Brand prestige in the digital age: Tech trumps social!

By Dr. Danny Wang

As we move deeper into the digital age, companies are increasingly embracing technology, particularly digital platforms, to gain insights into their customers' preferences and to foster interactions between brands and customers. Meanwhile, many firms strive to cultivate a prestigious image to attract aspirational customers in pursuit of exclusivity. But is it realistic to keep a prestigious image while operating a digital platform opened to all?  A new research paper[1] delves into whether digital platforms facilitate or hinder corporate brand prestige.

An interface between sellers and customers aimed at facilitating exchanges, digital platforms enable a company to use technology-enabled storefront functions to customise their offerings while engaging with various customer segments. The objectives? To improve productivity, reduce transaction costs, generate sales, create new markets and improve operational efficiency. Reaching these objectives depend on leveraging two powerful but very different aspects of digital platforms. On one hand, a platform’s technical functions can help boost exposure and credibility while reducing search costs and facilitating transactions. Meanwhile, its social functions can be used to expand a company's reach while enhancing interactivity and improving accessibility for customers.

Despite such promising benefits, not all companies are adept at managing the dual aspects of digital platforms. Given their inclusivity, interactivity and accessibility, digital platforms are ideal to address the needs of the mass market. But since a prestigious brand image is fundamentally exclusive, its success depends on establishing a psychological distance between the premium segment it seeks to address and the mass market.

After surveying 240 senior executives active in fields ranging from F&B and auto to tourism and IT in China, the researchers conclude that while the technical functions of digital platforms can have a positive effect on a brand’s prestige. However, the opposite holds true for the platform's social functions. Accordingly, while the brand prestige of a company can benefits from the firm using its platform’s data resources and advanced analytics to solve problems for customers, that same platform’s social functions may lead a company to focus resources on the wrong segment. Instead of seeking to meet the exclusive aspirations of valuable niche customers, many brands will end up wasting resources catering cater to the immediate requests of fickle mass market clients, possibly losing their uniqueness, rarity, and exclusivity in the process. This double-edged sword impact is especially apparent when market uncertainty prevails or where imitation is rampant. For example, a brand forced to use its digital platform to explain how to differentiate its products from cheap knockoffs may see its appeal erode with high-value customers as more attention is diverted to interact with the wrong target market.

The findings underscore the necessity for companies to differentiate between the varied functions of digital platforms clearly. Firms concerned about their brand prestige should considerer avoiding high-level engagement with mass-market customers as this could compromise important markers of prestige such as exclusivity, status signalling and quality. Instead, they should invest more in improving the technical functions of their digital platforms to better predict customer preferences and concentrate on clientele that truly matters, particularly in a market flooded with imitations. After all, why waste time on appeasing counterfeit Rolex buyers when there are more discerning customers to attend to?

Reference:

[1]  Tse, S.Y., Wang, D.T., Cheung, M.L. & Leung, W.K.S. “Do digital platforms promote or hinder corporate brand prestige?” European Journal of Marketing 57 #4, 2023, pp 987-1013(https://doi.org/10.1108/EJM-11-2021-0837)