The
prevailing opinion on branding in e-commerce is that its importance and consistency
will grow even beyond those prevailing in the brick-and-mortar world. We argue,
however, that traditional branding will be negatively affected by the
Internet’s capabilities of individualization, which means a much stronger
emphasis on customized sub-branding. This will lead to a federated system of
branding, with an overarching meta-brand and many sub-brands. Central brands
will therefore be weakened, and brand management becomes significantly more
demanding and costly than in the past.
Branding in e-commerce has
received much attention with the concern about viable business models for
Internet companies. Brands help a company to stand out in the clutter.
Therefore, a strengthening of the brand identity is generally recommended. In
this article, however, we argue that branding over the Internet will not simply
follow traditional branding strategies, but will fundamentally change brand
building. The ability to individualize the relations to customers extends to
the brand. Brands can become customized according to different use and user
categories. Instead of the consistent and uniform brand cherished by central
managers, a brand hierarchy emerges, in which meta-brands convey the core
values of the brand, while customized sub-brands appeal to customers according
to their needs, perceptions and values. Brand customization inevitably leads to
some brand dilution, and becomes more complex and costly. However, the ability
to customize a brand also offers a better opportunity to positively engage a
larger segment of customers.
The concept of branding is
not new. Branding has existed at least since Greek artisans used symbols to
label point-of-origin and quality. In the Middle Ages cities or regions served
as brands for certain products like textiles, wine, or cutlery. A brand
delivered orientation, trust and served in the consumers’ perception as an
anchor to be differentiated from other offers. Each new medium affected brands.
The industrial age with its mass production, rail transportation, and
inexpensive print publications enabled the emergence of national brands. The
advent of broadcasting further accelerated brands. Today, the Internet is the
new medium, and the question is how it affects the concept and strategy of
branding.
In discussing the Internet
it is necessary to look beyond its present text-based, low capacity kilobit
stage, and envision a mass medium that can carry rich media such as television
over emerging megabit and even gigabit individualized networks. It offers a
vast information distribution capacity, leaving as the bottleneck the
individual processing capacity with its limited attention span (Noam, 1993;
Goldhaber, 1997).
The early view of branding
on the Internet was shaped by the medium’s low barriers to entry and fairly low
economies of scale. It assumed the Internet to be a relatively open and level
playing field. Consumers would be able to instantaneously find the best deal
for their shopping, assisted by intelligent agents and Internet shopbots. This
led to a view of brands as industrial age legacies, associated with mass
production and mass marketing. This perception of brands on the Internet was
therefore that the Internet would destroy or at least weaken brands in a
process of commodification.
3. The second stage of
e-brand perception: Brands are essential on the Internet
The second stage of perception of Internet brands reversed course radically and now elevated brands to an essential element for e-commerce. In 1998 Business Week declared building and maintaining brands on the Internet as the ‘Holy Grail of Marketing’. With hundreds of thousands of websites in existence, brand differentiation could lift a site above commodification. Studies showed that branded e-commerce retailers held significant price advantages[1]. Consumers use brands as a proxy for a retailer’s and product’s credibility with respect to service quality, especially in situations of asymmetric information (Brynjolfsson and Smith, 2000: 43). Brands on the Internet can also create stickiness through cognitive lock-in as consumers can avoid the time to establish a relationship and account with a new retailer (Johnson et al., 2000). Moreover, brands are important to establish trust. With the burst of the Internet bubble, consumers need the trust on the web that brands offer. Of particular importance are trust and consumer concerns about the security of payment procedures (Camp, 2000) and the protection of personal data, fears that have slowed e-commerce. Such trust element transcends the particulars of a brand image, whether ‘exclusive’, ‘cheap’, or ‘rebellious’ and is therefore essential for building e-brands.
Strategic brand management
in this stage stresses the importance of the brands’ overall consistency, and
views the identity of the brand by integrating the outward perspective like
image with the inside perspective such as intrinsic values. It emphasizes the
importance of a cohesive brand structure where all stakeholders, including
suppliers, employees, analysts etc. receive a common view on that brand. This
view supports a policy of “brand centralism” controlled by central management,
in which all aspects of the brand are tightly controlled and made uniform. This
centralized branding is also a tool for management to internally exert control
over their far-flung and disparate operations and employees by providing
internal signals through the brand.
So critical is the notion of
an undiluted central brand, that some authors argue that an e-brand can only be
successful if it is completely independent of and unrelated to any offline
brand (Ries and Ries, 2000), because the online and offline branding would
otherwise conflict. Companies that want to make a commitment to building an
e-brand should therefore start from scratch, avoiding its inherently
inconsistent offline brand. There are examples to support this view, as are
successful counter-examples. Charles Schwab, the offline broker with a discount
image successfully managed to build an online brokerage service with a premium
image. It shifted consumers’ perception of Schwab from a non-frills broker to a
high-integrity investment services company online (Pottruck, 2000: 250). The two brand images co-exist.
On the one hand, an e-brand
benefits from positive offline existing brand images since consumers already
start with an ‘ex-ante-trust’-attitude. In the previous case, brands provide a
unique brand promise on the Internet with no expectations or transfer to
offline products. But it is an expensive proposition to build an e-brand on top
of a new e-business and new e-brands risk running out of time and money before
they established themselves in the evoked set[2]
of the consumers.
4. The third stage of
e-brand perception: customization and brand federalism
Into the 1970s, North
American and Western European societies tended to be more homogeneous, and the
advertising on the major television networks reflected this. In the 1980’s, US
society recognized its heterogeneity, and differentiated branding strategies
emerged as a result. Cable based multichannel TV led to a "narrow-casting”
that made targeting easier. The Internet accelerates this trend. It provides
tools for customization that allow to target customers individually. Differentiation is possible, because it is a
two-way medium that permits feedback and addressablility. Customers provide
information and reveal preferences directly through the choices they make, as
well as from past transactions. Firms therefore know their customers better
than before and can recognize them. They can respond with appropriate ads,
promotions, and efforts at image creation. Such differentiation can take place
not only across users and user groups, but also across time.
Customization and individualization
invariably become dynamic processes. By observing consumer behavior in real
time one can analyze consumer needs as they change, and respond to it. The
framework to implement customization strategies in branding on the Internet is a federated system, in which the core
identity is preserved in the meta-brand, and sub-brands provide customizable
elements.
The meta-brand provides an
overarching set of brand core values. Brand consistency offers some stability
to customers and delivers value of recognition and trust, especially when the
brand is encountered in offline situations. A meta-brand may promote a generic
idea, e.g. ‘The best entertainment can get’. Meta-brands are sending a unifying
message amid the variety of sub-brands with its products, actions, and slogans.
In some cases meta-brands may be irrelevant to consumers, such as for some
conglomerate. In other cases, the sub-brands become so desparate that a
meta-brand is too diverse and diluted and may be abandoned, or there is the
inherent possibility of splitting the company to accommodate desparate brand
images.
Underneath the meta-brand,
uniformity gives way to reveal a number of choices for sub-brands that are tailored
to sub-markets, not just for different products, but for customer segments.
Sub-brands may target customers depending on basic socio-demographic and
depending on consumer attitude criteria like lifestyle, tastes, needs and
interests. The sub-brand personalities need to fit the self-expressing needs of
the customer. The sub-brand is created in a two-way interaction between
customers and firms. The Internet gives more autonomy to the consumer. At the
same time, it enables companies to pursue a “push” strategy in branding, in
which they can create different images to different people. An e-commerce site
that offers clothing can be pitched as sporty to one person, stylish to
another, and economic to a third. This customization on the sub-brand level offers
the opportunity to create different brand styles, to unbundle the portfolio of
values that a brand offers and to set individualized priorities.
The concept of sub-brands is
not new, of course. It exists in the
extensions of existing products or brands into different product classes, as
well as in stretching the brand vertically in its existing product class or
co-brand it. E-brands, however, can be more dynamic through the adaptation to
changing customer needs. This happens under the premise that people use brands
to express themselves, preferences for brands with certain personalities in
specific situations change.
Customization in branding will also be supported through the rapid growth of mobile Internet markets. Mobile devices offer unique ways to deliver new forms of value through ubiquity, localization, real-time applications and stronger individualization. Sub-brands will have the potential to additionally be targeted location-based. Therefore, a federated system of branding will better serve customer needs in the future than centralized and strictly controlled brands.
4.3 Brand federalism and brand hierarchy
E-brands are coordinated in
a hierarchy. Clearly the federalistic brand model, with the meta-brand on top
of customized sub-brands, will lead to a weakening of the centralized brand.
Within the federated system, different product and surrounding lifestyle
attributes are pushed into the foreground, based on electronically observed
consumer behavior. It will be more likely to be successful for goods that offer
a broad set of lifestyles and emotional attributes and values to create
sub-brands from. The centralized power that management used to have in offering
pre-packaged brand features gives way to a collection of these sub-brands that
can be allocated in a more targeted way.
The customized and federated
approach to branding is neither simple nor cheap. Creating information and
interaction requires skilled people and technology. Internet marketing often necessitates
more human interaction, not less. Mass-produced relationships created by
technology are often subject to consumer’s suspicion of the claim of
relationship. Therefore, more personal involvement is required than expected.
If cost-cutting is the motivation for entering e-commerce, it will prove to be
dead wrong for the branding of many products. To the contrary, Internet
technology and marketing requires more people, more effort, and more
creativity. This has consequences. The brand architecture and its support all
exhibit economies of scale - high fixed cost and low marginal cost. This means
that, ceteris paribus, size creates an advantage in the next-generation of
branding on the Internet. This size advantage will be even stronger when
broadband connectivity will make the vehicle for brands an expensive video
medium, instead of the fairly inexpensive text medium of the present.
Other problems of customized
branding include the danger of using stereotypes to create sub-brands, and in
making certain assumptions on the preferences and values of some groups, in
order to target them. This can easily backfire. Similarly, the same customers
may be subject to conflicting approaches as they change their role or location.
Brand management in the
digital economy requires a different approach than for one-way media. Brands
will become multi-layered in a federation of sub-brands. We identified three
different stages of e-brand perception, starting from the view that the
Internet will destroy brands, developing the argument that brands are extremely
important on the Internet and suggesting a new approach of multi-layered
brands. E-brands will take advantage of the Internet’s capabilities of
customization. Meta-brands will create the overall elements of the brand,
whereas customized sub-brands are more interactive and give some influence to
the consumer over the brand. This means that Internet brands are more diluted
and that firms lose some control over their brands. The centralized brand
weakens. Yet decentralization better serves the individual needs of a larger
customer base, strengthens customer relationships and heightens the value of
the e-brand.
In the megabit Internet, the traditional mass-branding of the industrial age will give way to customization and heterogeneity. Branding activities will be more important, more expensive, and require more creativity than ever.
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