Efficiency and Moderation Are Key; Don’t Sell Out to Big Data

In the new era of big data, it seems that almost anything can be put in quantifiable terms. Even a brand, an idea that has been considered the epitome of the “feel” and “quality” of a company, can be augmented with the help of data analysis. Finding trends in target market demographics, buying habits, and related products can boost short-term revenue while – if data analysis is utilized correctly – maintaining brand equity in the long term. In “Don’t Let Big Data Bury Your Brand” by Peter Horst and Robert Duboff in the Harvard Business Review, the authors say “It’s often far too tempting to forsake the character of the brand facing the powerful temptation for short-term sales boosts, especially to make up for a down period.” But how much can long-term brand equity really matter anyway when big data analysis allows companies to precisely and efficiently generate near-future sales? In brief, big data used for short-term sales can become an addiction if not applied responsibly, with brand equity taking the brunt of the punishment.

Short Term vs Long Term

Short Term vs Long Term

When it comes to sacrificing character and status for discounting based on market research, it is key to ensure that price-cutting strategies do not become a significant part of the brand to the point where it overshadows the other differentiators that you’ve worked so hard to instill into your identity. In simpler words, the more value your company places on character and brand equity, the less significance you will want to place on quantitative things such as price. There is a reason that luxury car companies, like BMW, and premium clothing companies, like Polo, have a much lower focus on pricing while Walmart and Toyota focus on price much more intently. Promoting discounts, in many cases, is advantageous to companies without a major focus on brand equity because their consumers are generally not focusing on brand equity when making purchasing decisions. If you began to see on television that Lamborghini was cutting the price of its vehicles in half, of course short-term sales for Lamborghini would increase with a larger target market that can afford the cars, but people would place less value in the brand than if they advertised the art and style of the car, essentially sacrificing name and status for revenue. Over time, short-term profits would level out, requiring more and more discounts to achieve the same immediate gratification due to diminishing marginal returns.

Like an addiction, continuing to devalue long-term stability for the “high” of short-term success will begin to erode the foundation a company is based on. A prime example of this is outlined in the article from the Harvard Business Review. The steep decline of print media put significant pressure on Time, a powerhouse of tradition and esteem, to maintain its readership. Higher officials in Time decided to slash prices and advertise discounts and, using data, attempted to attract new readership in the short term instead of pushing the historic brand, eventually leading to a long-term collapse, ending with its closure by parent company Time Warner.

These examples don’t mean that companies shouldn’t use data – quite the opposite. What it does mean is that it’s important to regulate the use of data to achieve a healthy balance. While big data and trend analysis are exceptional at boosting short-term sales, they can also help companies to identify how people view them as an entity. Taking into account target market sentiment can help your company steer itself in the direction of optimal market strategy by placing emphasis on the parts that the market appreciates most about your brand, e.g., reputation or patriotism. Conversely, data analytics makes it easier to identify the characteristics of your target market, making it significantly easier and more advantageous to cater your image toward them. Like most things in business and life, big data is all about balance and moderation. Like Spiderman said, “With great power comes great responsibility” – and it’s vital to make sure the power of big data flies your brand to new heights, not into the ground.

Sources: https://hbr.org/2015/11/dont-let-big-data-bury-your-brand

Andrew Jobling - Summer 2016 Intern

Andrew Jobling
Summer Intern