Digital Businesses Are Redefining Brand Value

Nowadays we are bombarded with a steady stream of commercials, celebrity endorsements, recognizable logos, and all kinds of products and services tempting us. But does constant brand exposure really resonate with today’s consumers? The answer is actually no. The most successful brands focus on users, not buyers. Digital brands do things differently than traditional brands. They also think differently. This is according to a joint study by SAP, Siegel+Gale, and Shift Thinking. The main difference between traditional brands and digital brands is that traditional brands focus on positioning themselves in the minds of their customers, but digital brands focus on doing the same in their customer’s lives. They engage customers more like users, not mere buyers.

Purchase Brands VS Usage Brands

What are purchase brands? Companies that fall under this category are typically, but not always, legacy brands. What are usage brands? For the most part, digital newcomers, as well as service-oriented legacy brands, comprise this category.

It is too simplistic to say that traditional brands and purchase brands, while digital brands are usage brands. There are exceptions, of course, brands like Visa and Lego for example, which have characteristics of both purchase and usage brands. They think of customers less as one-time buyers and more as users or members with an ongoing relationship. Some main differences between purchase brands and usage brands are:

  • Purchase brands focus on creating demand to buy the product, while usage brands focus on creating demand for the use of the product.
  • Purchase brands emphasize promotion; usage brands emphasize advocacy.
  • Purchase brands worry about what they say to customers; usage brands worry about what customers say to each other.
  • Purchase brands try to shape what people think about the brand along the path to purchase; usage brands influence how people experience the brand at every touchpoint.
  • Purchase brands focus on the “moments of truth” that happen before the transaction, such as researching, shopping, and buying the product. By contrast, usage brands focus on the moments of truth that happen after the transaction, whether in delivery, service, education, or sharing.

There are similar differences in how people’s brand perceptions are formed and reinforced. We are more likely to hear about traditional brands through advertising and traditional media. You are more likely to discover a usage brand via social media and word of mouth.

So what are the benefits of shifting from being a purchase brand to a usage brand? Research has shown that customers show more loyalty to usage brands. They had stronger advocacy in the form of spontaneous recommendations to others. And they showed a higher preference for usage brands over competitors, not just in making the purchase but also in a willingness to pay a premium in price. On average, the customers of usage brands were willing to pay a 7% premium, were 8% less likely to switch, and were more than twice as likely to make a spontaneous recommendation of the brand.

If you’re looking to exploit the branding potential of a usage brand, then your business will need to make the shift in how you engage with your customers. This is a fundamental change, and will require a rethinking of your company’s strategy, organization and investment. A usage mindset requires a closer relationship between your marketing and product development. Customer service and loyalty have to be at the forefront of your business and become key drivers of your growth.

The shift from purchase to usage also has implications of measuring brand equity. Brand ratings released annually by top firms measure how much a brand is worth to its investors, more than its consumers. The focus is on how the brand is perceived, rather than how people experience the brand. While measuring that data is important, what matters more is engagement. If consumers find the content created by the brand to be relevant and useful, if they are actually using the products or services, then they are most likely also spontaneously talking about the brand. Focusing on the consumer rather than the ratings is what will eventually win in this new and shifting marketplace.

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