Alex Steer

Advertising effectiveness, analytics and strategy / about

Algorithms will not kill brands. Really.

825 words

Right then, marketing industry, we need to talk. See, there’s this story going round that the future of brands is under threat from algorithms. It’s nonsense, and it does disservice to our trade.

Most versions of the story go like this. Over the last decade or so, and especially in the last few years, media consumption has switched dramatically from environments controlled by editors, to environments controlled by algorithms, which filter and prioritise the content we see (hear, watch, etc.) based on knowledge of our own preferences, generated through machine learning. I talked about this to the Advertising Association in early 2017, and I raised the prospect that as the use of algorithmic decision-making extends from media prioritisation to e-commerce, existing brands might have to work a bit harder to make sure that they don’t get relegated to becoming back-end service providers. For example, if I am constantly asking the Amazon Echo on my kitchen counter to tell, sell or play me stuff, I may lose the sense of regularly interacting with the brands who supply those services (Spotify, National Rail, Jamie Oliver, etc).

But the narrative of ‘algorithms vs brands’ is taking this to a ludicrous extreme. Take for example this extraordinary rundown from Scott Galloway:

Brands are shorthand for a set of associations that consumers use for guidance toward the right product. CPG brands have spent billions and decades building brand via messaging, packaging, placement (eye level), price, creative, endcaps, etc. The internet loses much of this, since the impact of zeroes and ones is no match for atoms, and much of the design and feel of the product loses dimension, specifically from three to two (dimensions). As a result, the internet has become a channel to harvest, rather than build, brands.

However, all these weapons of brand … all of them go away with voice. No packaging, no logos, no price even. The foreshadowing of the death of brand, at the hand of voice, can be seen in search queries.

Crikey.

Before we go any further, for some reason ‘brand’ is one of those terms that everybody seems to interpret differently. Which is surprising, because a company’s brand is normally its single most valuable asset, typically account for about two-thirds to three-quarters of volume across a year. You would think that, as an industry, we’d understand this and be pretty clear about what a brand is, the way that businesses tend to be pretty clear about what a pension fund or a manufacturing plant is. So, for the avoidance of doubt, I define a brand as a recognisable identity of a business in the marketplace, which creates value by increasing demand and discovery for its products or services.

So, I think this ‘death of brands’ narrative is rubbish. Not just because it’s not true, but because it’s the opposite of the truth. Let’s be loud and clear on this one.

The environment the scare stories describe, is the exact environment that brands were built for.

Cast your mind back to the mid nineteenth century in Western Europe and the young United States. As the economy went through a series of dramatic structural shifts, large populations began to urbanise and living standards went up, and with them so did competition for goods and services. Manufacturers began to find their profits under threat by new intermediaries. These intermediaries were large, powerful, and had enormous and rapidly growing user bases (as we’d now call them). Their power was cited as unfair influence, as the death of the manufacturer, as a slippery slope towards commoditisation and a race to the bottom. These intermediaries exercised almost total control over the goods that people saw, they could put substantial pressure on pricing, and their customers loved them for it.

They were called shops.

So manufacturers began to invest in raising the profile of their products in people’s minds. They used media to push back against the price wars and the margin pressure. They used creativity to make their products more appealing, more pleasing, more meaningful and differentiated — so that customers would ask for them by name, and so that shops would look bad if they did not stock them.

Sounding familiar yet?

Brands thrive under this sort of pressure, because they become the only unfair advantage that a business can deploy. Algorithms and ecommerce won’t kill brands, they will kill some brands, and they will raise the stakes. If your route to market involves someone standing in a kitchen and asking a plastic and metal box to ship a product to you, you need to make sure you’re already in the kitchen, by being in the mind. And there is a very good, reliable, extremely well proven mechanism for making that happen.

It’s called brand advertising. Ask for it by name.

# Alex Steer (05/01/2018)


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