Although what comes next will offend generations of power-mad English teachers, red-pen-wielding copy editors, and Spelling Bee conquistadores, these days most people don’t need to learn how to spell.
Spellcheck saves us from having to do work that we don’t care about and that we don’t have time to do anyway. Plus, more and more of our communications are digital and spellcheck ready: word processing, blogging, email, texts, and instant messages on Facebook, Skype, WhatsApp and more.
Brands are the cognitive equivalent of spellcheck. The purpose of brands is and has always been to be proxies for serious thinking. Brands help us to make decisions that we don’t care about and for which we don’t have sufficient mental energy.
To get fancy about it, and to use some lingo from behavioral economics, brands engage “System 1,” the part of the mind that Nobel-laureate Daniel Kahneman describes as the lightning-fast but easily fooled collection of thin-slicing mental reflexes that help us to make fast decisions under time pressure.
In contrast, “System 2,” a different collection of reflexes, is methodical, logical, evidence-driven, and less prone to mistakes. This sounds good for decision quality, but the bad news is that System 2 is lazy, only getting out of bed to address itself to problems that really matter.
Most purchases don’t qualify as problems that really matter.
Asked what industries focus on System 1 at the 2012 Hay Festival, Kahneman replied “advertising and politics.”*
The half-lives of brands and television
Brands are robust proxies for serious thinking that System 1 can use to make unimportant decisions, but that doesn’t mean that brands are the only proxies for this sort of thinking. A pencil is a great tool for writing, but so is a pen or a laptop.
Brands, particularly big national brands, were most powerful when television was at the height of its power around 1978 — right before ESPN (1979) and CNN (1980) began the fragmentation of the TV audience that continues to this day.** Since that time, both television and brands have acted like radioactive isotopes: powerful but decaying.
One way to measure the half-life of TV is to look at the ratings for the #5 shows over the years: in 1980, M*A*S*H had a rating of 23.8; in 2000, Friends had a rating of 12.9, and last year NCIS had a rating of 5.8 (these are Nielsen numbers). Roughly speaking, this equates to a twenty-year half-life for the power of television, and therefore an equivalent half-life for the power of brands.
Television advertising is still the most powerful way to build a brand, but that power is eroding by 50 percent every twenty years.
New threats for brands
The new proxies in today’s data-driven digital world are algorithms that we trust will take care of our unimportant decisions. The most recognizable and remarkable such algorithm is Amazon.
This came into stark relief over the weekend: a fascinating New York Times article by Julie Creswell — Amazon the Brand Buster — showed how the ecommerce giant uses its massive stores of data to promote its own private label brands over big national brand counterparts.
While store brands have been a part of traditional retail for a long time, Amazon presents its own brands as the default choice in search results, and since — as I argued earlier and elsewhere — most people don’t care about most purchasing decisions, the default choice is the place to be.
With the rapid rise of Amazon’s Alexa and other digital assistants, what some people call “conversational commerce” adds still more commodifying pressure on low-consideration purchases because it’s unlikely that we’ll say, “Alexa, I need Duracell AA batteries” rather than “Alexa, I need AA batteries.”
The Times article is well-worth reading in its entirety. For the moment, I want to zoom in on what Creswell does not discuss: how Amazon’s entertainment and retail strategies extend and amplify the algorithmic work of its ecommerce platform.
It’s probably easier to calculate Pi to the last digit than it is to measure Amazon’s ambitions, but over the last year here at the Center we have tried in columns like this one. The Center’s director, Jeffrey Cole, explored Amazon’s endeavors in sports, how its cashierless technology is changing traditional retail, and how it has chosen to build rather than buy a movie studio. Likewise, I thought through the implications of a possible move by Amazon into retail banking.
Amazon’s acquisition of Whole Foods made sense as a gateway into the lucrative grocery business, but it makes even more sense when we look at Whole Foods as a massive generator of passive awareness for Amazon’s private label brands.
Each time a shopper wanders through the aisles at Whole Foods (System 1 on autopilot and moving fast) and sees different brands of beer, crackers, soy sauce, toilet paper, soda, toothpaste, and every other kind of packaged good; not to mention clothes, candles, and housewares, those background exposures create more and more passive awareness.
In the compelling book How Brands Grow, Australian marketing professor Byron Sharp has argued that to be successful, a brand needs two simple things: cognitive availability and ability to purchase. A shopper needs to know about a product and be able to buy it easily. Whole Foods is a mechanism for Amazon to create cognitive availability and ease of purchase for its private label brands.
Moreover, since Amazon gives Prime members discounts on many Whole Foods purchases, those members have motivation to share their information. All that purchase data from Whole Foods will go back into Amazon, where it will also inform the algorithm that decides what goods Amazon shows its Prime members when they’re in front of their computers and shopping online.
With ambitious moves into showing live sports — where ads are unavoidable — and a rumored free-with-ads version of Amazon video for non-Prime members, Amazon can use that ad inventory to generate more cognitive availability for its house brands, which shoppers can then purchase with a click.
Rather than what MediaLink’s Wenda Harris Millard has described as the “spray and pray” technique of broadcast TV advertising, Amazon will be able to use its algorithm to narrowly target each individual viewer.
And the next time the shopper wanders through the aisles of Whole Foods, the private label brands will be more recognizable because of the exposures through ad-supported video.
In the future, the most-trusted brands won’t be the manufacturers of the goods we buy: it will be the retailers (online or in real life) that sell them to us.
Amazon is far from alone in its efforts to promote trusting the seller over the things sold (see Walmart’s new Jetblack.com offering for another example), but it is ahead of the competition.
In the short and long terms, shoppers will benefit from quality goods at lower prices.
Traditional big brands, however, will be under ever-increasing evolutionary pressure — only the most adaptable will survive.
* Most of what I have to say about advertising in this column is applicable to politics as well, and much scarier when so applied. The 2016 Presidential election can be seen as an intense workout for the voting public’s System 1.
** When people talk about our being at “Peak TV” they’re making a qualitative argument about how there’s a lot of really terrific programs to watch, which is different than the quantitative argument I’m making here about when television programming had the greatest impact because most people knew at least a little about everything that was on.
[Cross-posted on the Center site and elsewhere.]
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