Branding theories under scrutiny in “Absolute Value”

To call advertising as the ‘art of relative persuasion‘ is sure to get the major advertising practitioners to put you on their black list.

I just completed the book Absolute Value, and found it to be a larger thesis than the title implied. In some ways it’s a systematic take-down of several sacred cows of marketing, branding, the role of persuasion and much more. But what’s impressive is how the authors (Ithamar Simonson and Emanuel Rosen) do it in a calm, intellectual fashion, trying to assure readers they are not really picking a fight.

Book - absolutevalueThey observe how we customers have a hard time assessing the quality of products, so we typically use ‘quality proxies’ such as a brand name, prior satisfaction, country of origin, image of the store at which the purchase could be made etc. Oddly enough, we change these proxies over time. Think about this: There was a time when ‘made in China’ meant superior quality, but not anymore. There was a time our prior experience with a brand determined its replacement. Today? (I recently ditched another carrier for T-Mobile because prior experience wasn’t exactly great.)

Absolute Value gives you a three-part theoretical framework of how to promote brands –the P-O-M Influence Mix. I find it interesting how the authors steer clear of calling it the Marketing Mix. It stands for Prior Preferences (P), Other People (O), and Marketers (M).

Does this mean the death of branding? No! But it does reveal serious cracks in what is typically considered brand management –tied to Positioning theory, Segmentation etc. Today we are nearer to having perfect (or ‘absolute’) information about a brand we are considering because of the abundance of reviews, and websites dedicated to testing, comparing, or even disparaging brands. Bloggers and journalists prod and pry a brand’s claims to see if it is living up to it or the market hype, exposing the slightest flaw, or lesser-discussed breakthrough feature. Social media is a big part of this, obviously.and marketers should understand that their primary role is shifting from persuasion to (and this should not come as a shock!) communication!

In this scenario –this has to be troubling to ‘positionistas’ and those running loyalty programs—customers can evaluate a brand for what it is, rather than how it compares with other “choice-sets” they are allowed to see.

Sidenote: There’s a great story about Jonney Shih, who created a brand following with hardly any brand advertising. I was in the market for a laptop a few weeks back, so having sworn by a Toshiba for many years, guess what brand I bought?

How medium size ‘decoys’ mess with your head – ‘Absolute Value’ explained

As I mentioned, I am reading ‘Absolute Value, a book that will certainly rock the world of marketers who have sat on their bottoms with the idea of branding. The idea that the ‘brand’ equity they create, can determine people’s choices.

This explanation by Itamar Simonson on NBC, explains the concept of why manufacturers ‘frame’ the price to provide an imperfect set of choices.

Simonson is a really good interviewee –he firmly, and politely disagrees with the host of the show and others at the table) to make his point and clarify the thesis of the book.

Two things, he says, worth noting:

  • Marketing as we know it is no ‘trick’ – just an outdated way of providing consumer choices, so they make an irrational compromise.
  • Brands are not the same ‘filters’ as say Facebook is. They were proxies for value that do no work as well now. The best filters live outside of the control of brands.

http://www.viddler.com/v/bceefb4a

“Absolute Value” confronts traditional marketing theories

We’ve all been influenced by customer reviews, right?

Whether it’s a low-ticket item (ordering food online) or not we use the “knowledge” gleaned from other users as a habit before we make up our minds.

Is this  new? Not exactly, because in the pre-Internet era, we bumped into this information in a haphazard way — chance conversations  during our commute, by trading opinions over our fence etc.

But it’s less haphazard now. It’s ingrained in our purchasing behavior.

In the just about to be released book, Absolute Value, by Itamar Simonson and Emanuel Rosen,  we see how this stream of information is what marketers must now lose sleep over.

I just received an advanced digital version of the book from Rosen, and I have to say it is a compelling idea –the idea of how “nearly perfect information” could disrupt the pillars of marketing we know of as segmentation, positioning, promotion etc. And if course the whole basis of branding and brand value would be in question, if their thesis is true.

The New York Times described it as a book that deals with the power of online reviews, based on Dr. Itamar’s decades-long research at Stanford, prior to this.

Here’s how they summarize how the power of information from ‘other people’ tilt the balance.

Customers’ purchase decisions are typically affected by a combination of three things: Their prior preferences, beliefs, and experiences (which we refer to as P), information from marketers (M), and input from other people and from information services (O). …

…If the impact of O on a purchase decision about a food processor goes up, the influence of M or P, or both, goes down.

For those whose business is all about the M — the marketing push and the brand strategy, you better start paying attention to how the hoi polloi, those “other people” might matter, after all.