Brands are out, customer relationships are in

In an era of perfect information, writes Furthr founder Andy Pemberton, the businesses that will succeed will be customer, not brand, focused.

In a digital era in which people have access to 'perfect information' brands need to be customer-centric
In a digital era in which people have access to 'perfect information' brands need to be customer-centric

Last year I wrote a piece in Marketing magazine suggesting brands were dying. I argued the effect of globalisation and the digital information revolution meant consumers were becoming more rational and needed brands less and less.

If the job of brands was to "assure customers about the quality of a product or service" as The Econonist put it, customers could now easily figure that out for themselves on comparison websites, review sites and via social media.

Itamar Simonson and Emanuel Rosen, authors of 'Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information’, argued that brands had  "a reduced role as a quality signal. Brand equity is not as valuable as it used to be."

I sort of believed it too. But now it turns out – it’s true. A new study has looked at the value of brands and customer relationships as revealed by Mergers and Acquisition data covering 6000 M&As worldwide between 2003 and 2013.

M&As are interesting because they reveal the dollar value of a company's assets at the time of acquisition. These valuations have to adhere to accounting and reporting standards, so they can’t be fudged.

The sometimes intangible assets being measured include brands and, crucially, customer relationships.

What this study has revealed is simple: brand valuations have declined by nearly half, while the value of customer relationships have doubled over a decade. All other categories of intangibles remained stable.

Companies acquiring other companies have moved from investing into businesses with strong brands in favour of businesses with strong customer relationships – with all the loyalty and cross-selling benefits that it suggests.

Why? Digital technology has changed the marketing game.

Businesses are now able to interact directly with customers, reducing the cost of sales and marketing as a result. It’s cheaper and the results are better.

On the demand side, the web has enabled customers to instantly compare different products, just as Itamar Simonson and Emanuel Rosen predicted.

As Harvard Business Review puts it, what we think of as a strong brand is now "more dependent on customers direct experience with an offering and their relationship with the firm that produces it."

So is it time for branding to take a back seat?