Brands

In the late 1800s, a brand was a tool used to identify ownership. Cattle ranches placed their brands on their cattle, and biscuit manufacturers burned their brands onto the barrels containing their products. As manufacturing processes improved throughout the Industrial Revolution, brands became a way for parity products to differentiate themselves (Pope 1983).

Today, a brand is a symbol that embodies a range of information connected with a company, a product, or a service. Elements of a brand include a name, a logo, and other visual elements such as images, colors, or type fonts. The term “brand name” is often used interchangeably with the term “brand,” although a brand name is specifically the written or spoken linguistic elements of a brand. In this context, the brand name constitutes a type of trademark, if the brand name exclusively identifies the brand owner as the commercial source of products or services. A brand owner may seek to protect proprietary rights in relation to a brand name through trademark registration.

Many brands have demonstrated a unique durability and sustained competitive advantage that many view as unmatched by any other corporate asset. Every year, Interbrand calculates the brand value of the world’s top brands. Brand value is calculated as the net present value of the earnings the brand is expected to generate and secure in the future for a specified one-year time period. The world’s most valuable brand, Coca-Cola, is more than 118 years old and has a brand value of US$67 trillion. While the top five brands (Coca-Cola, Microsoft, IBM, GE, and Intel) are all US-based, international brands Nokia (Finland), Toyota (Japan), and Mercedes-Benz (Germany) are included in the top 10. Many brands have survived a string of different corporate owners. The combination of durability and commercial impact make brands a key corporate asset equally for companies marketing to consumers and to other businesses.

Through the various communication methods used by marketers (including advertising, packaging, public relations, and direct sales), brands provide information to consumers. Individuals interpret this information, and a brand image is created in the minds of consumers. Once this brand image is in place, consumers develop a set of expectations for the branded product or service. These expectations, or values, are referred to as brand equity, an intangible asset related to associations made by individuals regarding the product or service.

Brands become valuable to consumers who want or need products that are better than satisfactory, and they provide consumers with a range of different benefits. First, brands indicate value and quality to many consumers (Ries & Ries 2004). Brand advertising promotes and encourages the development of quality products for consumers to buy (Schudson 1984), since advertisers will not want to risk spending money to develop a brand image for a product that will not perform up to expectations. When price parity exists, some consumers perceive brands to be a better value than non-branded items (Shavitt & Lowrey 1998).

Consumers can use brand information to defend their own purchase decisions, which minimizes cognitive dissonance, an internal conflict about a decision that occurs after the decision is made. Finally, consumers use some brands to indicate to other consumers who they are, or who they would like to be. Consumers make certain purchase decisions (such as automobile decisions) based not only on the functional qualities of the brand, but also on what owning the brand says about the consumer to others. This brand image is often associated very closely with advertising messages for the brand.

Brands are valuable for companies as well. When consumers purchase a brand that they like, the brand is contributing to the commercial success of the company and to the creation of shareholder value. If a consumer associates a brand with quality, the brand can command a higher prices than a weaker brand, and this then contributes to company profits. Strong brands, which resonate strongly with consumers, allow for reduction in advertising expenditures. Brand advertising can be defensive in that it can try to prevent consumers who are currently satisfied with the brand from switching to other brands (Schudson 1984). Several studies have attempted to calculate brands’ contributions to shareholder value. Interbrand’s (2006) study of the “best global brands” concluded that brands account for more than a third of shareholder value in the average company, and in many cases for more than 70 percent of shareholder value.

A strong brand can be used as a platform to launch related products; for example, the strength of the Coke brand led to the introduction of other popular brands such as Diet Coke and Cherry Coke (Bottomley and Holden 2001). However, brand strength will not always translate into a successful brand extension. Coca-Cola’s attempt to market “New Coke” as a replacement for its flagship brand was met with hostility from consumers, and the product was quickly pulled from the US market. Companies can also benefit from other aspects of the brand, such as brand loyalty and brand equity. Brand loyalty is a consumer’s decision to continue to purchase the brand without considering other options. Brand loyalty is created by a consumer’s continued positive experiences with a brand, and often translates into brand equity. Brand equity facilitates a more predictable income stream, increases cash flow by increasing market share, and is an asset that can be sold or leased.

In a world of abundant choices such influence is crucial for commercial success and creation of shareholder value. Even nonprofit organizations have started embracing the brand as a key asset for obtaining donations, sponsorships, and volunteers (Twitchell 2004). This represents a movement to have brands represent a company’s key values in order to connect with a consumers on a deeper, more emotive level.

References:

1. Bedbury, S. (2002). A new brand world. New York: Viking.
2. Bottomley, P. A., & Holden, S. J. S. (2001). Do we really know how consumers evaluate brand extensions? Journal of Marketing Research, 38(4), 494 –500.
3. Clark, E. (1988). The want makers: Inside the world of advertising. New York:
4. Interbrand (2006). Best global brands. At www.interbrand.com/best_brands_2006.asp.
5. Pope, D. (1983). The making of modern advertising. New York: Basic Books.
6. Ries, A., & Ries, L. (2004). The origin of brands: How product evolution creates endless possibilities for new brands. New York: Collins.
7. Schudson, M. (1984). Advertising, the uneasy persuasion. New York: Basic Books.
8. Shavitt, S., & Lowrey, P. (1998). Public attitudes toward advertising: More favorable than you might think. Journal of Advertising Research, 38(4), 7–2.
9. Twitchell, J. B. (2004). Branded nation: The Marketing of Megachurch, College Inc., and Museumworld. New York: Simon and Schuster.