What do you think of when you think of a Brand? We know brands like Nike, Toyota, and Apple AAPL +2.68% in a very intimate way—they have distinctive personalities and we may even feel like we have “relationships” with them. The power and the meaning of “Brand” has some powerful implications for us as consumers, entrepreneurs and business people, but the idea of “Brand” may now be under pressure from an emerging new way of doing business.
When buying products, we very often look for Brand relationships: Would you buy a no-name first aid kit? A no-name bluetooth headset? A no-name computer? A no-name car? Buying a name is buying into the promise of a great experience because a Brand is the mark of a company that has pinned its success on keeping you coming back again and again. This means, interestingly, that Brand aligns the needs of a company with those of the consumer— because both consumer and company are trying to create a great experience.
In recent history, the widespread ability to manufacture at low cost overseas and to distribute worldwide through sites like Amazon and eBay EBAY +3.70% has resulted in a great proliferation of no-name brands and often dodgy, low-quality products. In a world of cheap, the absence of Brand puts you at cross-purposes with the companies behind them. Have you ever bought a no-name-brand, cheap electronic gizmo on Amazon that was ultimately a waste of money because it didn’t work, or performed poorly? I have – regrettably on several occasions. Proof that absence of Brand and the lure of a low price can get you in trouble.
Without Brand and the relationship that a Brand implies, a product manufacturer’s job is simply to get you to buy the product—just once, and at the greatest margin possible. That means their best bet is to design fancy packaging or offer a low price to make you pull out your wallet and pay. Forget anything about whether the product is good or not—without Brand, quality is irrelevant. The company that makes a product without Brand front-loads all of its efforts into getting you to make a decision to buy just one time. Forget coming back and being a repeat customer—that’s not part of the equation. For a company that is not building a Brand at some level, it would actually be economically irrational for them to research and develop the best possible product. This is a bad deal for the consumer because you are going to get a product you can’t trust, and one that will be of unpredictable quality that ”just has to look good enough” for you to buy it.
As businesspeople, it is useful to recognize that whether they know it or not, consumers want a relationship. They want the promise of getting a great product or service this time and next time for even the smallest products and services they use. But this recognition of value (Brand), comes at a cost.
Brands are expensive for companies to build. Brands take time, commitment, and investment. This commitment means that the product has likely gotten a lot of feedback before it was placed on the shelf in front of you. Brand means you probably have some recourse if the product doesn’t work. Brand brings the benefit of predictability because the company that created it has staked a lot on ensuring that you love the product every time you use it. Brand benefits everyone in the equation: Companies gain repeat customers, eventually significantly decreasing their cost-per-transaction on their marketing spend. Customers get the predictability of an experience that was designed not just to sell, but to make them happy and to keep them coming back. Brands are relationships, and the promise of taking care of you in the way you expect.
The absence of Brand reduces us to the simplistic transaction, a onetime “cha-ching” of the cash register that, after catching your attention on price or flashy packaging on a product, will almost always be a disappointment.
A New World: Meta Brands
What happens when we want ultra low cost and trust of a great experience at the same time? This is one place where “meta brands” come in. Meta Brands are retailers that position themselves as proxies for otherwise nameless/Brand-less products.
Let me explain: Retailers such as Harbor Freight Tools are Meta Brands that offer the advantage of low cost associated with no-name products through a storefront that does have a brand. This branded storefront in turn represents hundreds of unknown manufacturers. These overseas manufacturers are competing against one another behind the scenes for the privilege of producing and shipping products to the U.S. through the storefront. Stores like Harbor Freight can sift through the problem of finding and demanding good products from no-name manufacturers, and stand as a proxy brand for them in their interactions with you. If consumers have a problem, they can return the goods to their local point of sale: this is accountability. The advantage is that the sales model for the store keeps prices extremely low, undercutting traditional retailers like Lowe’s orHome Depot that focus on brands or house brands but are looking for higher margins per transaction. The Meta Brand relationship with the store combined with a non-brand price point keeps consumers coming back. The Meta Brand management team provides asymmetric value and competitive advantage by finding and transacting with only high-performing non-branded manufacturing outfits overseas. This is a win/win situation since they are offering non-branded product pricing while also offloading much of the risk from the consumer –since the store positions itself as a Brand with accountability, and a physical presence nearby.
Good products, trust, and accountability make up the wish list for consumers when looking at Brands – which when combined with lowest-possible pricing becomes a powerful value proposition indeed. The power of Meta-Brands may finally provide a way for consumers in physical product marketplaces to ‘win’ in a whole new and compelling way.
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