My friend Nathan Labenz writes about the success of TripAdvisor (the leading review site of hotels) and what it means to the future of brands:
Historically, brands were built on the assumption of limited information. As mass production made it possible to sell soap and soup nationwide, companies developed brands to represent quality and cultivate product loyalty. Brands were a natural fit for radio and TV advertising, and brands thrived with the proliferation of cable channels, which kept advertising costs down while offering unprecedented demographic targeting.
… Facebook and Twitter get most of the attention for brand disruption, but the biggest problems for brands are in search and e-commerce.
Take this Google search for Super 8 Motels, for example. On the front page, you’ll see ratings that hotel guests have written about particular Super 8s on TripAdvisor, Yahoo Travel and Yelp. Importantly, the reviews vary widely. When I checked, a New Mexico location was rated 4.5 stars, while a Los Angeles location was at 3.5 stars and one in British Columbia had only 2 stars. Such location-specific information undermines brands’ ability to affect consumers’ purchasing decisions with 30-second TV spots and gives TripAdvisor a powerful position….
For the Super 8 brand, the end game could be scary: as TripAdvisor accumulates more and more trusted reviews, the best-performing Super 8s, all of which are independent franchises, may eventually realize that their business is suffering from their association with lesser motels. At that point, we might see a “brand run,” wherein the best locations leave the chain, lowering the brand’s value and ultimately leading to its collapse.
It's a solid point and underdiscussed in the hoopla about social media and how it's affecting big brands.
An even better example than Super 8 might be Mariott as I'm guessing a large percentage of Super 8 rooms are sold on no reservation and reviews don't play as much a role.
In the case of Mariott, I'm likely to have reserved a room in advance. In the old days, perhaps I assume that all Mariotts around the world are good. Now, in conjunction with booking the reservation online, I can read reviews of individual locations. There's more variance in the quality of Mariott properties than Mariott HQ would like to admit (I've stayed in dozens of Mariotts myself), and that variance is now for all to see on sites like TripAdvisor.
The end game that Nathan proposes–the outperforming properties dissociating from the national brand because they're being hurt by the low performers–seems quite possible in the long run. After all, wouldn't you rather stay at a hotel you've never heard of (i.e., no national brand) but one that has hundreds of credible five star reviews over a Mariott location that has hundreds of two star reviews?
Eventually, the good franchises will recognize this. And Mariott HQ–whose business is premised on the benefits of a national brand uniting thousands of independent franchises in an information-poor world–will be hurt.
Thanks Ben. I agree that Mariott is a somewhat better example given that they are more often booked in advance, but in the mobile era even people driving along the highway might say “2-stars? We can keep driving a little longer…”
As I was reading this my thought line was….well this will force companies to increase the value in their product (because they’ll be rated for it) or simply falter and die out.
Apply this to a brand that is product and not service based. For example Dell – say they place two products on their line. One receives stellar reviews, one marginal to poor. Regardless of advertising, the better product will sell better due to reviews. Dell’s options are improve the weak product or pull it from the line. The premier product won’t become it’s own brand, but increase the value of the brand itself. Critical feedback forces improvement.
Also, Super 8’s best franchises could leave, but does it find itself better off with better ratings but with a name nobody recognizes? Doubtful. Outliers, both high and low performing, are natural within a brand – rating services just make it easier for consumers to pick a brands highest performers.
Having just driven from Atlanta to San Francisco – Nathan you’re totally right. Looking for cheap hotels on the road, I absolutely would drive a few more exits for a more highly rated option.
Ben,
While I agree with your thesis about out-preforming hotels being brought down by the lower-performing hotels of the same brand, there is something that the brand does unquestionably do for them:
4.5 Stars at a Super 8 does not equal 4.5 stars at a Mariott.
In other words, the brand anchors them to a tier of quality within the industry. And, while I understand that, hypothetically, the higher-end Mariotts could go out and create their own brand, I’m not sure that the costs outweigh the benefits at this point.
Thanks for the great thoughts, as usual!
Rebecca
I’ve never heard of the concept of a “brand run” – very interesting. I would suspect that the franchisee’s contract agreement would include legalese to make this more difficult – almost a no-competition clause. Do you know how the brand protects themselves from this happening?
Not sure exactly. Franchisees probably sign long-term contracts with the
brands, but at some point they surely have an out.
Ben,
The widespread availability of information will impact brand image, and not just of ratings, but anything.
There was some issue with Domino’s pizza where the guys were dropping the crust on the floor and putting cheese up their nose or something before sending it out to be delivered – one or two employees at one location impacted 9,000 stores because that went viral.
Brand control in the socially networked world will be a continuing challenge for all companies.
Firms like Marriott manage hotels for the most part, the owners are separate (usually local investors) and license or contract for the name and branding.
Marriott will be just as incented to rectify or cut loose those that bring the brand value down as it is that others will flee to a different brand.
great post thanks for posting this
If ratings websites could make the McDonald’s brand (or Facebook’s, for that matter), irrelevant, I would stand and cheer.
I can tell you that McDonald’s has never had good burgers or french fries, but the inferiority of their product hasn’t stopped them from becoming the number one chain of hamburger fast food restaurants in the world.
Anyone in advertising can tell you that most advertising doesn’t work, but clearly a multi-hundred-million dollar advertising budget has enabled McDonald’s to attain ascendancy all while purveying sickeningly grey dead animal flesh of questionable provenance and greasy flaccid fries.
There is heavy irony in Nathan Labenz’s repeated emphasis on the importance of Facebook-powered logins for credibility and legitimacy of reviews at TripAdvisor, when TechCrunch’s logo is prominently displayed on his company’s landing page.
I also notice Labenz links to Umair Haque’s nearly four-year-old missive The Shrinking Advantage of Brands, which, while it makes some valid points, is written very much in Haque’s accustomed huckster mode. What else should we expect from the Director of Havas Media Lab, an “advisor that helps investors, entrepreneurs, and firms experiment with…and drive radical management, business model(sic), and strategic innovation”.
I would say this is localwashing of an insidious kind, if it weren’t so blatant. The locale being “washed” is the respective readerships of these comrades-in-arms.
To redirect a quote of one of the comments on Haque’s piece I assume that Haque does “mean that advertising as a mechanism for building brands is becoming seriously disadvantaged when compared to the power of the social web”, which is certainly arguable.
You might consult Pepsi about their recent experiment in social media. Pepsi took their money off TV and put it in social media. They lost 5% market share, slipped from 2nd in market to 3rd, and sales were down $350 million.
Now that makes me cheerful.
Vince – I agree with a number of your points here.
In my expansion on this post on http://blog.Stik.com, I wrote:
“I didn’t have space to discuss which sorts of brands are more or less threatened by reviews sites, but it’s worth pointing out that consumer product brands like Coca-Cola, Gillette, and Doritos are safe. Online review sites don’t make sense for such items, as everybody already knows the taste of Coca-Cola.
Franchise brands like hotel chains and national insurance agent networks (think Farmers, State Farm, Allstate) – will face the biggest challenges as consumers gain access to location- and employee-level reviews.”
Interesting! I didn’t realize that these chains were actually local franchises. You make a good point that an owner can be hurt by association with others and can undeservedly benefit as well. I’ll be more careful about the particular the specific hotel I check into from now on. This was very useful to know.
I think this will affect the travel industry hard because for a couple reasons unique to the travel industry. People love to talk about their trips and we’re accustomed to asking polite questions about them. Accordingly, we devote an inordinate amount of time researching and planning them (for some of us that’s the fun part). People will spend years trying to buy the cheapest tickets to the best locale, or getting the right hotel or whatever. Then they get to the airport and buy 10 magazines, lest they stare out the window of the plane for a few hours, but that same person could easily waste a few hours each week spacing out on their commute.
Anyway, I think there is some consumer behavior peculiar to travel that would exacerbate a brand run. I can’t think of something comparable to Trip Advisor in another industry…maybe Yelp for restaurants or Amazon reviews for audio equipment? But then again who goes to Yelp for an Applebee’s review?
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