Building brands in the networked economy

That's the word from Janice Spark, managing director at Idea Engineers. She says that consumers are pooling their knowledge and resources to create (or, often, subvert) value in unprecedented ways and with little regard for the constraints of space and time.

Examples of this trend abound, from the consumer-to-consumer auctions on EBay to the open source software movement and the way that bloggers are rocking the media establishment. Skype allows users to make free or cheap phone calls over the Internet using peer-to-peer software. File-sharing programmes like Kazaa are undermining traditional business models in the media and entertainment industry.

Closer to home, consumer lobby groups such as MyADSL are turning the heat up on South African companies such as Telkom. They're using the Internet to rally support, pool resources and drum up ideas and have claimed a number of victories such as prompting regulator, ICASA, to hold public hearings into Telkom's ADSL pricing.

"A second wave of Internet technologies makes it easier than ever for consumers to share information, work in collaboration and turn their ideas into economic value - blogs, file-sharing applications and wikis (group-edited sites)," says Spark. "People will often band together to design something they want that no company is providing them - be it an alternative perspective on the news or a piece of software such as Linux."

Although these developments may be threatening for companies unwilling to move away from a 'command and control' mindset, many organisations around the world are tapping into consumer networks to create value for their shareholders.

A recent study by Vivaldi Partners and Forbes found that 'digital' brands such as Apple, Google, Blackberry, Amazon, eBay and Yahoo! are experiencing exponential growth in their value that outpaces powerful traditional brands such as Coca-Cola.

Despite the amount of money that they plough into advertising, the likes of McDonalds and Coca-Cola did not even rank in the top 20 fastest-growing brands of the past four years, according to the study. Several brands in the top 10 do not sell a physical product and many of the brands that experienced the highest increases in their value do little or even no television advertising.

Says Spark: "Most digital brands have built themselves up by tapping into networks of connected consumers and by clever use of public and media relations rather than through traditional advertising. Several companies in this list - Amazon, Google, eBay, Yahoo! - have harnessed content, ideas and behaviours from their customers to create compelling business models." For example, user reviews on products that Amazon supplies and popular searches on Google are central to the value proposition that the two companies offer.

Spark says that the challenge that many of the world's biggest traditional brands face is to emulate the example of these Internet powerhouses by using their Internet to create emotional bonds with their customers. One example of a company that is doing this is Microsoft, which maintains communities on its Web site for user groups such as developers. Apart from building a closer relationship with their customers using the Internet, companies such as Lego are even drawing consumers into their product development process.

Concludes Spark: "As consumer power continues to grow, brands will become more important - and more fragile - than ever before. For many organisations, the idea that a brand is created through interaction between staff, customers and other people rather than being defined by the marketing department is a difficult one to come to grips with. But exciting times lie ahead for those companies who learn how to harness consumer power for mutual benefit of company and customer."