The Alexa Effect: How brands evolve in the age of digital intermediaries

together with Axel Löber

Surpassing the capability of any CDO, Covid-19 catapulted Germany’s reluctant digitisation into fast forward mode. The ‘new normal’ means we attend events on Zoom rather than schlepping to some hip industrial location, we pay with our iPhone instead of our bank card, and we use Alexa to do our shopping instead of going to the supermarket. 

Think you don’t know anyone that shops with Alexa? A PwC trend report published at the end of 2019 found that 11% of typically conservative German consumers use voice assistants like Alexa at least once a week to do their shopping. And it’s on the rise.

This growing trend has real consequences for our relationship with brands. Increasingly digital intermediaries are coming between us, so what does it mean for brand management?

Thought construct and intermediary

Brands help steer our decision-making, enabling us to easily recognise and distinguish products and organisations. They are thought constructs in the consumer’s head made up of experiences, associations and emotions. It’s no surprise that brand communication is hard to measure. There are as many Spotify brands as there are people who know (or think they know) the brand itself. In ‘Sapiens’, Yuval Noah Harari references Peugeot as an example when he says that brands are “a figment of our collective imagination”. The role of brand management has always been to shape this fiction, but imagination is a hard thing to control. There’s no doubt that branding is a highly indirect business.

Communication has been democratised to a previously unimaginable degree. Many believe that the internet and social media have brought consumers and brands much closer together, but paradoxically it’s the opposite. Digital platforms are actually increasing the distance. A traditional intermediary – like a journalist or the publisher, who decided what the audience was going to read has been replaced by the ranking algorithms of the platforms. In today’s world, Facebook, LinkedIn, Alexa and Co create almost closed ecosystems and a new kind of co-dependency.

My (product) brand risks evolving from star to ingredient to commodity – or even to a brand within a brand. The seemingly small difference between “Alexa, order tissues” and “Alexa, order Kleenex” can have huge impact on the P&L of our brands. The art of branding has never been more important. If consideration or awareness is in doubt, the platform intermediary takes over the purchase decision in favour of his own brand; voice assistants use search engines like Google for this. If Alexa is asked about a brand, the answer is determined by SEO and special speakable content. It’s no wonder that search and voice optimization and other algorithms are becoming increasingly more important.

Data over Big Budget

Begging for a bigger marketing budget? Perhaps you don’t need to. The devil is in the detail; in a typical digital customer journey (optimised based on data), if the customer journey takes place predominantly on an external platform that also controls efficiency, a conflict of interest arises. We simply can’t rely on this.

If we want to develop a more precise picture of the customer journey, it helps to dig a little deeper into Google and Co. The platforms reveal a great deal of our customers’ data, if you know how to access it. So, the question is, how much data expertise do we have in our organisation? And do we trust the insights they come up with? Are we ready to base our strategies on data?

Design on Alexa

There is another challenge that voice assistants present to brand management – what happens to the visual world of branding and corporate design? In a world where colours, graphics and fonts no longer play a role, the importance of tone of voice and sonic branding is growing. Alexa is a dialogue channel unlike radio or TV, even the best jingle doesn’t cut it. Welcome to the next generation of algorithms – Conversational Artificial Intelligence.

Effective sound branding is dependent on a strong channel-specific data strategy. Just as communication technology has evolved from newspapers and TV to social media and voice assistants, brand communication must transition from visual design to data strategy, but without giving up the pursuit of good design.

So how can we shape brands through dialogue with a Conversational AI? Let’s assume a chatbot handles customer service. Depending on how much energy has been put into the user experience of the chat bot, the customer experience is positive or negative. A chatbot is only as good as the data available for the conversation and the digital customer journey for the interaction. Intensive collection and analysis of customer data is the basis for successful data-driven process optimisation and thus a convincing digital customer experience. So, it will be easier for companies that have cleaned up their data and digitalised their processes. Having said that, reducing data collection is key when it comes to a brand’s reputation. Brand managers are likely to find themselves conflicted between data protection reputation and customer experience and must increasingly weigh up the two. Like social media, Conversational AI will provide an insight into the company, so the clearer the processes and data strategy, the cleaner the perception will be from the outside world.

Reality Check

It’s clear that the world of brand management and communication needs a whole new set of skills to respond to the demand for Conversational AI. Expertise in how an AI algorithm works, how to generate insights from data, and how to develop a data strategy.

The European Communications Monitor (ECM) offers some interesting insight through their annual survey amongst 2000-3000 European communicators, led by Professor Ansgar Zerfass from the University of Leipzig. In 2019, ECM was concerned about the influence of AI on communication: three quarters of those interviewed believed AI would change our profession. However, only one third thought that their own work would be affected. A small test was also built into the survey and interestingly, only 15% of the communicators had a rough idea of what AI actually is.

The recently published ECM 2020 addresses the ethics of big data analysis in communication. For almost 60% of the communicators, the use and analysis of behavioural data is ethically very challenging. Apparently, the new digital channels create ethical questions that we have not yet answered. Perhaps part of the concern stems from the fact that we don’t yet fully understand the issue?

Branding is about trust

Brands are increasingly shaped by dialogue channels and closed ecosystems in which visual design fades into the background. Alexa & Co. render traditional brand communication ineffective.

The better we understand the platforms we use to connect with our customers, the more efficiently we can influence the thought construct of ‘brand’ in the consumer’s mind. In order to develop a better understanding, we need more data and algorithm expertise in our organizations, and there’s no doubt that building this expertise is a worthwhile investment.

In addition to the brand, Harari calls money a fantasy product. “Trust is the raw material coins are minted from.” Ultimately, the goal of brand building is to build trust.