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Strong brands are even more important online than they are in stores

Prof Dr Marc Fischer analyses the influence of brands on online shopping in his study

Prof. Dr. Marc Fischer

Strong brands are even more important online than they are in stores

They reduce the risks and offer orientation / By Marc Fischer, Sascha Lehmann and Nils Lietdke

Online shopping is cheap and convenient. But what if your long-awaited package never arrives even though the bill has long been paid? Then good advice is expensive. Online users prevent such disappointments by adhering to strong brands. This is shown by the latest survey by McKinsey and the University of Cologne on brand significance on the internet.

The importance of brands for consumer purchasing decisions has been growing for years. The McKinsey Marketing Practice and the University of Cologne have been following this development since 2002 in a long-term study. Especially in the years 2010 to 2016, the brand importance in almost all industries went up steeply; the increase amounted to more than 11 percent in this period. The average value has been stable at a high level since 2016. In the latest wave, the survey was expanded to include six entirely online categories, ranging from mail order, delivery services and media streaming portals to platforms for travel bookings or insurance policies. More than 1000 users of all age groups were surveyed.

The surprising conclusion: on the internet, brands are not less important, but at least as important as in the stationary offline sector. From the consumer's point of view, brands are even 14 percent more important when shopping online than they are when shopping in a local store. How does this match the image of online shoppers as bargain hunters who are only interested in low prices and fast delivery? A deeper analysis of the brand functions provides the explanation. We distinguish between information efficiency, self-fulfilment and risk reduction. For online shoppers, risk reduction is by far the most important brand function. The corresponding value is more than 13 percent higher than for self-fulfilment. A strong brand creates trust and protects consumers from the consequences of a wrong decision.

Which consequences should brand managers draw from this? Even pure online brands should not underestimate the importance of clear positioning and well-defined values. Many consumers perceive the internet as a confusing and potentially dangerous place. Strong brands help overcome such reservations. However, campaigns that only target clicks and sales are not enough. Trust only develops when a brand shows an attitude and takes the consumer seriously as its counterpart. If the development of your own brand exceeds the means of a provider, you should consider cooperation with established partners such as Amazon and Ebay. Strong partners with trustworthy brands such as Paypal or DHL, which like Amazon and Ebay are now among the most valuable brands in the world, are also recommended for processing. The good image of the cooperation partners radiates to the own brand and indirectly strengthens the trust of the consumers.

The brand significance of online dating is even higher than that of online shopping. If you are looking for a partner on the Internet, you not only spend a lot of time and money on it, but also reveal a lot about yourself and make yourself vulnerable. In order to prevent this trust from being exploited or abused, users stick to providers with strong brands and a good reputation. In addition, the brand serves as a source of social distinction and an indicator of the seriousness of potential partners. A provider who demands detailed profiles and a monthly membership fee from its users is perceived as serious. If, on the other hand, use is free of charge and revealing photos dominate the offer, users tend to be presumed to be rather superficial.

The study does not only provide important clues for the strategy of purely online brands. Brands that are present in several sales channels can also use the results to compare the needs of their offline customers with those of online shoppers.

In some areas, one brand is sufficient to successfully cover all channels. But in certain industries and markets, it can pay to invest in a separate online brand or even multiple micro-brands to meet the increasingly differentiated expectations of target customers. We therefore recommend that our clients accurately analyze the dominant decision paths and buying factors in their competitive environment. Only on the foundation of such a factual basis can the right decisions be made for a valuable management of individual brands and brand portfolios that is oriented towards long-term corporate success.

Marc Fischer holds the Chair for Marketing and Market Research at the University of Cologne. Sascha Lehmann is a partner, Nils Lietdke is a senior expert at McKinsey & Company.

This article was published in the F.A.Z. of July 1st 2019, Wirtschaft (Wirtschaft), on page 16.