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22 Oct 2015

Branding vs Customer Relationships

Next week I’m going to be part of a panel discussing this topic, which has been (at least partly) inspired by a Harvard Business Review article Why strong customer relationships trump powerful brands.

Customer relationships have always been highly valued – I mean there’s really no business without them – but I think the perception of what ‘brand’ is has changed a lot over the years, and with that so has how the value of ‘branding’ is assessed.Toward the end of the article, authors Christof Binder and Dominique Hanssens say: “Although closely intertwined, brand equity and customer equity are different concepts that need to be measured and reported separately”.

But just how do you figure out where to separate them? Where is the line?

The other question I have is when comparing values over a span of ten years, are they accounting for variations between the way we measured and reported them in 2003 and the way did in 2013? Or the accuracy of the measurements?

I think there’s little doubt that our means of evaluation changed significantly over those 10 years (and are still changing) so we now have not only a much greater volume of data but also more detailed and accurate data, and more sophisticated methods of analysing it.

As our measurement and reporting becomes more refined, we’re able to re-evaluate, reclassify, and even create new sub-categories.

In short, we’re learning more and more about how to do business well, because we are becoming better at gathering relevant information and then crunching that data.

The biggest driver of all of that is, of course, digital technology.

There’s no disputing that digital technology – or, to be more accurate, widespread access to digital technology – has changed how people make buying decisions

Looking at things from a corporate perspective, customers are more empowered than ever to make buying decisions – especially for high-value products – based on facts, rather than brand.

However all this simply confirms what we’ve always known: knowledge is power.

As much as businesses have more knowledge than ever, so do consumers.

Because people have much easier access to a wide range of information – literally at their fingertips – they no longer need to rely on a slick commercial or sales pitch or cleverly crafted image to convince them of the value of a product or service. On the contrary, a slick commercial or sales pitch might now make them wary and even more likely to do their own research.

One of the most impactful things that digital technology has done is amplify word of mouth.

Whereas in the past you might never have heard about a bad customer experience to put you off a purchasing decision, now you can go to forums, Facebook pages, Amazon, Yelp, Trip Advisor, Citysearch, Urban Spoon, or whatever other online portal pulls together relevant reviews.

This means a disgruntled customer who is motivated to moan about his or her bad experience can undo a lot of good work and negate the impact of several positive reviews.

The equation has become that the more positivity about your business that is out there in the customer-experience-sharing world, the more resilient you are to the odd hiccup.

Which, to my mind, means the stronger your brand, the more resilient you are.

The strength of your brand underpins everything.

It gets your foot in the door. People have to know you exist to even consider doing business with you.

It edges you ahead in comparison. If people are comparing products or services that are otherwise quite similar, they will invariably opt for the one from the brand they know better.

It affords you the benefit of the doubt. Unless you make a Volkswagen-sized stuff up, people are likely to cut some slack to a brand they know and trust if they read a negative review.

It opens people up to loyalty. If people make a random, one-off purchase, that’s the extent of their relationship with that business, but when they make a considered choice to favour a brand, they’re not only making a single transaction but testing the water for a potential long-term relationship.

It encourages customers to become ambassadors. No-one becomes an advocate for a ‘no-name’ product, but when someone buys an item from a brand, they’re likely to ‘show off’ their purchase and take pride in owning something with some associated prestige.

All of these things add up and they show that ‘intertwining’ of brand equity and customer equity referred to by Binder and Hanssens.

They also serve to illustrate my point that without brand equity there is little customer equity. I believe that there can only be customer equity without brand equity if you haven’t established your brand, and in that case the customer equity is weak and very difficult to evaluate.

With all of that in mind, it’s not unusual to see small business owners making the mistake of being too eager to take people on a journey before taking the time to establish a clear brand message.

They just might be taking the wrong people on a roundabout journey to somewhere no-one actually wants to go.

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