August 30, 2006

Don Libey on Brand Utility

Yesterday, Don Libey left an excellent comment regarding branding. I mentioned that customers do not seem to rally around a dying brand. Rather, customers tend to bury a brand when it is near the end of its life. Click here to read my post about the end of a brand.

Instead of referring you to his comment, I thought it would make sense to just include his comments as an independent post for your browsing pleasure.

For those of you who do not know Don Libey, he is quite possibly the leading Direct Marketing mind in the entire industry. Click here to read his biography:

Here are Mr. Libey's comments from yesterday:

Excellent proposition. I would add that, not only is the relationship relatively shallow, but it is rooted in "utility," the classic element of economics. If I get the same utility from a non-branded box of soda bicarbonate as I do from the venerable and instantly recognizable Arm & Hammer brand, and if the price is less, I will likely choose the non-branded product, thereby invoking the ever-present economic element of "substitutes."

If we look at strong versus weak brands, there are almost always echoes of utility and substitutes within the intellectual dialogue of the customer's decision-making processes. As a relevant example, the Ford Motor Company, in its present state of extremis, is failing to honor its extended warranty policies and, as a partial consequence, the brand has deteriorated due to a failure of utility (in this case, satisfaction). Of course, there are substitutes to that tired brand, and the marketplace has decided that Honda, Toyota, and other brands offer greater satisfaction and, therefore, greater utility.

Like the four cardinal elements in the upper right corner of the Periodic Table of the Elements, there are only four classic elements to the branding issue: 1) Utility; 2) Substitutes; 3) Demand; 4) Supply. These are a linear relationship. All demand and--as a result--supply begins and ends with utility and substitutes. For a brand to be relevant and successful, there must be--in this order--utility, satisfaction, demand and supply.
Marketers within any and all channels would do well to harken back to Economics 101 and reflect more often on the concept of utility.

For the textbook study on massive brand failure, look at the entire airline industry. Brand value is almost non-existent because the entire industry is a 75-year failed experiment in transportation. There is no utility, no satisfaction, no profitability, and no substitutes; it cannot exist in its present economic structure and is, therefore, doomed to failure, bankruptcy and a subsequent re-invention of transport systems and structures. Unfortunately, because there are no substitutes, there is only demand and a poorly managed, inefficient, unprofitable supply.

If there were high-speed inter-continental rail systems, both short and long-haul, there would be a lessening of demand on airlines and the system would either crumble entirely due to effective substitutes or be scaled back to something that delivered competitive utility at a competitive price.
But, nowhere in this equation does brand have any relevance.

Is it possible that we are in the sunset era of brands?

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