Brands Are Machines for Delivering Quality Earnings at High Margins Essay

“Brands are machines for delivering quality earnings at high margins” Tim Broadbent. ‘Advertising Works 2000’. Although brands do not solely refer to businesses and their products or services (e. g. charities, countries, celebrities), this essay will discuss their relevance to profits with regards to business operations unless specified. Where most companies must at some point make a decision (consciously or unconsciously) whether to brand their company or not, that question is often rhetorical.

Brands are established whether the marketing manager says they should or not. The decision really is whether to implement conscious brand management within the business or not. That is the difference between a strong brands and weak brands. Where weak brands often let its customers ultimately make their own minds up about the brand, and the values and associations of the brand are derived from its way of doing business and the way it carries itself in the world, branded businesses go in the opposite direction.

Strongly branded companies can manipulate their customers into feeling and associating certain things with their brand; giving it a personality, a purpose, values and its own identity. Effectively branding a company can be huge expensive and for that reason is done best by larger companies who have capital at their disposal. Branding is all about creating extra perceived value for a company over other similar companies in the market place. This extra perceived value can be known as brand equity and can be a major competitive advantage to companies.

Brand Equity has the potential to have major effect on bottom line results. Brand equity is defined as A brand’s power derived from the goodwill and name recognition that it has earned over time, which translates into higher sales volume and higher profit margins against competing brands. It is the remaining value placed on a product, service or company when you remove all of the tangible assets and are left only with the intangible. It is possible to put monetary value on this brand equity, an obvious example being Apple whose value is estimated by BrandZ to be around $153,285 M.

If a company has high brand equity it will reap the rewards. Firstly brands with high equity can command higher prices from their consumers. Consumers willingness to pay higher prices comes as a result of high brand equity. The financial advantages of branding are compounded by the fact that generally speaking strong brand sell more units than unbranded or weakly branded products. Brand equity can be seen as an unfair advantage to companies. One of the chief purposes of branding is to differentiate a product or service from its competitors.

We can see excellent examples of this with products such as Hoover, Kleenex and iPod where the value placed on the goods extends beyond the functionability of the products to the emotional. Vans are not just shoes, they represent a skateboarding culture, iPods are not just an MP3 player but a statement of pop-culture. Ultimately these brands have brand equity, i. e the value left in a brand after all the physical attributes have been taken away. This means that the brand itself has value beyond the product or service and results in the company’s ability to charge higher prices and the willingness of consumers to pay these higher prices.

Branding has moved on as businesses have moved on. We see where once it was once enough for a company to solely talk about the functional benefits of their products, it is no longer good enough. Consumers are now not only concerned with the functionability of products but also with the emotional appeal of the brand and what the brand will say about them. This ties in with Maslows hierarchy of needs. Maslow’s hierarchy of needs indicated to us the shift up the pyramid from the physical needs of consumers towards the emotional, esteem and belonging needs.

This is where the most successful firms capitalise. An excellent example of this is Apple whose core values are thinking differently and changing the world, and Coca cola and they’re push towards happiness and a sense of belonging. Branding is all about differentiation. Stephen King said; “A product is something made in a factory; a brand is something bought by a consumer. A product can be copied by a competitor; a brand is unique. A product can be quickly outdated; a brand is timeless. This is the very root of why companies should brand their products. Brand equity is a massive asset to the company. It is relatively easy for a company to replicate another company’s physical assets as well as their logo and packaging etc. However it is the brand equity that cannot be replicated. This is where the competitive advantage stems from. A perfect example of this is Pepsi and coca Cola. In a blind taste test, the result indicated that the majority of Americans, in fact, favour Pepsi over Coca Cola.

Coca Cola is the number 6 brand in the world and Pepsi doesn’t even reach the top 50. Coca Cola’s huge success is entirely to do with its effective branding which has lead to massive brand equity and it’s bottom line results speak for themselves. Heuristics are mental rules of thumb or shortcuts that simplify the decision making process for the consumers, also known as “mental biases”. This means that consumers do not have to go through an analysis of every detail each time they make a new decision. Heuristics are fundamental to the concept of branding.

Customers, with the use of heuristics, associate certain brands with certain things. Examples of this is the association of Apple with innovation, Coca Cola with happiness and Volvo with safety. Heurisitcs can be used by marketers the create mental short cuts between their brand and quality. An example of a firm who have been successful in doing this is Mercedes-Benz. While this takes a lot of time, it can be hugely profitable to the companies who manage to do it effectively. For a brand to work effectively it in necessary for it to resonate with customers.

The company and the values they stand for must be carefully formulated by the company in order to ensure that they are customer focused. Highlighting to the customer a set of values that they will identify with and not ones that the company think the customer wants to hear. In order for branding to be effective it is essential for the company to not only be consistent over time with their values but they must also show how these values affect their way of doing business. These values must appeal to the customers emotions; associating happiness with a brand as coca cola did.

By standing for something that the customer believes in the customer will be more likely to purchase the product because they believe that the brand is saying something important about them. So why should companies brand themselves? A major reason, as mentioned previously is that branding happens whether the company want it to or not. The company should be in control of the conversation that they are a part of. Strong brands have stronger voices than unbranded goods or weak brands. If brands do not have a voice and values they will not be able to stand for anything.

Brand extensions of a strong brand are much more likely to be successful in their endeavours than weak brands. Secondly, as is indicated by the concept of branding, strong brands are much more likely to develop relationships with their customers. Depending on the nature of the brand or the product, this could provide the firm with a sustainable, long term customer base giving the firm a sustainable, steady and predictable income. However, although the advantages of branding are numerous, it is also necessary to discuss the problems associated with.

The primary one being the cost. Brand management takes huge amounts of time, expertise and skill. This may not always be available to the business. Branding involves giving the company an identity, values and something to stand for. It is impossible for this to be done over night. Branding, when done correctly involves introducing a whole culture into the organisation from everything to how the package their goods, to how they treat their employees to how they advertise. Their values and culture are what supports the brand. This can take a huge amount of time.

It takes years to build up a corporate culture and to convince customers and employees and suppliers that the company values are not just fluffy window dressings for the customers but are at the very core of the businesses operations. Another major downfall of companies who brand is the business’s inability to recognise that the brand must go beyond the logo and the packaging. It must incorporate all aspects of a business. If different aspects of a business are conflicting the credibility of the business will ultimately be diminished.

Branding requires a huge amount of diligence and a concrete vision of where the company is headed. This doesn’t require massive investment but does require a huge amount of consistency in how the company operates. Companies who are implementing new brands must understand the importance of building the relationships with their consumers. Consumers especially do not trust large corporate entities and so it is important for brands to let them see the culture themselves rather than just assuring them that it exists. Many consumers see certain brands as a quality stamp.

There are no more obvious examples than 2 of the world’s biggest brands; BMW and Apple products which are perceived as high quality brands. Customers know when they purchase one of these products that they are guaranteed the quality they are paying for. This is a massive advantage to strong brands when setting a price point, as it makes customers much more willing to pay a premium price than they would for an unbranded good. This essay has highlighted the reasons why strong brands deliver higher calibre results through innovation and through appealing to the consumers emotions.

Brand equity is a massive asset and its effect on bottom line results speak for itself.

References

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