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| How important is Vaule of brand to the consumer & company? |
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How important is Vaule of brand to the consumer & company?
How important is Vaule of brand to the consumer & company?
The brand: A source of value for the consumer
Although we are primarily dealing with brands and their
optimization, it is important to clarify that brands do not
necessarily exist in all markets. Even if brands exist in the
legal sense they do not always play a role in the buying
decision process of consumers. Other factors may be more
important.
For example, research on 'brand sensitivity' shows that in
several product categories, buyers do not look at the brand when
they are making their choice. Who is concerned about the brand
when they are making their choice? Who is concerned about the
brand when they are buying a writing pad, a rubber; felt tip
pens, markers or photocopy paper? Neither private individuals
nor companies. There are no strong brands in such markets as
sugar and socks. In Germany there is no national brand of flour.
Even the beer brands are mostly regional.
Inherently, brands exist as soon as there is perceived risk.
Once the risk perceived by the buyer disappears, the brand has
no longer any benefit. It is only a name on a product, and it
ceases to be reference mark, a guide or a source of added value.
The perceived risk is greater once the unit price is higher or
the repercussions of a bad choice are more severe. Thus the
purchase of long lasting goods is a long term commitment. On top
of this, because humans are social animals, we judge ourselves
on certain choices that we make and this explains why a large
part of our social identity is built around the logos and the
brands that we wear. As far as food is concerned, there is a
certain amount of intrinsic risk involved whenever we ingest
something and allow it to enter our bodies. The brand's function
is to overcome this danger which explains the importance of
brands in the market for, for example, spirits such as vodka and
gin.
The Brand: A source of value to the company
Why do financial analysts prefer companies with strong brands?
Because they are less risky. Therefore, the brand works in the
same way for the financial analyst as for the consumer, the
brand removes the risk. The certainity, the guarantee and the
removal of the risk are included in the price. By paying a high
price for a company with brands the financial analyst is
acquiring near certain future cash flows.
If the brand is strong it benefits from a high degree of loyalty
and thus from stability of future sales. At Volvic, 10% of the
buyers of this brand of mineral water are regular and loyal and
represent 50% of the sales. The reputation of the brand is a
source of demand and lasting attractiveness, the image of
superior quality and added values justifies a premium price. A
dominant brand is an entry barrier to competitors because it
acts as a reference in its category. If it is a prestigious or a
trendsetter in terms of style it can generate substantial
royalties by granting licenses, for example, Naf-Naf earned over
six million pounds in net royalties in 1993.
Investment in production, productivity and R&D. Thanks to these,
the company can acquire specific know-how, a knack which cannot
be imitated and which in accounting terms is also an intangible
asset. Sometimes the company temporarily monopolizes the product
by registering a patent. This is the basis of marketing in the
pharmaceutical industry but also companies like Ferrero, whose
products are not easily imitated despite their success.
About the author:
Visit bra
nding strategies or brandin
g issues for more information on Branding your product or
service.
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| Category
branding online products |
Author
David Gabbitas |
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