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Does advertising or engagement build stronger brand equity among Millennials?

The concept of brand equity (i.e. the perceived value a brand) firmly arrived in the 1980’s when consumer goods’ companies reacted to a surge of cutthroat discounting with a new search for a more sustainable way to boost sales and profits.  The answer was to pour money into well-crafted brands, increase pricing, and highlight distinctive product features: all designed to create a more favorable brand image that would lead to greater loyalty. As David Aaker wrote in his book in 1991, “Managing Brand Equity,” aggressive marketing is needed to generate awareness, create a positive perception of key brand qualities, and grow loyalty. These are the three pillars of brand equity.

My experience at Seagrams in the 1980’s demonstrated the validity of this approach. Seagram had just hired Phil Beekman, the president of Colgate, to take over all this respected spirits and wine business. He immediately set out to change the overall business culture from sales intensive to brand building, by increasing prices and advertising.  The resulting sales and profit growth was remarkable, as well as the stronger brand equity for its key products.

While traditional advertising is still important for building brands, it is viewed more and more as a primary driver for creating awareness and/or reminding consumers of brands. What is different today is the impact of the internet, especially for the 86 million Millennials. Mass marketing died several years ago, replaced by more targeted advertising in a highly fragmented marketplace. The key issue with advertising for this Generation Y is trust and credibility. Their behavior is not influenced as much by advertising any more, but by online feedback and the experience of their peers and other respected sources:

  • Only 6% of Millennials consider advertising to be credible (source: Edelman Research)
  • Instead, 95% say friends are the most credible source of information.
  • 92% say trust is the most important influential factor, and most advertising lacks this trust.

Social engagement via the internet is the key driver for building brand equity today, more than advertising (e.g. television viewing is down 9% so far this year, more among younger people).  A positive perception of a product or service brand is best developed by sharing one’s experience, ideally from friends who have a track record for honest, objective and non-commercial opinions.

A recent Boston Consulting Group study detected a notable shift among Millennials away from advertising as a source of brand advice. The internet is more influential, as Millennials are significantly more trustful of social media. For purchasing decisions among Millennials, 5 people (mainly friends – 59%) are usually contacted for advice versus only 3 among non-Millennials. On average, 49% of Millennials say they trust retailer websites, compared to 35% of non-Millennials.

The importance of interactive engagement was recognized by Gallup in their 2014 report on the “State of the American Consumer”, saying connecting online is most critical for developing a strong, loyal relationship with customers and even employees, which is the heart of branding.  According to Gallup, companies that fully engage customers saw a 240% boost in their performance.

While online engagement is primarily a vehicle for communication, what is shared (i.e. the content) is critical for making final decisions and ultimately building brand equity.  Millennials identify with brands more personally and emotionally than do older generations. This BCG study found that 59% of Millennials buy brands that reflected their own style and personality. Related to this, 40% said they were willing to pay extra for a brand that reflected the image they wished to convey, compared to only 25% of non-Millennials.

Millennials view brands as extensions of their own values and status, so what is most important to them?  The most influential value shaping their brand preference involves companies that are actively supporting social causes and show concern for the environment and sustainability (48%). Other key drivers are brands that available 24-7 and are viewed as having a personality. In contrast, older generations are driven mainly by brands that (1) “resolve conflicts with products quickly,” (2) “have a long history and heritage,” and (3) “resolve conflicts sufficiently.”

These Millennial attitudes reflect their growing trust of the internet as an interactive medium. Credibility and authenticity are realized when consumers can openly engage with their friends, in contrast to traditional advertising.  The big challenge for companies today is how to create greater brand trust, and hence build more sustainable brand equity, especially among these Millennials with different values and beliefs.

Jay Gronlund

Jay Gronlund is an experienced business development and branding professional with a successful track record introducing new products and services, expanding into foreign markets, re-positioning products, and facilitating ideation sessions. Jay has effectively applied proven marketing and branding principles from his background in the consumer goods industry to other industry sectors, including B2B situations. Jay’s career began in consumer packaged goods and then expanded into household products, beverages and publishing. His first company was Richardson-Vicks (now part of Proctor & Gamble), where he held new product positions in New York and in London. He continued his new product responsibilities for Arm & Hammer products at Church & Dwight (Arm & Hammer), then VP Marketing of the wine/champagne division of Seagram, and finally VP, Director of Marketing at Newsweek. Gronlund started The Pathfinder Group in New York in 1990, an international business development and brand consulting firm. Related to this, much of his work today involves re-positioning brands, ideation sessions and marketing workshops, with a primary focus on emotional branding, especially building brand trust for clients. Jay has also been teaching a marketing course at NYU since 1999, “Positioning and Brand Development". Jay recently wrote a new book, “Basics of Branding," reflecting his NYU branding course and professional experience. He has also published several articles on diverse marketing topics: “5 Steps to a Successful Ideation Session," “What B2B Marketers can Learn from B2C," “Employer Branding," “Customized Marketing for Tomorrow’s Leaders," “Sharing and Implementing New Ideas Across Borders," and “Working with the New Russians”, “Word-of-Mouth Marketing for B2B Situations," “The Future of m-Health” and “How to Build ‘Value’ for Healthcare Brands in Emerging Markets." Jay Gronlund is a graduate of Colby College and has an MBA from Tuck at Dartmouth College.

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