Market View: The End of Brands?

May 27, 2014
You can still forge a relationship with the consumer; just consider using a modern medium.

REM wrote a song called “It’s The End of the World As We Know It.” And from the discussion taking place today you would think it is “the end of the brand as we know it.” There is a lot of controversy surrounding the future of brands.

Some argue brands speak to the heart of consumers and they develop a trust between the consumer and the company. Usually this trust is based on a story or history told by the branded company. I get this; I tend to be a branded guy.

What's a traditional branded food company to do?
  • Recognize the change is occurring.
  • Set aside some of your budget to explore as many new ideas as possible.
  • Hire young people; digital natives who are comfortable with social media and digital behavior.
  • Meet with executives who are currently using alternative selling models who are not in the food industry.

However, others are making an argument that the digital age is making brands less relevant, that information about any product is ubiquitous. Blogs, Yelp and other websites are making traditional marketing messages less important. Additionally, retailer's private label products are sometimes more "trustworthy" than national brands.

These "off brands" in non-traditional food channels such as Aldi or dollar stores are growing, and they often show a famous brand may not be better than a not-so-famous brand. Store brands like Archer Farms and Kirkland often are viewed as national brands and even best-in-class products.

The new consumers are more interested in information they glean from the Internet and not from commercials. It is clear many branded companies are using banner ads and the ilk to continue the old ways with new media, but there is not a lot of independent evidence as to how well it works and if it is working on the desired target market.

This would not be the first time a dramatic change affected the food industry. I think we are in for another dramatic change, and it will not be positive for all brands and traditional branding unless they act.

For example, most branded companies use a trade promotion model that optimizes temporary price reductions, in-store displays, free standing inserts, coupons etc. However, few if any have built into the model other types of digital promotion that might be occurring at the same time.

Now here is the kicker: The trade promotion analytics companies don't want to invest too much into developing an integrated traditional/social media model because no one seems to want it (and it would not be cheap). Branded companies don't do it because there are no models developed to analyze it. See a chicken-or-egg issue here?

What's a traditional branded food company to do?

First and foremost, recognize the change is occurring. Slowly but surely. Waiting to act until it is 100 percent clear to you is most likely going to be too late.

Second, set aside some of your budget to explore as many new ideas as possible. You don't want to be in a position of saying your company missed the boat on this one when someone came to you a year ago with the idea.

I worked for a guy many years ago at Campbell Soup Co. who reserved about 10 percent of the budget to explore all new media and advertising ideas. Not all the managers were pleased as they would rather use the money to get current sales up rather than plan for the future, but someone has to watch over the "house."

Also: test, test, test. One of the advantages is that some of the new digital approaches make it easier (I didn't say easy) to track sales changes resulting from some of the new media. You don’t need to go “all in”; just give it a test ride.

Third, hire young people; digital natives who are comfortable with social media and digital behavior. My two research assistants (both 26 years old) virtually never go to a store. They buy or at least check everything online. Listen to your young employees’ crazy ideas. You may not act on everything, but listen.

The list of companies changing the food channel is amazing. Amazon, Ahold with Peapod, Fresh Express. Even HSN and QVC are selling more food. Companies are using off-site grocery drop-off models. None of these companies is taking the “usual” approach.

Finally meet with executives who are currently using alternative selling models who are not in the food industry. Find out what the obstacles were and how they overcame them. Try to add these people to your share group. Remember the words of the Prussian Otto von Bismarck who said, “Fools learn from experience. I prefer to learn from the experience of others.”

I am not a pessimistic person. I am not saying the end is near. I am saying we are at the beginning of a very new era in marketing and specifically food marketing. The best brands will most likely be making the needed adjustments and will be just as viable in the future as they are now.

But failure to recognize what is happening will lead to failure in the future. And there will be plenty of new companies such as Amazon who are willing to jump in with both feet.

Jump in now -- don't wait.

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