Brands were created to lower search costs for consumers. A prospective buyer would have to spent less time determining the right product of the right amount of quality, and thus successful brands could charge more. A customer would pay more because they wouldn’t have to incur search costs comparing many other products.
A brand like Coke is probably the best example. It mostly doesn’t matter what country a customer is in, or who is selling a product - a Coke can will have the soda they expect. Which means they can save time not looking at other sodas, because a Coke is a Coke everywhere.
In “How Brands Were Born: A Brief History of Modern Marketing,” Marc de Swaan Arons writing for The Atlantic:
“There was a time, going back at least 70 years, when all it took to be successful in business was to make a product of good quality. If you offered good coffee, whiskey or beer, people would come to your shop and buy it. And as long as you made sure that your product quality was superior to the competition, you were pretty much set. Well into the 1970s, a savvy consumer could distinguish between high-quality and shabby products quite easily.
The shift from simple products to brands has not been sudden or inevitable. You could argue that it grew out of the standardization of quality products for consumers in the middle of the 20th century, which required companies to find a new way to differentiate themselves from their competitors.
In the 1950s, consumer packaged goods companies like Procter and Gamble, General Foods and Unilever developed the discipline of brand management, or marketing as we know it today, when they noticed the quality levels of products being offered by competitors around them improve. A brand manager would be responsible for giving a product an identity that distinguished it from nearly indistinguishable competitors.
As long as the brand was perceived to offer superior value to its competitors, the company offering the brand could charge a little more for its products. If this brand “bonus” was bigger than the cost of building a brand (the additional staff and often advertising costs), the company came out ahead.”
However all of this is starting to drastically change with the rise of the internet, and the overall improvement in production.
First, most sodas sold are of equal quality, taste aside. Choosing a non-Coke product is no longer risking getting a bad product, or even worse, getting sick. Across all product segments, from something as simple as sodas, to expensive items like cars, the overall quality and value differentiation has started to fade away. Thanks to improvements in technology and quality control processes searching for quality goods is a lesser concern for most customers.
Second, the internet means search costs are decreasing. Before the internet searching for the right product meant physically walking around a store, or sometimes even multiple stores, all in an attempt to discover the right item. Today this can be done in a matter of minutes. And thanks to customer reviews, the discovery process is now helped by other customers making the same journey. Most recently social media has changed this even more, birthing a collective discovery of products.
The remaining asset of a brand is “identity”. A brand communicates something about the owner to themselves and to the rest of the world. Think Apple products. Or a Ferrari car. This is an undeniable value of a brand, but interestingly not something brands initially were built to do. Yet whole industries like for example luxury goods are depending on this.
Nonetheless most brands make the mistake of thinking they’ve got the same brand identity value too. Most customers care about what car they drive, but few can name the detergent they use. And as much it is exciting to follow a brand like Apple, and see the branding work they do, many categories do not need this. The dynamics of what products customers buy are not the same as they used to be.
All of this is currently playing out on Amazon.
Farhad Manjoo of The New York Times in “The Hidden Player Spurring a Wave of Cheap Consumer Devices: Amazon” wrote:
“There is this erosion of what it means to be a traditional consumer product brand. In a way, Amazon is providing all this information that replaces what you’d normally get from a brand, like reputation and trust. Amazon is becoming something like the umbrella brand, the only brand that matters.”
Putting aside the thousands of private-label brands, which are rarely more than a logo glued to an existing product, there are true new products being created for the Amazon market. They are often born from the data and insights on Amazon, and are digitally-native on Amazon alone. They don’t involve retailers, they don’t sell anywhere else - all they do is play the Amazon game really well.
They cut out all middlemen, and built better, cheaper products than high-priced items from well-known brands.
Some of those brands highlighted in Farhad Manjoo piece, but many more exist without much recognition. Because in the age of Amazon they don’t need to be recognized in the same way Coke does. They are great products, with great reviews, at a great price. That’s their brand. And even if Amazon would at some point hide the brand name people would still be buying just the same.
“The classic worry about Amazon is that it puts local retailers out of business. Now another worry is that by exposing global brands to the harsh reality of low-priced competitors, it may put them out of business, too.” says Farhad Manjoo. This is our thinking behind Brands Shouldn’t Fear Amazon, The Threat Is Millions of Marketplace Sellers too.
Brands as a concept are not going away, but the excess recognition of Apple or Coke is increasingly hard to achieve. Today brands no longer are built on trust, since most products can be trusted. Which means on a marketplace like Amazon a traditional brand has just as much chance of success as a no-name startup. Brands should check why people buy their products.