American businesses are in love with product. Our management books, business school lectures, and annual reports have been overtaken by talk of product innovation. Stories of young geniuses tinkering in the garage have become the stuff of legend. Research and development budgets have reached astronomical levels. As a result of this product obsession, most business executives view it as their mission to build a better mousetrap, or to perfect the mousetrap they’ve already got. Everyone seems to be on the same quest to develop a product so compelling that it will sell itself.
The paradox with our product obsession is that most consumers do not have the time or knowledge required to evaluate product differences. Because they are incapable or unwilling to compare sophisticated product features, they look for shortcuts in the purchase process. They seek word-of-mouth recommendations, read reviews, and most importantly, they rely on brand. As brand management guru Kevin Keller has stated, “The power of the brand name to consumers is a shortcut – it provides a way to simplify things.” In other words, most consumers make choices on brand, not on product, because it makes the decision easier.
Even when consumers claim to have a product preference, studies have shown that their decisions are primarily driven by brand preference. Consider a recent experiment conducted by wine critic Robin Goldstein. Over the course of several months, Goldstein hosted 17 double-blind wine tasting events across the United States. Featured wines ranged in price from $1.65 per bottle to $150 per bottle. The study found that, on average, people actually “enjoy more expensive wines slightly less.” These results provide strong evidence that sophisticated wine consumers are making purchase decisions based on brand, not on product.
Wine consumers are not the only ones to mask their brand preferences with purported product preferences. The famous “Pepsi Challenge” revealed similar results among cola drinkers. In blind taste tests, subjects revealed an overwhelming preference for Pepsi’s product, even while Coca-Cola dominated the market. While some have attributed these results to experimental noise associated with beverage size and a short-term sweetness preference, more sophisticated studies support the influence of brand. One study conducted at the Baylor College of Medicine, compared blind test results to open trials. As expected, Pepsi was the big winner during blind tests. The results flipped, however, when consumers tasted the same colas with labels intact. “When the research subjects knew which brown liquid was which, almost all of them suddenly preferred Coca-Cola.”
The marketing research and scientific discovery have not yet caught up to most company executives. As noted in a recent article by Eric Ries, “[T]oday, consumers think brands instead of products. Heinz instead of ketchup. Hellmann’s instead of mayonnaise. Tropicana instead of orange juice. Campbell’s instead of canned soup.” And yet, most companies continue to subscribe to the notion that products drive preference. Accordingly, they continue to allocate a disproportionate share of resources to product improvement while, sometimes, neglecting their brand.
So, how do companies overcome the product paradox? In many cases, businesses should stop working on their product and start working on their brand. Once a minimum level of product parity has been achieved, resources would likely be better spent building a world-class brand that truly drives consumer preference.