Advantages and disadvantages of branding

The definition for brand by Professor Peter Doyle “A name, symbol, design, or some combination which identifies the product of a particular organization as having a substantial, differentiated advantage” (O’Malley, 1991, p.107). According to Blackett (2003), the word brand comes from the Old Norse brandr, meaning to burn. The farmers in early days, used to stamp their ownership on livestock, and the trade buyers would use brands to distinguish between cattle of one farmer and another. A farmer with a good reputation for the quality of his animals would find his brand much sought after, than the brands of farmers with a lesser reputation were to be avoided (Blackett, 2003).Thus the brands were used as a guide to choice and this role has remained unchanged to the present day.. Brands are mainly focused to play on the emotions and nature of human beings. Only humans are capable of creating a strong bond and feeling to objects and random symbols and logos. Once the customers are attached to one particular brand it makes it very difficult for the competitors to enter the market and replace the current product of a particular brand. Organisations find different ways to take full advantage of this human behaviour -thus popularity of branding (Rooney, 1995). According to Blackett (2003), brands not only depend on the names but also many other visual distinctiveness like symbols or logos. For example, Nike with its tick-like ‘swoosh’, the ‘golden arches’ of McDonald’s, BMW roundel and briskly walking gentleman of Johnnie walker.. According to Blackett (2003), Brands create an impression which cannot be removed or erased of customers mind easily. In developed countries, the diversity of choice of brands puts tremendous pressure on those making and selling products to offer high quality ,excellent value and find more effective ways of differentiating themselves and securing competitive advantage over other brands(Blackett,2003).

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Impacts of Branding

Financial value of brands: The main advantage of businesses of owning a strong brand is unquestionable. Brands which are able to live up to their customers’ expectations can expect their loyal buyers to return at regular intervals .This helps the brand owner to forecast the cash flow and in turn helps in planning and developing the business with greater confidence .

Brand Equity is defined as certain marketing outcomes that result from the marketing of products or service as a result of its brand name that would not occur if the same product or service did not have that name (Keller, 1993).Strong brands would directly result in maintaining a strong financial value for that particular Company. According to Blackett (2003), the stock market value of Coca-Cola Company in mid-2002 was around $136 billion, but the net asset value of the business was only $10.5 billion. These clearly show us that the remaining market value (around $125 billion) depends on the shareholder’s confidence on the intangible assets like brand names (Brand Equity). Gillette’s balance sheet shows physical, tangible assets of mere £4 billion but its brands were worth £10 billion (Jobber, 2007).This is a clear indication that brands generate high-quality earnings which affects the overall business performance. The above examples show that Owning or possessing a strong brand by a company is very beneficial as they have high financial value. Thus brands provide a secure income which can be classified as productive asset, the same way like other traditional assets (Plant, Investment, Cash and so on).

Trustworthiness of brands: Consumers place a high value towards the brand they trust. Consumers trust in Nordstrom has created higher level brand equity for Nordstrom stores (Lassar, Mittal and Sharma, 1995).But on the other hand; distrust on the brand by the consumers may result in negative effects on brand equity. For example Sears automobile repair service lost its consumer franchise because it was revealed that it made unnecessary repairs (Lassar, Mittal and Sharma, 1995).But the Companies need to make sure that they maintain the quality and are able reach the expectations of their consumers, if not the fallout can be catastrophic was when once strong brand Marks &Spencer brand lost the trust of many of its Customers (Jobber, 2007).

Brands on Consumer perceptions and preferences: Jobber (2007) represents a survey based on De Chernatony and McDonald (1998) and Doyle and Stern (2006) findings. A bunch of consumers were divided into 2 groups and asked to taste Diet Coke which was the market leader in diet Colas, and Diet Pepsi. The first group tasted the drinks ‘blind’ (Identities of the brand were concealed) and were asked to make a preference. The procedure was repeated for the second group with the brand identities shown.

The results show that the consumers preferred Diet Pepsi (51%) over Diet Coke (44%) when the brand identities were concealed. But when the brand identities were shown consumers preferred Diet Coke (65%) over Diet Pepsi (23%).This shows us that how strong brand name can influence consumer’s preference and choices.

Brands yield high profits: Important feature of strong brand is Price premium. Price premium acts as an indicator of consumer loyalty .Price premium of a brand is the amount the customer will pay for the brand in comparison to set of other brands offering same or similar benefits (Aaker, 1996).For example, consumer may be willing to pay more (10%) for coke than Pepsi or may be willing to pay double the amount to buy a car with a brand name Mercedes than a Toyota even though both have the same features and capabilities. Jobber (2007) represents a results based on De Chernatony and McDonald (1998) and Doyle and Stern (2006) findings in a car industry. Toyota and General Motors(GM) resulted in two identical cars which are manufactured from the same plant in Saone was branded the Toyota Corolla and the other GM’s Chevrolet Prizm.The production cost were the same but Toyota was priced higher than the Chevrolet .Despite the price difference ,Toyota was able to achieve twice the market share of GM. The reasons for this was that the consumer’s had excellent reputation of the Toyota brand has their cars are more reliable than the GM’s brand (Jobber, 2007).Thus strong brands are always associated with premium price which will yield high profits. Some of the firms like Intel, conduct surveys asking people in computer stores how much discount would be needed before a customer would feel comfortable to buy a personal computer without Intel product (Aaker, 1996).According to Aaker (1996), This methodology or practice helps Intel to keep a track on its price premium and which can be used to evaluate the marketing programs and to track the overall performance of the brand.

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Brand Extensions: Brand extensions are when an organisation or a firm uses established brand name to introduce a new product into the market (Keller, Aperia and Georgson, 2008).The main reason behind this is to minimize introductory cost of a product into the market and to increase the success factor of the product by gaining consumer acceptance. For example, Jello frozen pudding pops, Clorox laundry detergent and Ivory shampoo so on (Aaker and Keller, 1990).The benefit of brand extension is to improve the brand image. When a new product is introduced into the market in association with a well-established brand, consumers make inferences and form expectations of the product on what they already know about the parent brand.

Brand extensions may have negative impact: Brand extension proves beneficial but at the same time may have negative impacts. According to Loken and John (1993) findings, those unsuccessful brand extensions can dilute brand names by diminishing the attribute beliefs that consumers had learnt from the parent brand name. Consider General Motor’s merger with Cadillac Cimarron, this model was ‘relative’ of models in other GM lines (Keller, Aperia and Georgson, 2008).But Cadillac Cimarron failed to generate sales with this market segment and even existing Cadillac owners hated it.Thus resulting in drop of Cadillac sales in the mid-1980s (Keller, Aperia and Georgson, 2008).

Impact of anti-brand websites: Strong brands are always prone to criticism. One such criticism is in the form of Anti-Brand websites. These websites rely on visual expression, memorable domain names and critical language to target a particular brand and create negative online identity for that brand (Krishnamurthy and Kucuk, 2008). Some of the Anti-Brand Domain Names are Amexsux.com for American Express, killercoke.org for Coca-Cola and MSboycott.com for Microsoft (Krishnamurthy and Kucuk, 2008).According to Krishnamurthy and Kucuk (2008), the reason that strong brand are targeted by these websites are due to their popularity. Strong brands are well-known and it causes negative impact on its brand value and calling for their boycott may cause a noticeable impact on market shares. Negative impact may change consumer’s attitude towards that particular brand and leading to a drop in brand value.

Social value of Brands: There’s always an argument regarding the social value or the social effect of the brands. According to Lindemann (2003), Strong brands clearly provide economic benefits to their owner but controversial question that keeps recurring is ‘Do brands create value or benefits for anyone other than their owners?’ Many people around the world link strong brands with issues like exploitation of workers in developing countries. But I agree with Hilton (2003), that many innovations that improve quality of life for individuals and communities are generated by brands. Brands are the source of wealth as they form a crucial economic growth and development of a particular country. In Brazil, Unilever’s Ala brand was created specifically to meet needs of low-income consumers (Hilton, 2003). Nike was targeted for “sweatshops” scandals of 1990s, but now it has become one of the leading players in tackling issues related to poor working conditions and human rights abuse in the developing countries (Hilton.2003). I would like to conclude, that strong brands will always play a major role in a firm’s economic development by yielding high profits which in turn helps economic growth of a country.