods made in China or other developing nations, even goods of demonstrably lesser quality, just so they can own
, while at the same time complaining when corporations do the same thing when they outsource manufacturing or service jobs.)
- In the consumer market space, the introduction and aggressive promotion of private label products has done significant damage to the computed brand equity of the largest consumer brands. This, in principle, I do not mind because the excess returns reaped by a brand are in large part used to finance additional advertising and marketing, creating a certain circularity in extracting a brand premium to pay for supporting the brand's strength. I suppose in a way, there might be some logic for it if I watched television, as the additional pennies spent on Crest or Tide go to subsidize the primetime lineup.
Of course Taborrak points out that superior information flows can also raise the profitability of product evaluators, pointing to the example of Roger Ebert in the movie space. I would add to that Consumer Reports as an obvious example, although they are a non-profit. A trusted product evaluator could to whom I could pay $5 to validate a genuine $30 savings might get me to buy that no-name DVD player. But, consider the very false economy if you end up paying for bad information, in this piece from HBS Working Knowledge, "The Hidden Cost of Buying Information."
I also agree with Taborrak's suggestion that brands may maintain value if they move from the "attribute space" to the "lifestyle space." I think the biggest winners there will be retailers, Pottery Barn being a great example. The premium charged on their products is quite impressive.
An additional thought: is "design" the new "brand," at least in many product segments? While I haven't thought much about this, I think the argument could be made that it has become something like that. And I'm speaking in the case more of more superficial or even package design, not genuine product design, as that is a legitimate value component of the underlying product.
e-mail post | Link Cosmos | [Permalink] | | Wednesday, November 10, 2004
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