Consumers are increasingly having difficulty understanding the differentiating features of leading brands. The marketplace is more cluttered than ever, and meaningful innovation is harder, costlier and riskier. In the eyes of consumers, shelves are filled with look-alikes, leaving the door wide open for “disruptor” brands to storm in and grab market share.

The evidence about this is clear. The WPP/Kantar Millward Brown BrandZ study of leading brands in all categories shows that the average rating of clarity about a brand’s value proposition is down by one-third since 2008, when the financial crisis began.

This isn’t surprising. The aggregate number of ads tracked by Kantar Media is up 120% since 2008, while the time consumers spend with all media, as tracked by eMarketer, is up only 17.5%. Marketers are outstripping the capacity of consumers to keep up by nearly seven-fold.

Add to this the deteriorating landscape of innovation. Stanford University researchers published an analysis recently that looked at the productivity rate of invention since 1980 across 15,000+ firms of all types and sizes. It takes more researchers and more R&D investment than ever to generate a single good idea. In aggregate, research productivity is falling in half every 13 years, which means that to stay even — much less get ahead — research effort must double every 13 years. It’s like the Red Queen in “Alice in Wonderland” running as fast as she can simply to remain in place. Brands are hard-pressed to afford the increasing price of innovative differentiation.

As a result, most of the innovation that big companies are doing is incremental. It’s business as usual, only with more fingers crossed.

Business leaders are acutely aware of these challenges. Topline growth is flatlining; the U.S. economy is mired at well under three percent annual GDP growth; pressure is mounting from activist investors to squeeze costs to boost bottom-lines.

‘Normal’ isn’t coming back
Companies are hunkering down, waiting for the storm to pass so they can go back to normal. But there is no going back to normal. Normal doesn’t exist anymore. The only way forward for established brands is to make bolder bets that take on disruptors by being disruptive themselves.

Amazon is everybody’s favorite example nowadays, with good reason. Unlike retailers of old, Amazon is using a new business model to take the ownership of customer relationships away from brands.

For brands to compete against an Amazon-like attack, they have to innovate through new business models, not new products.

The future of consumption will see even bigger disruptions. For example, the use of algorithm-driven apps that advise consumers on what to buy, and how, are on a rapid growth curve, nudging, notifying and, more and more, deciding for consumers.

In the blink of an eye, marketers will find themselves advertising to algorithms not to people because only algorithms will be processing ads. This, too, will take new business models to compete.

The investment required for innovation is bigger than ever, so spending those monies on small bets for incremental improvements makes little financial sense, much less marketing sense. If big dollars have to be spent, then bolder bets should be made. Only bolder bets will stand out in today’s crowded, cutthroat marketplace.

Bolder bets don’t come in the form of models that have worked before. Bolder bets consist of the new business models that break out of stagnation — the status quo for incumbent companies across the board.

The imperative is clear: make bolder bets or watch the future of consumption pass you by.

Originally posted AdAge 18 September 2017

 


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