Transcript of "The Brand Bubble In The Digital Era - An interview with John Gerzema"
“The Brand Bubble in the digital era”: an interview with John Gerzema .
Gabriel Rossi: What are the new rules of Brand Management as we enter the
digital age? What has changed essentially?
John Gerzema: The new reality is that brands don’t control the relationship. Consumers do.
Marketers will have to think in entirely new ways and work much harder to be different and
stay special. Yet the traditional business models and strategies marketers have used for
generations have not acknowledged the consumer, whose behavior has changed so rapidly
and so profoundly it requires an entirely new vision of brand management. The rules I
outline in my book as ‘Laws of Energy’ are meant to guide marketers to move more fluidly,
openly and to take every step with the consumer by actively listening, engaging and taking
nothing for granted.
Gabriel Rossi: A number of the people to whom I’ve
spoken about Branding in the new digital paradigm
have talked about the importance of ultimate
transparency and accountability (mostly because of
the digital trail it leaves on Google and Twitter
Search). What does that really mean for brands?
John Gerzema: I think a brand that isn’t entirely dedicated
to honesty and transparency is courting peril. I spent last
week at The Economist Conference in San Francisco doing a
keynote and speaking with Tony Hsieh afterwards was really
inspiring. Here’s a CEO that understands the importance of
core values. When a brand has integrity its conduct matches
its promises. In the case of Zappos, this is a brand consumers engage with because of their
customer service commitment. And this focus with values on treating customers and
employees well extends into social media and their trust in their employees to advocate for
the brand on twitter, which has scaled Zappos tremendously without advertising. Watch for
more companies to understand that transparency can actually liberate them to do better for
their people and grow their business in the process.
Gabriel Rossi: How can large Brands benefit from micro-niches and interactions?
John Gerzema: In a challenging economy the first thing to interrogate is your segmentation.
Many big brands are learning to get small with new forms of segmenting their audiences by
assessing the channels that their customers use as sources of influence. And I think it’s
interesting that some of the most interesting brands in social media are big brands. Ford’s
Scott Monty and Sun’s Jonathan Schwartz come to mind for example. And Dell is selling last
minute offers on Twitter. In this environment its important for a brand (large or small) to be
a community builder and create the oxygen for its customers and fans to interact, share and
explore together. That might mean Twitter and Facebook, or Ning and Bebo. I think
consumer rating sites like Engadget and Gizmodo are enormous sources of influence and
Gabriel Rossi: You have done some ethnographic studies in India in order to write
“The Brand Bubble. When mobility market leaves its infancy, how people in
developing countries will be affected and how smart brands can take advantage
John Gerzema: Our largest client in India is Airtel and it was enormously gratifying to spend
time with the marketing, technology and product teams and feel firsthand their enthusiasm
for their role in India’s growing quality of life. You’re talking about farmers that can use a
phone to keep tab on their crop shipments and Dads in Delhi who can talk to their
daughters in Bangalore. While we wrestle over rate wars and 3-4G, you forget how simple
and powerful a cell phone can be in the hands of a new user. It’s transformative.
Gabriel Rossi: Is mobility a tale of two markets at the end of the day?
John Gerzema: Yes at the moment, but watch India to jump infrastructure and develop from
voice into new data services at Moore’s Law speed. If you think about the U.S., we’ve only
begun to realize the power of the third screen and we look third world when I go to
Denmark and Korea and give talks. QR codes are still science fiction in many parts of the
Gabriel Rossi: Please tell me what you mean by consumers as investors in the
third chapter of “The Brand Bubble”.
John Gerzema: I came to the conclusion that consumers were self-selecting a smaller list of
brands to be loyal to on the basis of their ability to provide, if you will, dividends.
Consumers were looking for permanence, but also expectations of future utility that comes
in the form of creativity, innovation, trust and leadership. It was all part of my argument to
look past today in your brand building, because consumers are. And secondly to try to get
everyone in the organization — many of whom don’t understand consumer marketing — to
see the consumer through a lens that’s familiar (the investor). We spent enormous time
trying to show our investors the rosiest prospects of our company. But do we do that for our
consumers? Jack Welch recently said ‘companies focusing on shareholder value is a dumb
strategy’ so I kind of feel vindicated.
Gabriel Rossi: What kind of opportunities Branding professionals can explore
during economic crisis?
John Gerzema: I just gave a talk at The Economist Conference on this very topic. I’d
encourage your readers to download my presentation ‘Calamity: Marketing your way
through the recession’ available at thebrandbubble.com/blog or on slideshare.
Gabriel Rossi: How does BAV data analysis work? Please talk about its pillars.
John Gerzema: BrandAsset Valuator is considered the world’s largest global database on
brands, and because of its scale and longevity, it is recognized as a reliable diagnostic tool
for understanding how successful brands are built. Each year we interview almost 500,000
customers in 44 countries across 40,000 brands on more than 70 brand metrics. We
conduct surveys in more than forty languages. From Arabic to Zulu, we ask consumers how
they feel about local, regional, and multinational brands, media, and celebrities. We’ve
invested almost $115 million dollars in our study and our data tracks back to 1993. There’s
an excellent tutorial on BAV at thebrandbubble.com/explore including free access to
researching hundreds of brands.
Gabriel Rossi: What’s happening to Brand value?
John Gerzema: The brand bubble represents the growing disparity between Wall Street and
Main Street. We found the multiples that markets place on brand valuations far overstate
actual consumer sentiment, so the value creation that brands bring to a company’s total
business value is exaggerated. Wall Street thinks brands are worth more than the
consumers who buy them.
We found this pattern of irrational exuberance extended into thousands of brands in our
data and was occurring precisely at the same time that the media and digital was
dramatically changing. We found that embolden by the tools of the new world, consumerism
was profoundly changing, accelerating the decay in their perceptions of brands. But
business had yet to understand what was really happening. And while we know brands are
important assets, we haven’t fully come to comprehend their significance. Brand value now
represents almost 30% of the total business value of companies comprising the S&P 500.
This figure has risen from 5% only thirty years ago to make up the lion’s share of total
business value. We’re talking over $ 4 trillion dollars in the S&P market capitalization on a
pure stock market valuation basis. This figure doesn’t even account for all brands in the
U.S., or in the world, yet already it’s twice the size of the U.S. residential sub-prime
Gabriel Rossi: How does the concept of continuous differentiation impact on sales?
Is that the only way to to fight Brand Darwinism?
John Gerzema: Brand Darwinism is an awesome concept and I wish I’d thought of it!
In 2004, we were trying to identify if there might be a key correlation between various
brand attributes and unanticipated stock returns. And we discovered a key consumer
perceptual component of brands that was highly related to movements in stock price. We
observed that a few brands were absolutely stellar, doing exceedingly well among
consumers and advancing far ahead of their competitors and some were leaping out of the
category. Consumers seemed captivated by a quality that reflected a more exciting,
dynamic and creative experience. They were concentrating their passion, devotion and
purchasing power onto an increasingly smaller portfolio of special brands – because they
keep exciting and evolving. We discovered that what these stellar brands have in common is
a more powerful form of Differentiation. We called it Energized Differentiation, which reflects
a brand's questing spirit for continuous change and evolution. These brands aren’t just
different -- they keep being different by utilizing motion, momentum and creativity.
Energy plays a significant new role in protecting and enhancing brand differentiation. Energy
has three components:
•Vision – The brand’s purpose and aspirations, often originating from its leadership,
convictions and reputation of the company behind the brand.
•Invention – The most tangible dimension, demonstrating the brand’s vision through
product/service innovation, design, content and other tactile brand experiences.
•Dynamism – How the brand expresses its vision in a dynamic way in the marketplace to
create persona, emotion, advocacy and evangelism through its marketing and other forms
of conversations with consumers.
Gabriel Rossi: Which categories tend to have the most energized brands? Why?
John Gerzema: The awesome thing about this learning is see that while energy has category
effects, brands can leverage it to competitive distance in any sector in consumer or BTB. For
example Zappos, Dove, Geico, Subway and Campbell’s are high energy brands in somewhat
low-energy categories. This when you see how creativity helps a brand transcend its
You are Young and Rubicam ‘s Chief Insights Officer. What are the challenges and
strategies that agencies should be considering at the moment?
This is worthy of ten thousand words, but in just a few I’d say its about understanding the
profound cultural values shifts that the global financial crisis has brought upon consumers
and their new strategies for survival. This runs headlong into the explosion of social media
which presents amazing opportunities to converse, listen and react in real time. Brands are