We all know there is no link between Corona beer and the Coronavirus, but they have an unfortunate coincidence of sharing the same name. After 100 years of building a formidable beer brand, Corona is helplessly watching its brand name become a victim of a devastating global pandemic. Prior to Coronavirus, Corona Extra was the third-most popular beer in the United States. Coronavirus is becoming this century’s biggest catastrophic causing untold amounts of mental and physical mayhem on people, societies, businesses, and countries. Coronavirus destruction will live in the annals of history longer than any pale lager. Suddenly, Corona’s brand name is under attack with no clear direction of what they should do.
The first bad press Corona got in association with Coronavirus was from 5W Public Relations. They surveyed 737 U.S. beer drinkers and vigorously promoted their results: 38 percent of beer-drinking consumers would not buy Corona under any circumstances due to concerns about Coronavirus. They also claimed that 4 percent of people who previously drank Corona would stop drinking it — a rounding error.
PRWeek received the release but determined that “it was lacking in credibility…due to previous interactions with 5W and Torossian [CEO of 5W], who has courted controversy in the past and is not averse to a little self-promotion.” The 5W website shows no connection to beer consumers. But they got the results they were looking for. Mainstream media (like CBS News, CNN, Bloomberg, Fox, Vice and New York Post) jumped on the story, focusing on the 38 percent stats without any further investigation.Constellation Brands CEO and PresidentBill Newlands, owner of Corona, had to address the situation head on. He stated that “these claims simply do not reflect our business performance and consumer sentiment, which includes feedback from our distributor and retailer partners across the country.”
We all know that Corona beer does not causes Coronavirus, at least I hope we do. But people are scared and drinking a beer that shares its name with the virus can make some people uncomfortable. Is this the beginning of Corona beer’s demise or just bad research?
Negative Brand Names
The world is over saturated with brand names, making it almost impossible to break through the marketing noise. Wine brand names have tried to break this barrier with negatively charged brand names. With wine brands popping-up on shelves everywhere like Frog’s Piss, Earthquake, Killer, Fat Bastard, Prisoner, and BoomBoom. Negatively charged brand names are cutting edge. They are notorious and risqué like Fcuk fashions, Heart Attack Grill, Monster Energy drink, Skinny Bitch apparel, and Raging Bitch beer.
While negative words can generate negative feelings, they also create marketing opportunities because they are different and memorable. However, research has shown that extremely negative brand names can create consumer avoidance. But humour and attitude based negative brand names can create excitement, savviness, sensuousness, hipness and daringness that appeals to Millennials. Negative brand names challenge conventions and stand out from the crowd, but I don’t think this is where the Corona beer brand wants to go. It prefers golden sandy beaches, turquoise waters and clear blue skies.
Brand Name Casualty
Every brand works hard to build positive associations through product performance, employees, advertising, promotions, sponsorship, events, customer interactions, and social and community engagements. Once a negative association starts to take hold, its hard for people to separate the two.
A similar unfortunate situation developed for Ayds (pronounce as “aids”) candy. They were a popular appetite-suppressant candy in the 1970s and early 1980s until Acquired Immune Deficiency Syndrome (AIDS) was discovered. The horrible disease also caused massive weight loss in patients. To try to save the brand name, they changed it to Diet Ayds. The negative connotation was still too great to overcome. The brand eventually went out of business.
In 2005, Hurricane Katrina, the most devastating hurricane to hit southeast New Orleans killed 1,836 people and affected over 15 million residents. At the time, the name Katrina was ranked the 246th most popular female baby name according to nameberry.com. Seven years later, the name’s popularity has dropped 696 spots to 942. Once a negative connotation is placed on a name, it’s hard for people to move on. Once a brand name becomes negative, its almost impossible to turn the tide.
As the saying goes “when times are good, people drink — when times are bad, people drink.” Beer and other alcoholic beverages sales continue to rise as people self-isolate and worry about their future. No sports, no clubs, no concerts, no events of any kind, yet Nielsen data showed that beer sales rose 34 percent year-over-year for the week ending on March 21. Sales of Constellation Brand products, owner of Corona, are up higher at 39 percent, led by the Corona family, which is up 50 percent. Impressive until you compare it against toilet paper sales which are up 160 percent!
Corona Beer Virus
Since the end of January, the hashtag “corona beer virus”, “beer virus” and “beer coronavirus” have continued to trend upwards on Facebook, Instagram, and Twitter. Some followers support of the brand, while others mock the virus and beer with creative memes. As the Coronavirus situation continues to intensify and people are in lockdown, connecting with friends and family through video conferencing online is the new normal. Corona beer has become an online celebrity for all the wrong reasons. Kellan Terry, senior manger of communications at Brandwatch, says that young people tend to laugh at what they consider to be dystopian events as a coping mechanism online. Having your brand associated with a deadly virus isn’t a healthy trend with or without the name.
Then, corona’s next problem appeared. Corona launched an online campaign for their new Corona Hard Seltzer with the slogan “coming ashore soon.” Twitter followers quickly attacked the campaign as “bad timing” and in “poor taste” amid the spread of Coronavirus. Corona promptly removed the slogan.
Marketing alcohol is like marketing water; its not the taste that matters, its the brand image. In a classic blind taste study done in 1964, regular drinkers of certain brands failed to rate their brand as significantly better than the other samples. In fact, regular drinkers of two of the five types of beer scored other beers significantly higher than the brand that they stated was their favorite. There have been many other studies since with similar results. In 2018, the beer manufactures in the United States spend close to $1.5 billion on advertising. Constellation Brands ranked 2nd with a $368 million ad expenditure on Corona and Modelo. Beer brands live and die on their image. Corona brand marketing executives are likely increasing their own alcohol consumption in these unprecedented times.
Corona owner Constellation Brands has over 100 brands in beer, wine, spirits and, more recently, cannabis. Each brand gets its allotted marketing, brand support, and funding. So far, they have been lying low. If sales are good, why rock the boat? Reputation expert Andy Beal says, “The real threat would come if Corona were to dive in and capitalize on this by running some crass social media post.” In light of the seriousness of the situation, he cautions that “they should not make light of it.”
This isn’t about online social strategy (which Corona isn’t involved in). They do the bare minimum on social channels. Sitting on the sidelines and hoping this will eventually blow over isn’t a leader strategy either. The challenge is all alcohol brands make money on the image of people having fun. The Corona brand is all about sandy beaches, hot sun, and total escapism. John Alvarado, SVP of Brand Marketing for Corona Extra says Corona is “a carefree brand that encourages consumers to relax and enjoy life no matter the situation.” The Coronavirus is the antithesis to these positive vibes.
Today, the Corona virus is attacking the United States with the fierceness never before seen in our lifetime. The Coronavirus crisis is affecting millions of people’s lives and livelihood. Consumers will judge brands on how they helped and stepped-up through these terrible times. Stress can cause people to make inappropriate jokes to lighten the mood; right now, Corona beer is one of those jokes. After all the turmoil, deaths, and dramatic life changes, can Corona bounce back as the king of carefree and sunny times? Will the emotional shock associated with one of the world’s darkest moments destroy the Corona name? Can a brand name live with so many negative connotations? In these catastrophic times more alcohol will be consumed than ever before. Hopefully after the hangover of isolation is over, Corona beer will still live on.
The world is in a crisis. The doomsday prophets are alive and well. The stock market is reaching historical lows. Government leaders have never been in this situation and are making up their plans on-the-fly. The major solution is pumping trillions of dollars into a fragile system with the hope that the market will return to normal. People are terrified of the invisible COVID-19 enemy that is attacking thousands of people. Locked-up in their homes, they count the days. A perfect script for a horror movie of epic portions. But it’s not. How do you protect your brand in a volatile world? Here are some immediate steps:
Many brands saw the writing on the wall and quickly sent most of their employees home, as did many government institutions. Those brands that operated their business as usual were eventually forced by governments to close their doors, unless they were essential services. The employee that stayed to keep the business running are instructed to keep their social distance (two meters) from anyone else and ensure the highest hygiene standards. Employees will be your first critic if you fail to protect them and only focus on profits. People first!
As brand ambassadors rush home with office laptops and mobile devices, their ultimate goal is to keep customers happy and revenue flowing. This new decentralized work force must adjust to the new work and home realities as they are forced to improvise new ways to delivery customer satisfaction. Thank heavens for digital technology that can replace face-to-face interactions! The dreaded meetings are still happening, just virtually with frozen faces and choppy voices. A crisis means more meetings. Those brands that require face-to-face interactions with customers are scrambling to find online solutions to keep them afloat. But many can’t find a solution so closing their operations is the outcome. This has resulted in millions of North Americans being laid off. Not serving customers means no revenue. It also means keeping people safe and isolate.
So far, millions of people have flooded the employment insurance system with benefit claims. All indications suggest that this event will surpass the Great Depression with the number of people unemployed. Many of the big multinational brands have deep pockets and a war chest to fall back on to ride-out this crisis. Small brands or brands that survive on cash flow and low margins (airlines, hotels) will struggle as revenues abruptly stop and expenses pile up.
With everything closing except for essential services, online commerce is skyrocketing. However, before the crisis, over 50 percent of American families were living paycheck to paycheck and most didn’t have any emergency funds for this type of crisis (First National Bank of Omaha in Nebraska survey). What does this mean for brands? If consumers don’t have money, they won’t be spending on brands, which means further decrease profits.
Full of Fear with Empty Wallets
This is the worst combination: concerned about their financial situation and pessimistic about their future. Some economists say consumer expectations concerning economic conditions tend to be self-fulfilling prophecies. If they expect doom and gloom, the economic conditions worsen because they stop consuming. In this case, they were forced to stop consuming and by stopping, many people have lost their jobs. The reality is that many consumers are terrified for they health, their family well-being, and their future survival. Even with billions and trillions of dollars being promised to help businesses and consumers, there is little confidence that help will reach them.
Here are five actions to protect your brand in a volatile world:
1. Be Real and Engage
WPP, the world’s largest multinational advertising agency, says in a study that brands need to face the reality of the situation and address customer needs by showing a sense of honesty and concern. There are intelligent ways to acknowledge the problem and to reinforce your brands positioning and relationship. Similar to customers, brands must make difficult decisions with limited resources. Brands that take meaningful actions to help their customer through difficult times will be rewarded in the long run. If your brand doesn’t have the resources to help, continue to communicate with your customers in meaningful ways.
2. Create Added Value
If consumer don’t have money or think they could be in a difficult financial situation, they will be looking for inexpensive options with greater value.
Justify price – Demonstrate superior performance and value, product comparison, testimonials etc.
Add features and services – Free support & servicing, check-ups, extra quantity, extended warranties, free shipping or setup, or choice of colours. Make it easier for them when they are trying to juggle expenses on a shoestring budget.
Economy sizes – buy more, get more. You are positioning savings, retaining sales, and not sacrificing value. This is the Costco model of buying bulk.
Do it yourself – The IKEA model. The perception that you have to assemble it means you will be saving money – or just creating more pain at home. “What do you do with all the extra bolts and screws they give you or should there be extra?!”
3. A Strong Purpose
This isn’t the time to be an exclusive, high-end brand. People are hurting both physically and mentally. Give them a strong reason for why they need your brand today. Create urgency that this is the best-time to be buying your brand. Give them a reason why your brand will help them. Make your brand part of the solution.
4. Reduce Fear & Barriers
Show that you brand cares and understands the situation customers are facing in these difficult times. Provide alternative payment options – nothing down, don’t pay until next year, zero percent interest payments, free financing, no-credit-check, job loss protect, etc.
5. New Innovations
Make consumers forget about the bad times and create excitement towards a new product with never before seen features or benefits. For many brands, this might be difficult to accomplish in a short-time frame. Online convenience and no-contact delivery can be a simple solution. But you can also adjust your brand to have new efficiencies or reduce costs. Reduced costs can be accomplished many ways such as production efficiencies, cheaper ingredients, smaller package size, single servings, and slimmed-down basic version with no bells or whistles. So, if you can’t “wow” your customer into buying your products, then reach out with an offer they can’t refuse.
To protect your brand, not only do you need to address customer’s fears but continue to strengthen your brand’s relationship with your customers. Be creative. Remember that your best customers can be your best backers during difficult times. With the help of social media, they can quickly be mobilized to get your brand message out – from a simple customer referral program to getting “likes” for a new product. Always talk about the value your brand brings –the rational and psychological. Tap into the concepts of small indulgences, sharing, and helping. Do random acts of kindness, reach out with empathy and connect with your customers on a different level. Build trust based on reassuring your customers that your brand is committed to their well-being and not profits.
Stay Safe & Healthy
Consumers are scared. The future is unknown. The brands that step-up and help their customers during these uncertain times will survive. This is a time to start thinking differently. A time to take chances in a risk-adverse, volatile world. Brands will need to reinvent themselves to flourish in a new post COVID-19 world. Good luck in these challenging times.
Infamous advertising guru David Ogilvy originally defined a brand as “The intangible sum of a product’s attributes: its name, packaging, and price, its history, its reputation, and the way it’s advertised.” Ogilvy always had a way with words and found clarity in simplicity. While his definition is clear, logical, and succinct, it only scratches the surface. Brands, like people, aren’t easily defined. Both are complex and just plain messy. It is so complicated that Heidi Cohen pulled together 30 branding definitions to help brand owners. That being said, I have broken this topic into Who, How, What and Why to help explain what is a brand.
The Who – The Product
The brand story always begins with a product. Without a product there is no brand. Authors P. Kotler and K. Keller define a product as “anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.” For the moment, let’s suspend the concept of services and talk about something that is made from physical materials.
So much time and thinking must go into designing, building, testing, refining, and producing a product. Decisions must be made on how and where it will be manufactured? What ingredients and basic materials will be used? How, where, and when will it be marketed? Who will be the best customer? How will the product feel? What will it look like? Smell like? What colour is it? All of these physical product attributes must be replicated perfectly each and every time. The logistics and distribution, the support, the partnership, the price, the competition and the consumer must be analysis and selected. Then you need to assemble a team of employees to execute the production schedules, logistics, marketing and sales plans. All of these tasks are daunting.
The last thing you are thinking about is its brand identity, brand personality, brand value, brand purpose, and brand vision. Without a product there isn’t a brand or a who.
The How – Product Attributes
How the product works in making a consumer’s life better is the start to a wonderful relationship. Product attributes are the unique physical and abstract aspects of how the product works such as speed, size, weight, material, finishing, durability, functionality, flexibly, and features. The brand experience begins the day the customer positively interacts with the product features and attributes. The interaction can be instantly gratifying or build over time through repeated usage or elaborate steps of anticipation. In some of these situations, the brand is completely orchestrated to minute details; in others, the brand experience is wholly defined by the consumer. The consumer’s interpretation of how the product makes their life better is when the brand relationship begins.
The What – Visual & Audio
The what is all of the visual and audio manifestation that moves a product beyond the who and how into transforming it with human characteristic with physical and emotive features. Unlike a human, a brand can build its brand identity from the ground up. This brand identity begins with a name, colour palette, design, logotype, symbol, and, where possible, stimulating consumer’s senses: sight, hearing, smell, taste and touch. Every interaction with the brand directly or indirectly through visual or audio content must support and build the brand experience. This means every branding channel used must feel like it coming from the brand’s ethos.
The challenge is expressing what people think about your brand. This is ultimately where your brand lives in the consumer’s mind, based on feelings and emotion. Some branding experts describe it as the brand promise or the emotional bond. I like Ze Frank’s definition as an “emotional aftertaste”. A great brand should taste like a wonderful 2000 vintage Bordeaux wine, preferably from the left-bank.
The Why – Action
Action is louder than any brand identity. This is where the brand walks the talk. The brand’s guiding principals must be solid and based on its purpose of why it exists. The best time to watch a brand shine is when things go wrong – especially terribly wrong. What a brand does when it fails to deliver on its promise is a true moment of truth.
In essence, a brand is all the positive physical and emotional brand attributes combined into a consistent, memorable experience with a product or service. Please note, that the interactions don’t need to be direct. Advertising and storytelling play a big role. We all love a great story. Great brands tell great stories that inspire a passion for life and illustrate the why and how behind the product.
What is Branding
Branding is the act of showcasing your brand purpose, promise and/or personality. Its the articulation of why your brand exists. Consumers don’t care about the how and what. Consumers care why brands do what they do; it gives customers a reason to embrace a product. Successful brands always start with the brand’s why. Consumers want to understand why they should care about your brand. As Cheryl Burgess CEO of Blue Focus Marketingsays, “a brand is a reason to choose.”
Branding is actively showing how your brand’s personality is desirable, relevant, unique, and cool. Never underestimate the cool factor. To have any value, your brand must always be relatable, reliable, consistent, but also change with the times and with consumer’s needs. Jeffrey Harmon founder of Harmon Brothers explains that “branding is the experience marketers create to win that attention.” All branding elements must be defined by what the brand represents, including in advertising and social media.
Branding is Big Business
Clutch.co, who evaluates marketing agencies, list over 28,121 branding companies in the US and Canada. Branding agencies come in all sizes from a one-person shop to hundreds or a company with thousands of employees in offices around the world. The cost of hiring a branding consultant or agency is extremely variable. The scope of work determines the cost. A consultant could be simply developing the visual elements or completing a complex task like developing the brand position and communication elements that support the brand strategy and business plan. The cost could range from thousands of dollars to over a million.
If a brand is cultivated with meaningful existential reference points that the consumer can embrace, the brand can have enormous monetary value. According to Brandz Top 100 Most Valuable Global Brand, the world’s most valuable brand in 2019 was Amazon at $315.5 billion, followed by Apple at $309.5 billion.
Brand is a Concept
Humans are creatures of meaning not transactions. Successful brands live in consumers’ minds. Defining the emotional connection is the most difficult but the most essential step. This is where the branding agency is worth their weight in gold. The deeper the connection, the stronger the relationship. The stronger the relationship to the brand, the more valuable the brand becomes. The trick is giving the consumer the power to own the brand but ensuring that the brand is still actively steering the relationship with positive brand activities and associations. Lester Wunderman, author of Being Direct says “Advertising becomes a dialogue that becomes an invitation to a relationship.”
People are attracted to people (and furry friends). The quickest way a brand can relate to people is through an authentic and distinct personality. This personality is made by how the brand and its employees act and speak. A brand’s personality can’t be manufactured but it can be built with the right tools. Recruiting the right people to represent the brand is a good start. Shaping the brand’s values will set the stage for the brand ‘s personality.
You must decide what characteristic is paramount. Define what the brand will not compromise on such as: quality, safety, transparency, sustainability, trust and/or customer service. You can also define what the brand will not be. These values will drive the brand’s tone of voice. Being witty and funny might not suit certain brands but being caring, empathetic, and lovable might. Once determined, all of the brand’s messaging and marketing must reflect its determined personality traits.
A brand evolves over time as do its customers. An EmotiveBrand blog post on the topic says: “Brands mean different things to different people at different times.” Amy Daggett, owner of Dagget Design, says a brand “is an associative memory in the brain of the consumer, who connects–or associate–the brand with a set of brand attributes, benefits, impressions or emotions. It’s everything the public thinks it knows about your name brand offering–both factual, and emotional.”
Brands are complex and always evolving. A great emotional
advertising campaign that connects with customers can make a brand famous. But
if the product doesn’t live up to expectations, it’s dead in the water. Every
product offering, every service, every message, advertisement, and digital
manifestation, every internal policy, email, and business decision must be
congruent with what the brand stands for. Each brand element and touchpoint
must be strategically and creatively aligned to have maximum impact. To help
navigate all the complexities of branding, I have complied several graphics to
help guide brand stewards.
Combine all of the brand essential elements and collectively you have the essence of the brand.
The Anatomy of a Brand
Brand culture is the set of experiences, attitudes, values, and meanings shared by the brand, its employees, and the customers. As Benoît Heilbrunn said in his book Brave New Brands: Branding Between Utopia and A-Topia, “A brand may be viewed not solely as a sign added to products to differentiate them from competing goods, but as a semiotic engine whose function is to constantly produce meaning and values.”
There are five possible brand structures to support a master brand and various sub brands. Most brands don’t have the luxury of building the architectural brand model first. They adopt the best solution for their ultimate goal of capitalizing on existing brand equity.
As the world becomes smaller and smaller from digitization and globalization, many brands are becoming bigger and bigger. There was a time when being too big was a disadvantage because of the layers of bureaucracy and the lack of agility, innovation, and entrepreneurship. Digital technology has changed all of that. The bigger, the better. In the book Big Is Beautiful authors Robert Atkinson and Michael Lind conclude that large companies are more productive, innovative, and diverse than small ones. The number of mergers and acquisitions have doubled since 1997 to 48,825 in 2016 with a total value of $3.62 trillion. Last November on “Single Day”, giant online Chinese retailer, Alibaba racked up more than $38 billion in sales in 24-hours. To put this into perspective, this is more than the yearly GDP of countries like Paraguay and Iceland. Killer brands are also collecting more consumer information and data than ever before. In 2017,DOMO estimated that 2.5 exabytes (add 18 zeros) of online data are generated worldwide every day. To put this in prospective, one exabyte is one quintillion, take 2.5 quintillion pennies and you can cover the entire surface of the earth five times! Market intelligence companyIDC predicts the world’s digital data will grow to 175 zettabytes (add 21 zeros) by 2025. With this much data power are killer brands monopolizing and manipulating markets and consumers, forcing consumers to pay more, destroying competition and innovation? Are domineering brands killing free enterprise?
Some killer brands are stronger and wealthier than many nations. McKinsey Global Institute says that 10 percent of the world’s listed firms generate 80 percent of all global profits. The top 20 global brands control over 42 percent of the world’s economy. If you dig deeper, you will see that some brands clearly dominate in several industry categories. Interestingly, the Technology sector, worth over $5.7 trillion, has the greatest concentration with over 50 percent controlled by four brands: Alphabet (Google), Microsoft, Apple, and Facebook. Similarly, the Consumer Services category, worth $2.6 trillion (about the size of France’s GDP), is controlled by two brands: Amazon and Alibaba. With so much control and money, can we trust that these brands have the our best interest at heart? In essence, these are brand-nations with a huge responsibility to society. These dominant brands are accountable only to shareholders; shareholders are only interested in profits and ensuring the brands continual expansion. Currently, there is a major debate on whether dominant killer brands are healthy for economic growth in free enterprise world commerce.
Death Row for Past Killer Brands
Go back one hundred years and the dominant brands were very different with US Steel, American Sugar Refining Company and Standard Oil in the forefront.
Standard Oil was founded in the late 1870s under John D. Rockerfeller. The story goes that Mr. Rockfeller expanded the brand by bullying suppliers for preferred rates and buying out many small competitors. At one point, Standard controlled nearly 90 percent of US oil production. In 1890, the US Congress passed the Sherman Antitrust Act which outlawed monopolistic business practices. After several legal manoeuvres, the world’s most powerful company, Standard Oil, was finally ordered by the US Supreme Court to break up into 34 independent companies. It is believed that Standard Oil came under heavy public criticism and outrage after investigative journalist Ida Tarbell published a 19-part series of articles damning Mr. Rockfeller and Standard Oil as ruthless and immoral. Today, these companies are now some of the world’s largest Oil & Gas brands like ExxonMobil, Chevron, and ConocoPhillips.
In 1969, the US government took a run at IBM who at the time had nearly 70 percent of the business computing industry, but the case never amounted to any significant action. While the case dragged on for over 13 unlucky years, the distracted IBM company missed out on personal computer innovations. This was a death sentence for the company.
The next big shake-up wasn’t until 1983 when the Bell System monopoly was broken-up. Bell Systems started as a monopoly back in 1876 with the help of patents that did not expire until 1915. This lone brand built a massive telecommunications infrastructure network across the USA. Today, the many Baby Bells contains well-known brands such as: Verizon, AT&T, CenturyLink, and US West, to name a few.
In the 1990’s Microsoft tried to force the computer industry to bundle their web browser with the operating system to control the market. This destroyed the top competitor Netscape and caused the US Department of Justice to file antitrust charges against Microsoft. While Microsoft wasn’t broken up during the appeal process, the distraction allowed for companies like Google to gain an edge. Senator Elizabeth Warren says the antitrust case “helped clear a path for Internet companies like Google and Facebook to emerge.”
Today’s Killer App Brands
We know the big six killer brands. We interact with them daily and sometimes hourly: Alphabet (Google), Microsoft, Apple, Facebook, Amazon, and Alibaba. They are all technology, digital application driven and American, except for Alibaba. American brands account for a disproportionate percentage of the world’s largest brands.Elvis Picardo, Portfolio Manager, attributes this phenomenon to a strong US equity market, a strong US currency, and premium valuations (mega-caps).
Collectively, these companies have defined the world’s culture and drove the information and digital revolution. They have changed our lives: how we work, play, and think. They have contributed to political upheaval; misinformation; economic, social, and technological trends; and other changes beyond our imagination. Together, their total market value is over $4 trillion, equitant to Germany’s GDP (4th largest in the world). Freelance writer Daniel Baylis says, “The benefit of being one of the biggest brands of the world is that you often get to define the rules of the game.”
This statement is very true. Apple redefined the music industry. They destroyed the recording industry and record labels. Today, Microsoft’s windows system has only 80 percent of the desktop operating system market share. Back in 2013, it had over 90 percent of the market share. Amazon redefined the book industry forever and is in the process of destroying the bricks and mortar retail industry. Without Google we would never find anything on the internet. Try navigating over 1.5 billion websites without Google. Facebook has played a major role in overthrowing governments and making political movements a reality both positively and negatively. They have also driven the human psych to crave more “likes” by the minute. Alibaba is still behind Amazon in e-commerce revenue, but it continues to defy expectations with constant growth of over 50 percent every quarter. It doesn’t hurt that they have 1.4 billion potential consumers.
Collectively, Google and Facebook control over 60 percent of the global online advertising market (excluding China). This year, the duopoly is forecast to pull in $174 billion in ad revenues. Together, they’re redefining the advertising industry.
All of these numbers are mind blowing, but this is the world these brands live in. It’s not hard to believe that in the world of trillions and billions, the average consumers can get lost between the commas. The interesting fact is that these companies are making billions because they know us better than we know ourselves. What is good for the brand might not be good for you or me. Ram Shivakumar, economic professor at TheUniversity Chicago Booth School of Business says these brands have given us enormous benefits to our quality of life. But he cautions that “the value of these contributions shouldn’t blind us to the dangers posed by the power modern superstars have accumulated.”
To keep their dominate power, these brands either buy out potential start-ups or drive them out by pricing or other predatory activities. This killer instinct is better known in the venture capitalist world as the “Kill Zone”, where start-up don’t have a chance of competing.
Facebook has become a brand we love to hate but not enough to logout forever. The fear of missing out is too great for most people. While our commitment to Facebook doesn’t have a financial impact (because its free for users), we do pay dearly, giving up our privacy as they collect personal data that they have sold and misused. Facebook estimate that more than 2.1 billion people use Facebook, Instagram, WhatsApp, or Messenger every day and around 2.7 billion people use at least one of their services each month. Facebook’s on track to bring in over $60 billion in total revenue in 2019.
Its through their active database that they can tell if a competitor app is getting too hot for comfort. The “Kill Zone” around Facebook is big. They either buy them out (like Instagram and WhatsApp) or mimic their popular features like Stories and Bonfire to neutralize Snapchat and Houseparty apps. Linette Lopez, a political journalist, said Facebook used user-data against smaller rivals such as Vine. In essence, they destroyed the Vine app by blocking its friend finding feature.
Before the acquisition, Instagram had only 30 million user and 13 employees. Today, they have over 1 billion monthly active users and LinkedIn indicates they have over 9,000 employees. Facebook has the power to make or break any start-up. Wikipedia says Facebook has acquired 82 companies so far.
Free or not, Facebook has had its fair share of negative press and global regulatory attention due to mishandling of private personal data, disseminating fake news (especially for the Russian military-intelligence agency), and severe data leaks.
Anna Johansson, marketing and PR consultant, says, “Facebook is obviously operating in some contentious and ambiguous ethical territory, and some of the decisions it has made in the past decade are somewhere on the spectrum between short-sighted and dumb.” Andrew Burt, Chief Legal Officer at Immuta,is less polite and states that the privacy and online security risk is too great for consumers. He believes governments must “diminish the vast power of companies like Facebook by limiting their ability to hoard the data they collect and to aggregate the services they provide, contracting their ‘attack surface,’ so to speak, to a level that is manageable.”
If Google used its dominance to gouge us on prices, we would all be up in arms or become a fan of Yahoo. The problem is we don’t see their revenue model. Why would we be upset with services (such as search, Gmail, Google Docs, Translation & Maps) that are free and some of the best services. Google controls over 88 percent of the internet search market share. Statista states that there are about 4.5 billion active internet users or 58 percent of the global population. That would mean that Google touches around 4 billion people or 52 percent of the world’s population. Should we be worried?
Google has more data on us than any other internet service. They know our wants, needs, and desires – priceless for the marketer. Getting a marketer’s message to the right audience, at the right time, is the ultimate goal. In 2018, Google made $116 billion in advertising. With a war chest of billions of dollars, they are free to buy-out potential competitors that get in their “Killer Zone” and pick up new innovations before they are hot. To date, they have acquired over 120 such companies.
In their data harvester information, Google listed 10 principals that are important to making “money without doing evil.” There are many companies that are extremely frustrated with Google’s behaviour, but the average consumer remains blissfully ignorant. The Federal Trade Commission investigated Google and concluded that they used their dominance to make competitors harder to find on its search engine. A simple ranking algorithm mishap or change can destroy a competitive brand. Who is watching Google to ensure their definition of “evil” is the same as ours? To date, they have been fined $2.7 billion for violating antitrust regulations in Europe.
Amazon has been accused of hurting suppliers, competitors, and even their own employees, but their growing online customer base is addicted to their competitive prices, convenience, huge selection, and fast delivery system. While they destroyed the original bookstore market, they made books more sustainable and environment friendly as long as you have their e-reader. The company commands 50 percent of all book sales in the United States and 75 percent of all e-book sales. There has been a number of reports of Amazon using its dominance to pressure publishers into more desirable agreements.
Their goal is to have e-books be the gateway to the store of everything. So far, about 197 million people visit their online store each month. Over half of American households are Amazon Prime subscribers. In 2018, Amazon’s share of the US ecommerce market was 49 percent and still growing.
The tactics they use to keep growing is the concern. Brad Stonerecounts in his book The Everything Store how Amazon wanted to get into the diapers business and reached out to Quidsi who owned diapers.com. They weren’t interested in selling. This led Amazon to set up the Amazon Mom Promotion, where they discounted baby products including diapers and free delivery basically forcing Quidsi to call “uncle” and sell to Amazon. Amazon then quickly retired Diapers.com. This is a perfect example of how the “Kill Zone” works. To date, Amazon has acquired 101 companies and has a stake in another 22 companies.
Amazon’s ultimate power is its transactional data. They can see what is trending and what is hot. They aren’t just happy with being the biggest online marketplace for other vendors but want to get into the action directly through their own product brands such as Amazon Basics and Amazon Essentials. This is not dissimilar to supermarket house brands, but they don’t stop there. They have many other brands that aren’t associated with Amazon as Goodsport, Lark & Ro, North Eleven, and Society New York. TJI Research Inc. recently reported that Amazon has more than 450 brands sold exclusively on Amazon. The third-party brands don’t have the complete picture like Amazon who has all the consumer data and expertise to react to analytics. Is this a conflict of interest?
There is always one bad apple, but Apple is hard to dislike. They made music accessible to everyone through iPods and other Apple devices. They took everything big and made it small and portable. Their closed ecosystem business model is brilliant. Every transaction that goes through their iOS has a positive financial benefit for Apple. Some call it the Apple 30 percent vendor tax. Jonathan Prince says “…Apple makes more off a Spotify subscription than it does off an Apple Music subscription and doesn’t share any of that with the music industry. They want to have their cake and eat everyone else’s too.” As of June 2017 (the most current statistic), 180 billion apps have been downloaded from Apple App Store.
Apple has always been seen as an exclusive luxury brand with profit margins (32 percent) similar to Hermès (35 percent) and Ferrari (29 percent). Think about it. They can sell a phone at $999 and sell 29 million of them in less than two months. That’s what happen in 2017.
Apple has also acquired its fair share of potential competitors. Wikipedia reports about 100 competitors, but they state Apple doesn’t regularly release financial details on mergers and acquisitions. In May 2019, CEO Tim Cook told CNBC that Apple acquired a company every two to three weeks on average, having acquired 20 to 25 companies in less than six months. Sounds like the “Kill Zone” is alive and well at Apple.
Apple has had its fair share of antitrust lawsuits for anti-competitive practices, price-fixing accusations, tax avoidance schemes, and deplorable working conditions in Asian electronic sweatshops. Their aggressive business tactics only negatively affects vendors, app developers, and competition – not customers. Keeping their customer happy is priority number one.
Amazingly Microsoft has been around for over 44 years and has been a dominate player in the personal computer operating system market since the mid-1980s. Its founder, Bill Gates, is one of the largest philanthropists in the world, reportedly donating over $45 billion in the last 25 years. Today, Microsoft understands how to protect its market without raising the concerns of the antitrust police. Since its conception, Microsoft has acquired over 225 companies and has investments in over 60 other companies.
Alibaba is Amazon’s nemesis. Established five years later than Amazon, it continues to grow exponentially in it’s region. These two killer brands have many things in common except that Alibaba has over one billion potential customers in China compared to Amazon’s half billion in North America and Europe. Ming Zeng a long-time executive at Alibaba and currently the Chief Strategy Officers says Alibaba is more than another online commerce company and “does what Amazon, eBay, PayPal, Google, FedEx, wholesalers, and a good portion of manufacturers do in the United States, with a healthy helping of financial services for garnish.” Their goal isn’t just to conquer China, but Southeast Asia, India, Africa, Europe, and, hopefully, the US. I’m not going to get into any China rhetoric, but this brand could be the biggest killer brand the world has every seen.
Since it’s inception, Alibaba has only acquired 29 organizations, a small number for a killer brand. The large problem with Alibaba is that we don’t have full transparency on this company as it resides in secretive China.
Serial Killers on the Loose
Killer brands have enjoyed a world unhindered by rules and regulations as they define the future. Consumers have embraced these new toys and innovations, regardless of the consequences. These killer brands have empowered consumers and enlarged their brands. Consumers are addicted to this new digital world and the ability to be in control, but without guidelines and clear values, this empowerment can lead to chaos and bad decisions both by consumers and companies. Unencumbered by laws and regulations, killer brands have been able to prosper and make shareholders, employees, and governments very wealthy. The trillions and billions of dollars I have quoted are unimaginable and impossible to comprehend, but they are real. To date, we have relied on these brands’ corporate governance to do good and not evil. Many consumers are oblivious to the risks and dangers; they are addicted to the digital candy and satisfaction what these brands give them.
Our antiquated legal systems, laws, and regulatory framework haven’t been able to keep up with the digital revolution. The US is still protecting consumers from monopolistic business practises defined by the Sherman Antitrust Act passed by the US Congress in 1890. The world and business practises specifically have changed a lot in 130 years! In the last decade, the killer six have made over 657 acquisitions with little to no challenge from antitrust authorities. In some cases, these acquisitions propelled these brands to new heights, but many were just killed or silently integrated to reduce competition.
The problem today is that the authorities don’t have the tools, the understanding, or the laws to protect humanity in this new digital world. The scary part is that technology isn’t waiting for the authorities to catch-up. Technology is advancing at warp speed. Governments can only protect us if they know how, which means they need to be smarter than the killer brands. A scary thought indeed!
The German consumer isn’t as trusting as North Americans. Their history has trained them to be fearful of mass data collection and unchecked powerful forces. They are one of the few countries that haven’t embraced credit cards and debit cards for fear of leaving a digital path. Not surprisingly, they are at the forefront of data privacy and protection. They are currently trying to stop Facebook from aggregating consumer data between their various platforms (Facebook, Instagram and WhatsApp) and other third-party site data collection.
Throughout history we have seen that extremely concentrated wealth and power that hasn’t benefited humanity. Toby Walsh, professor of artificial intelligence cautions that immense wealth comes with immense impact and responsibility. He says, “We’ve always had to regulate markets; unfettered capitalism tends to go to excess. Regulation is needed to ensure that companies act in line with the public good and not just the stock options of their CEOs.”
The winner-take-all approach comes with many risks. History tells us that governments take actions only when consumers aren’t happy. Today, the killer six are focused on keeping consumers happy, but what happens when they aren’t? With all the data monitoring killer brands have they will know this answer before we do.
As these killer brands race towards the internet-of-things with further digitization and data harvesting who will protect the consumer? The world has never seen such massive, powerful brands with their ability to invade consumer privacy, monopolize new markets and quietly destroy competition on their quest to dominate. Will this quest eventually translate into political power and the demise of free enterprise? Only time will tell.
The article illustration was done by David Parkins, a prolific illustrator and cartoonist. It first appeared Jan. 18th, 2018 on the cover story of The Economist titled How to tame the tech titans.
I just finished shopping in a
typical large urban shopping mall. With over 360 stores, I was sure I could
find a simple pair of black active-wear shoes, your basic laced up runners. I
was on a mission.
The first store I saw was the very popular and trendy Steve Madden with a large “50% OFF” sign in the window. They had a couple pairs of runners that were close to what I was looking for, but they all had a white rubber band at the bottom. If it was black like the rest of the shoe, it would have been perfect. A salesperson asked if I needed help, but I politely declined the help as this was the first store I had tried. So, I left Steve Madden and I continued on.
Next was B2 Shoes, another
trend setting store. I quickly found two styles that could work. I approached
the checkout counter to find my size 11. The friendly young lady replied that
they didn’t have an 11 in either of the styles, but she had 10.5. When I said
10.5 wouldn’t work, she suggested that I go online where they had a greater
selection. I thanked her and went on my way.
I proceeded to Little Burgundy,
Skechers, and then Hudson’s Bay with no luck. I was starting to
believe this wasn’t going to be as easy as I had thought. But I was persistent.
I found the mall directory and scouted out 29 other footwear locations, then
planned my attack.
My first stop was Browns who also had “SALE” signs everywhere. I found a perfect match, and, for safety, I choose another as backup and took them both to the cash register and waited for someone to help me. Patiently I waited as someone else was being helped. I stood there waiting and waiting. Finally, someone ask if I needed help. I forced a smile on my face and asked if they had these shoes in size 11. The lady went to the computer terminal. “We only have the one pair in 10.5” she announced as if she saved the day. Again, I replied that that size wouldn’t work. A shoe that was a half a size too small wasn’t helpful unless they thought I could curly my toes to fit. As I left, she suggested that I go online where there would be more sizes available.
Dejected, I went onto ALDO shoes who had a “Two for One” sale. I didn’t want two pairs of shoes; I just wanted a simple pair of black runners. They had a fancier black leather shoe. I was becoming desperate. Once again, I stood in line to see if they had my size. As I stood there waiting for someone to help me, I started to understand why retailer store brands are doomed. “Can I help you sir,” asked the young girl with bright colored hair. Startled, I asked her if they had these in size 11. No size 11 but they had a 10.5. Really! She too suggested that I go online.
I was beginning to think that size 11 was a rarity. I now understood how Shaquille O’Neal must feel with size 22 feet. The American Academy of Orthopedic Surgeons reports that the worldwide average shoe size for men is between 9 and 12. According to Shoes.com, the average Canadian male shoe size is 10.5. Do retail stores only carry the average size?
I continued on my quest checking Champs,
Lacoste, Journeys, and SportsChek with no luck. Finally, I
gave-up. I had spent over an hour with nothing to show for it. I moved on to
other items on my shopping list.
As I was heading out of the mall
feeling defeated, I saw the Foot Locker. “Last chance,” I said to
myself. On display was a black Converse. I took it off the shelf and
walked to the counter to once again see if they had my size. The girl tapped
onto the screen and advised me that they did. I almost jumped up for joy, but I
just stood there feeling sad that the retail business was dying a painful death
and they were totally oblivious as to why. A young guy in a referee outfit came
over with a box and opened it to show me that the runners were the same as the
ones I took from the shelf. He put down the box as I started to take off my
shoes to try them on. Unceremoniously, he left, and I am there to fend for
myself. I thread the laces and put them on. Satisfied that they fit, I go to
the counter to pay. I explain to the lady that I will wear them out and will
not need the box. She replies that without the box I can’t return them. I agreed
to this condition and paid with my debit card. She hands me a bag to put my old
shoes in it, like I’m at a discount store.
I know all retail transactions aren’t like the one I just descripted, but this isn’t the first time I have been disappointed and totally frustrated with the line ups, lack of service, or no service at all, and limited selection and sizes. There are a number of reasons why retail store brands are doomed. Unconsciously, they are driving us to online shopping, if not telling us directly. Next time, I will start the retail journey on my laptop in the comfort of my own home.