How to survive in the ‘brand’ new world

We’ve seen in our first two blogs in our series on brands how millennials are driving big changes in the consumer landscape, and some of the challenges posed to global branded goods – challenges faced by smaller and more personalised businesses like advisers too. In this final instalment, we explore how established businesses can thrive in this ‘brand new world’.

We are confident that many of today’s consumer goods companies can not only survive, but even thrive in a rapidly changing consumer landscape, if they recognise the challenge and adopt the right strategies. From an investment perspective, vigilance and ongoing, active management of these major brands in client portfolios is needed to separate the wheat from the chaff.


No more ‘lazy loyalty’

In the past, the behaviour of younger customers may have been dismissed as ‘faddish’, but no brands can continue relying on ‘lazy loyalty’. As these ‘fads’ persist and are indeed increasingly adopted by older generations — particularly in areas like the desire for natural ingredients, sustainability and ethical standards — they will become impossible to ignore.

The way that consumers react to brands has changed fundamentally. Marketing is increasingly incorporating neuroscience to understand how consumers engage with brands emotionally. Brands are after loyalty, and they need emotional engagement to find it. Survey data suggests that when millennials find a brand which resonates with them and works hard to engage and retain them, they will be loyal. This requires the long-term cultivation of a personal connection.


Clarity and authenticity

A company must clearly define its values and what it is setting out to do in order to establish an enduring connection with consumers. Millennials are articulate about their own values and become loyal to companies which match them. They make an emotional investment beyond the basic product. 

Pretending won’t do. Brands must live and operate according to their promoted values. In an era of social media and heightened transparency, millennials will punish those that fall foul of their own self promotion; Twitter has seen the downfall of many. Getting the right brand message across, and living by it, is essential.


Engage socially

When younger customers do find a brand they want to fully engage with, they want to feel part of something bigger. Companies can create these communities through websites and apps where consumers learn more about a brand’s core values, purpose and qualities - a new dimension called ‘social commerce’, that can further increase loyalty.

Brands also need to tap into the ‘review culture’ of the younger generations, who place a huge weight on social proof and recommendations. In an age of mistrust of corporates and scepticism about advertisements, consumers feel that endorsement by peers has greater authenticity and value.


Leverage strengths

Large consumer goods companies perhaps became too complacent and bureaucratic to be agile, proactive and innovative, and found themselves playing catch-up with smaller more nimble start-ups. However, established consumer goods companies have some significant incumbency and scale advantages that we should not ignore.

Their scale means they can recruit the brightest talent, have well-established distribution networks and significant product development knowledge. They also enjoy good name recognition, albeit that needs to be supplemented by further moves into social commerce and engaging with consumers across multiple platforms. These nimble start-ups will face challenges of their own, like scaling up production and distribution. Being small doesn’t guarantee being perfectly formed.

Innovation is what matters. The large research and development teams often found in long-established consumer goods companies should work hard to improve their existing products and create new ones.


If you can’t beat em’, join em’

Sadly, employing these thousands of people doesn’t guarantee finding every promising new product opportunity. Start-ups will always exist to fill a gap missed by established brands. However, the insight gained through the research teams can offer the branded gentry additional insight in three ways. The first is to quickly move themselves into a new growth area identified by a rival. The second is to use their - often significant - cash reserves to buy the right niche players. Thirdly, the established brands can partner with start-ups, offering them expertise and resources in return for a stake in their business. The latter option is being pursued by a lot of consumer goods companies, as they recognise that they do not have a monopoly on good ideas.


A new brand of vigilance

The behaviour of the younger generations really matters to any established business. Millennials value cost-consciousness and experience over possessions, and this poses a threat to many brands.

Brands that ignore these threats will suffer, but there is great opportunity too. Active management of client portfolios is needed to identify brands that are forward-thinking and innovative, and weed out those that are not. At Rathbones, we’ll be keeping a close eye on this ‘brand new world’ to do just that.

 

 

Important legal information

This area of the site is for professional advisers

Please read this page before proceeding, it explains certain legal and regulatory restrictions applicable to the distribution of this information. It is your responsibility to inform yourselves of and to observe all applicable laws and regulations of the relevant jurisdiction.

This section of the website is directed only at investment advisers and other financial intermediaries who are authorised and regulated by the Financial Conduct Authority (FCA).

The information provided in this site is directed at UK investment advisers only and must not be circulated to private clients or to the general public. It does not constitute an offer to sell, or solicit an offer to purchase any investments by anyone in any jurisdiction in which such offer or solicitation is not authorised or in which a member of the Rathbone Group is not authorised to do so.

I confirm that I am an investment intermediary authorised and regulated by the Financial Conduct Authority. I have read and understood the legal information and risk warnings below:

Important Information (Terms and Conditions)

The information contained on this site is believed to be accurate at the date of publication but no warranty of accuracy is given and the information is subject to change without notice. Any opinions or estimates included herein constitute a judgement as of the date of publication and are subject to change without notice. Furthermore, no responsibility is accepted for the accuracy of any information contained within sites provided by third parties that may have links to or from our pages.

Rathbone Investment Management Limited ("RIM") is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered Office: Port of Liverpool Building, Pier Head, Liverpool L3 1NW. Registered in England No 01448919.

In accordance with regulations, all electronic communications and telephone calls between Rathbones and its clients are recorded and stored for a minimum period of six months.

The information provided in this site is directed at UK investors only. It does not constitute an offer to sell, or solicit an offer to purchase any investments by anyone in any jurisdiction in which such offer or solicitation is not authorised or in which a member of the Rathbone Group is not authorised to do so.

In particular, the information herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in France and the United States of America to or for the benefit of United States persons (being resident in the United States of America or partnerships or corporations organised under the laws of the United States of America or any state, territory or possession thereof).

In order to comply with money laundering and other regulations, additional documentation for identification purposes may be required.

Rathbones shall have no liability for any data transmission errors such as data loss, damage or alteration of any kind including, but not limited to, any direct, indirect or consequential damage arising out of the use of services provided or referred to in this website.

Past performance should not be seen as an indication of future performance.

The value of investments and the income from them can fall as well as rise and you may not get back the amount originally invested, particularly if your client does not continue with the investment over the longer term.

Changes in the rate of exchange between currencies may cause the value of an investment to go up or down.

Interest rate fluctuations are likely to affect the capital value of investments within bond funds. When long term interest rates rise the capital value of units is likely to fall and vice versa. The effect will be more apparent on funds that invest significantly in long dated securities. The value of capital and income will fluctuate as interest rates and credit ratings of the issuing companies change.

Tax levels and reliefs are those currently applicable and may change and the value of any tax advantage will depend on individual circumstances.

Investing in emerging markets or small companies may be potentially volatile, as these investments are high risk.

The design, text and images are owned, except as expressly stated by members of the Rathbone Group. They may not be copied, transmitted, displayed, performed, distributed, licensed, altered, framed, stored or otherwise used in whole or in part or in any manner without the written consent of Rathbones except to the extent permitted and under the procedures specified in the copyright Designs and Patents Act 1988, as amended and then only with notices of Rathbones' rights.

Rate this page:
Average: 3.5 (2 votes)

Subscribe to the In the KNOW blog email

Archive