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Death of the Travel Brands.
The Transit cafe
Wednesday, 8th July 2009
 
Ram Badrinathan, General Manager-Asia of PhoCusWright Inc writes about the move from brand value to intrinsic value.

The idea of manipulating public opinion using the sub consciousness was pioneered by Sigmund Freud's nephew, Edward Bernays, who is also regarded as the father of public relations. In the 1920s, working for the American Tobacco Company, he sent a group of young models to march in the New York City parade.

He then told the press that a group of women's rights marchers would light "Torches of Freedom". On his signal, the models lit Lucky Strike cigarettes in front of the eager photographers. The New York Times (1 April 1929) printed: "Group of Girls Puff at Cigarettes as a Gesture of ‘Freedom'". This helped to break the taboo against women smoking in public (Source: Wikipedia).

The emergence of brands was a result of the Industrial Revolution, when centralization of manufacturing resulted in mass production. My initial professional experience was in advertising and, while working at JWT and Grey, account management had to generate creative briefs for ad campaigns.

One of the questions that had to be tackled was ‘what was the functional discriminator?' or USP. But most products didn't really have one, so then we had to generate an emotional discriminator, which was basically a psychological motivator we had to induce or manipulate to get consumers to purchase the product.

As products emerged in various categories which couldn't compete on real discriminators, increasingly branding focused on human emotional drives. Fast moving consumer goods were masters in the game and categories like Tobacco, Soap, Beverages, Snacks invested heavily in advertising campaigns to build ‘brands'.

In the offline world, the brands started having enormous value and Coca-Cola, the brand built on its mystique of the secret formula, acquired billions of dollars in brand value. Brand management was perpetuated by professionals focused on the brand rather than product and spurred on by mass manufacturing and the concentration of capital, resources and wealth. The notion of the intrinsic value of a product was never asked, it was about brand value.

So what is intrinsic value? I don't have an empirical definition, but in general, it is the argument that the value of a product is intrinsic within the product rather than dependent on the buyer's perception. My personal opinion is that the intrinsic value of carbonated water, cigarettes and many other consumer products is far lower than what the buyer's perception is. Brand value amplifies the value of products with low intrinsic value.

How does the Internet change all this and what does the battle of brand value vs. intrinsic value have to do with travel? The emergence of Internet and online travel companies like Expedia, Travelocity, and Priceline actually changed the paradigm of how consumers search, shop and buy travel by making each step completely interactive, immersive and experiential.

One might argue that Priceline's advertising campaign with William Shatner is a great brand effort, but if the Priceline online experience, features, response time, product inventory depth, customer service, and usability were not behind it, the marketing campaign would be useless. Conversely, Marlboro can sell its cigarettes based on the Marlboro man myth for years without changing a thing, since it is primarily selling an image.

Coming back to online travel brands, no amount of brand marketing can offset the intensive consumer experience in which consumers interact with a travel product and its features. Competitors are just a click away. Big brands and mass media feed off each other but on the Internet, a level playing field has emerged due to Google. The Long Tail epitomizes that ideal; travel is a category that allows smaller players that provide consumer value to compete with larger brands.

Even the larger travel conglomerates get it. It is very clear that Expedia (with its large portfolio of travel brands) understands this dynamic. On the Internet, there is only so much that a single brand can do as demand is getting increasingly fragmented across multiple points of influence and sale. The key is to control, aggregate and empower supply.

In Expedia's case, Hotels.com, The white label business and Expedia.com all compete aggressively for the same customer. In addition another group company, Tripadvisor, actually drives traffic to Expedia's direct competitors (traditionally this would be seen as a brand disaster).

It's like Coca-Cola selling the same product under 10 different names, it would never happen. Yahoo faces the same problem, the centralized single brand portal is dead and content is all over the place, so there is little point in maintaining the walled-garden single brand approach to content, whether in travel or any other category. Expedia realizes that the real power is in aggregating supply or owning the system and empowering as many different point of sales or points of influence as possible.

Finally, Interbrand's annual audit of most valuable brands in 2008 included in the 10th spot a company we all might know – Google.

The firm's top 10 global brands are:

1. Coca-Cola
2. IBM
3. Microsoft
4. GE
5. Nokia
6. Toyota
7. Intel
8. McDonald's
9. Disney
10. Google

How much does Google spend on brand building? Literally zero, because Google's continued success will be dependent on delivering relevant search results, not image. The consumer is a click away in either direction - towards or away. Google realizes that advertising campaigns will do nothing if the product's intrinsic value doesn't hold up every second of the day. Negative word of mouth can spread globally in milliseconds.

As PhoCusWright has noted, one of the key tenets of the long tail is: size of the reputation matters more than the size of the marketing budget.

Get your weekly cuppa of news, gossip, humour and opinion at the cafe for travel insiders. www.thetransitcafe.com

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