The world has changed drastically from just twelve months ago, and the way consumers shop continues to be a hot topic for both brands and manufacturers.
Consumers now more than ever have been encouraged to shop from home, which, for direct-to-consumer (DTC) brands, is a dream come true. We live in the age of commoditization. For years, retail and wholesale channels have been steadily fading as a means to drive sales and traffic for brands. The internet has brought niche markets into people’s homes and onto their phones. If you can think of it, you can buy it, and on the go.
Amazon is one of the best at dialing into this, and while Amazon may be excellent for consumers, it’s not necessarily great for brands. Amazon’s model is built on the premise of creating a strong level of competition amongst merchants by providing customers with ample transparency and the ability to easily compare merchants and products side by side. In effect, this acts as a forcing function, driving prices down by commoditizing products and merchants. This is not the best e-commerce model for every brand, as it makes it substantially harder for them to differentiate themselves.
Like Amazon, the internet as a whole has created a level of transparency and accessibility leading to mass commoditization across the board, reducing many merchants and brands to virtual street vendors shouting at passersby in an attempt to hawk their products. This new level of transparency doesn’t only affect the interaction between consumers and brands, but also between brands and their factories and/or manufacturing partners, disrupting supply chains themselves. I won’t dive in too deep here, but the net effect is that it is easier than ever to launch a brand that can compete with the big players.
Why Every Company Should Care About Branding
Commoditization has stripped away many of the moats companies relied on to maintain their market position. Barriers to entry such as market knowledge/expertise, distribution capabilities, manufacturing capabilities and/or other costs have quickly eroded due to this commoditization brought on by the high level of transparency and accessibility.
So how do companies differentiate themselves? Through branding.
As a company, the brand equity you build is your most important asset and your moat. It’s what is preventing you from getting into an unsustainable race-to-the-bottom pricing spiral. Given this, in today’s world, brands are marketers first and manufacturers second. Companies today succeed by working backward, starting with marketing. They identify the demand, the positioning, pricing and value proposition that defines their brand, and they then manage the sourcing to bring it to life.
What Is Brand Equity?
Brand equity has two parts. First is the mental and perceptual “real estate” that a brand occupies in the mind of a consumer. The second is the level of trust the brand has in relation to the mental real-estate it occupies.
The real estate comes down to the overall associations that a brand has in a consumer’s mind such as the activities, emotions and sentiment that brand elicits when a consumer thinks about it. Since her time on Friends, Jennifer Aniston has been a popular public figure, which makes her a natural influencer for Emirates Airlines. If a consumer is thinking about or planning to travel and happens to see Jennifer Aniston’s commercial for Emirates Airlines, that branding has likely carved space into the mind of the consumer, who may have never thought of Emirates as a travel option before.
Another example is Nike. Sports and physical activity for many elicits a sense of self-accomplishment. Trust is simply the strength of the association with the activity and well-being that is then reinforced by first-hand observation or third-party validation. Michael Jordan, a very credible third party in the realm of basketball, reinforces the Nike brand’s association with basketball, success and accomplishment. As we can see, brand equity plays a key part in driving consumer demand.
Influencer Marketing And Brand Building
The confluence of commoditization and the democratization of fame has led to the rise of influencer marketing. Influencer marketing has been very successful in carving out mental real estate in consumers’ minds. Public personas who create content in the social sphere are uniquely positioned to secure brand real estate and consumer trust. This brand awareness, combined with trust, drives action and ultimately, sales.
For example, Gymshark, the U.K.-based startup, was largely fuelled by social media and influence marketers. Recently, Gymshark has further invested in its influencers and created designated lines for them. Gymshark’s fitness apparel collaboration with influencer Nikki Blackketter enables them to further connect with their consumers via her 1.8 million followers, and increase the Gymshark brand awareness, their social media traffic and ultimately sales. The niche that Ben Francis, the founder of Gymshark, carved out for himself was not his end goal but is where his story arrived at.
Brand building can take time, and it can be difficult to measure. Many smaller DTC brands find the challenge of measuring brand-building efforts to be a real roadblock. Alternatively, brands that obsessively hang by the findings of their KPIs can find branding efforts and engagements too abstract to fit into their business. Some understand the value intuitively and have had influencer marketers work their magic on their brands. They are willing to push branding efforts knowing that the attribution won’t be minutely precise but are happy to loosely measure overall lift. Others in the DTC space believe that if it can’t be directly measured, it doesn’t exist.
Though influencer marketing can organically drive a lot of direct purchases that are easily measurable, it also drives indirect purchases and builds an immense amount of brand equity that might be difficult to measure directly. Still, it’s effects on the overall success of a given company are very apparent.