It’s the real thing

BUSINESSES have always told stories about their products. But in recent years they have become particularly verbose, bombarding consumers with any small detail that might enhance the brand. Shoppers at Whole Foods can peruse scintillating biographies of the chickens they are about to casserole. Prospective Tesla drivers can learn not just about the cars’ specification and performance but about the principles of a stator rotating magnetic field. Guzzlers of Blue Moon beer can soak up its proud heritage, stretching back to, ooh, 1995, and read about its creator’s brilliant idea of garnishing each glass of the ale with a slice of orange.

Brands began as badges of product quality, going back at least as far as the medieval guilds of craftsmen who used them to distinguish their work. In the modern age they have sought to convey emotional and social values, too: think of Nike’s “Just do it”, or Kodak’s “Share moments. Share life”. Now, in inundating consumers with a cascade of fascinating facts, companies are striving to bestow “authenticity” on their brands. Interbrand, a consultant on branding, describes authenticity as “an internal truth and capability”, a “defined heritage” and a “well-grounded value set”. This slippery quality, the pundits tell firms, is what the public is yearning for, in an age of doubt and mistrust. In 2013 the Boston Consulting Group surveyed 2,500 American consumers and found that being authentic was indeed one of the main qualities they said would attract them to a brand. For younger “millennial” consumers (born between 1980 and 2000), it was second in importance only to rewarding their loyalty with discounts.

Authenticity is being peddled as a cure for consumers’ ebbing loyalty to brands. It is not hard to see why the old marketing magic is fading, in an age in which people can instantly learn truths (and indeed untruths) about the things they are contemplating buying. Online reviews and friends’ comments on social media help consumers see a product’s underlying merits and demerits, not the image that its makers are trying to build around it. The ease of accessing information makes consumers more likely to abandon their habitual brands because they have heard about something new, or learned that retailers’ own-label products are much the same, except cheaper. Depending on your perspective, people are either increasingly fickle or ever more impermeable to marketing bullshit. For brands that lack any truly distinguishing features, that is bad news.

The waning faith in brands is a greater threat to some types of products than others: snacks and household gadgets, say, as opposed to luxury handbags. But for a range of consumer goods, brands’ strength as a signal of quality, and their power to open people’s wallets, are fading, argue Itamar Simonson and Emanuel Rosen in their book, “Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information”.

Surveys back up this conclusion. In North America consumers say they trust only about a fifth of brands, according to a poll by Havas, a marketing agency. For slightly less sceptical Europeans it is about a third. Consumers seem particularly wary of big brands. About half of American shoppers say they trust small companies to do the right thing, compared with just 36% who say the same of large ones, reports Mintel, a research firm.

These opinions are starting to have tangible effects. Of the top 100 consumer packaged-goods brands in America, 90 lost market share in the year to July, according to Catalina, a marketing firm. In China and other big emerging markets, foreign-branded goods are losing their allure, as shoppers realise that local products are no longer so inferior. In a recent study by Bain, a consulting firm, foreign brands were found to be losing market share in China in 18 out of 26 categories of consumer goods.

The consulting firms that value and rank brands, such as Interbrand and Millward Brown, report that their top 100 names are still increasing in value. However, such firms have different and quite subjective methodologies, and often disagree on what any given brand is worth. Christof Binder of Trademark Comparables, an adviser on brand values, and Dominique Hanssens of the University of California, Los Angeles, sought a more concrete measure: when brands are sold as part of corporate takeovers, what price do investors put on them? They found that these prices, as a percentage of deals’ total value, have dropped since 2003. So, at least for those firms being taken over, the strength of their brands is becoming a smaller share of their overall worth.

Sincerely, folks

The silver lining—authentically handcrafted, of course—to the dark cloud looming over brands is that as people become better informed about products’ underlying qualities, and more sceptical of marketing gimmicks, they are exhibiting a desire for brands that are “honest” and seem to have some identifiable merit. Inevitably, this is leading some marketers to concoct campaigns that seek to conjure up the ineffable quality of authenticity out of thin air. As the cynics among them might say: authenticity is the secret of success; once you can fake it, you’ve got it made.

However, authenticity is far easier to pull off when your product has some real-world qualities that its competitors lack. The most striking recent example is that of America’s craft beers. As drinkers turn against the pallid swill pumped out by mass-market brewers, the craft brewers have almost doubled their market share in the five years to 2014. Although many long-established, heavily advertised but mediocre products are losing force, and the fickleness of consumers is making it harder for them to maintain premium prices, for those firms that get the product right and have a genuine story to tell, the rewards can still be huge. The textbook example of this is Apple, whose devices’ superior design and ease of use make it a powerful brand in a commoditised market. Last year it had only 6% of the revenues in the personal-computer market, but 28% of the profits. That’s real authenticity.