The importance of brand building is a consistently popular topic for entrepreneurs. But when we take a closer look at what gives company marks their value, it becomes clear that online brands will never amount to much. The problem is inherent to the medium of the Internet itself, a constraint that affects all online properties equally. In a nutshell, it is almost impossible to provide a truly distinguished experience to the user. As a result, online interactions, and by extension online brands, are essentially commodities.
Online brands can build awareness and trust, but have great difficulty building the emotional components that give luxury status brands their value. High status brands with significant inherent worth are built on two key foundations that are lacking in the online world.
1. An exceptional and unique user experience — Since online properties are all limited to interfacing through a screen and keyboard, there’s only so much you can do. Unlike a physical store which can be an immersive experience with high-touch human service and attention, online differences are largely limited to having a slightly better UI than your competitor. There’s very little to draw you in, the way an Apple, Louis Vuitton, or Disney store creates emotion around the buying process.
For example, Zappos’ famous customer service is primarily the result of real people taking phone calls, not a miracle website. And despite the high profile of the Zappos brand it’s nowhere close to the cachet of a luxury store that provides personalized attention. People don’t brag about shopping at Zappos the same way they might name drop Barney’s or Harrod’s.
2. Displaying the mark as a status symbol – Since online brands only exist on your computer screen, there are few opportunities to show them off. You can pull up to cougar night at the Rosewood in your Porsche but you can’t ask the valet to park your Instagram out front. Online brands have zero “flaunt” value. For those of you trying to build an internet brand by imitating Apple, remember, people can see who’s carrying an iPhone 5S, which is why nobody is buying 5Cs, but nobody is checking to see what websites people are using.
Even when an online property carries a public signature, such as an email domain, it never makes you look better but can definitely make you look worse. Nobody thinks you’re cool for having a @gmail.com address, but if you use an @aol.com email address you look like an idiot. This further supports the argument that online brands provide no reflected cachet to their users.
Lacking the ability to engage customers on these two emotional components, online brands are relegated to building awareness and trust. Awareness is the lowest value form of a brand. It makes people aware of your site but does nothing to keep them there. Consider Amazon, which has almost total online brand awareness. Amazon still sells at razor thin margins, even sometimes negative margins, because it must continue to undercut its competitors or people will readily switch. Without some kind of network effect or lock-in mechanism, such as owning a Kindle, there is very little brand loyalty.
The remaining brand component of trust is more significant but has been declining in relative value as the internet becomes more ubiquitous. In the early days of the Web, building trust was paramount. Many people were afraid to buy online and sharing a credit card number was a big deal. For many years, trust was PayPal’s primary defense against upstarts since people were afraid to trust other sites with access to their financial information. But as online transactions became more commonplace, people have become less suspicious of the Internet, and trust is more easily earned, thereby diminishing it as a continuing competitive advantage. Trust as a component of brand value will always carry considerable weight, but for online brands it isn’t as significant as it once was.
Without the emotional brand elements that keep customers loyal, online brands compete strictly on function and performance. When once dominant brands such as AOL, Myspace, and Yahoo failed to keep up with new competitors, few people continued to use them out of brand loyalty. Today Google and Amazon appear untouchable, but if Google search results start performing poorly or Amazon loses its price advantage, people will abandon them as fast as their predecessors.
Despite all the talk about brand building, online brands have little lasting value. It’s strictly perform or die.
[Illustration by Hallie Bateman for Pandodaily]