What is a Brand and What is Branding? Importance and Advantages

American Marketing Association (AMA) defines a brand as a “name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller from those of competition.”

Whenever a marketer develops a new identity in the form of a name, logo, or symbol for a new product or service, he or she has indirectly created a brand. Marketers can thus build a brand in the eyes of the buyers virtually – anywhere the buyer has a choice.

It’s possible to brand the following categories  –

Product – examples include iPhone, Tesla, Victoria’s Secret.

Service – Golds Gym, Singapore Airlines, Ritz Carlton, KFC.

Firm – Microsoft, Facebook, Google.

Additionally even the following three fall under the purview of the brand –

Person – Kim Kardashian, Donald Trump, Lionel Messi, George Clooney.

Place – Germany, Dubai, Las Vegas, New York.

Sports & Entertainment – Los Angeles Lakers, Real Madrid, Indian Premier League, GOT.

Marketing Advantages of Strong Brands

Brands often use marketing as a tool to give them a definite shape amongst the users and also give them a competitive advantage.

For instance,

  1. For an improved understanding of product performance – Toyota.
  2. Greater trade cooperation and support – Coca Cola.
  3. Greater loyalty – Lego.
  4. Increased marketing communications effectiveness – Gillette.
  5. Less vulnerability to competitive marketing actions – Red Bull.
  6. Possible licensing opportunities – Disney.
  7. Less vulnerability to marketing crisis – Samsung.
  8. Additional brand extension opportunities – Nivea.
  9. Larger margins – Apple.
  10. Improved employee recruiting and retention – Marriott Hotels.
  11. More inelastic consumer response to price increases – Tesla.
  12. Higher financial market returns – Amazon.

What is Branding?

Branding is all about creating differences between products.

Pepsi vs Coke.

Branding is a process that includes creating a quirky name and image for a product in the consumer’s mind, principally through advertising campaigns with a consistent theme. It is all around creating a point of difference among similar looking products.

It intends to establish a differentiated presence in the market that pulls and retains loyal customers. Branding helps the marketers in educating the consumers about “who” the product is by giving it a name and other brand elements to identify as well as what the product does and why consumers should consider buying it.

Example: Pepsi vs Coke

Importance of Branding to Consumers

1. Shopping Behaviour

Branding aids in simplifying the shopping experience for the consumers as the marketed product enables the buyers to instantly and efficiently pinpoint what they want.

It significantly reduces the wastage of time and money on unknown products.

Example: Durex.

2. Emotional Attachments

The objective of branding is to build a brand worth that adds value to the features and functions of the product. This value comes from a brand personality and image to which the customers feel emotionally attached.

Example: Xbox.

3. Habitual Buying

Decisions related to purchases made by the consumer are mostly due to a habit. It often creates difficulty for the competitors to break well-established habits even by providing heavy schemes, substantial discounts, offers, etc.

Example: In the United States – Amazon Prime has 100 Million Members

4. Easy decision making:

With the experience and search of information, the buyers can make decisions swiftly and easily for deciding about the purchase of the brand.

Example: Uber.

5. Branding also Reduces the risks in product decisions

Customers may identify different types of risks involved in buying and utilizing a product such as;

Functional risk: When the product underperforms and does not meet up to the expectations.

Physical risk: When the product poses a threat to the bodily well-being of the user or others.

Financial risk: When the product is not worth the amount spent.

Social risk: When the product results in social embarrassment.

Time risk: When the failure of the product results in an opportunity cost of finding another product that meets the needs.

Importance of Branding To Firms

1. Identification of the market

A Brand name recognizes the market it serves – which in turn helps in assigning the responsibilities in the distribution phase such as warehousing, classifying selling and after-sale service.

Example: Coca Cola sells 3500 brands globally as a group company.

2. Legal protection

A brand name also offers legal protection for the branded products. It does so through trademarks, patents and copyrights. Registered trademarks protect the brand name.

Registered patents protect the manufacturing processes of the firm. Similarly, copyrights of unique designs protect packaging.

Example: Starbucks, the world’s largest coffee franchise, sued ‘SardarBuksh’, a Delhi (India) based coffee chain in 2018, which had 25 outlets for using a similar sounding name and logo.

3. Unique association

Associations are the effect of different feelings and images the brand plants in the minds of the consumers.

Example :

Coca-Cola is one great example of a brand that connects emotionally with consumers, thanks to the feeling of happiness it is associated with. For example, Coca Cola’s “Choose Happiness” campaign showed how to use emotions to connect with the public.

4. High market share

High positive customer perception about the brand leads to organic and elevated earnings which result in higher market share for the organization. A happy customer recommends the same service which met their needs to other contacts that help in getting more customers.

Example: Apple Airpods.

AirPods, with a 60% of global market share is way ahead of the competition, which comprises of wireless earbuds from brands such as Jabra, Samsung, Jlab, and Bose.

5. Acts as an entry barrier to other brands

A strong brand that meets customer needs efficiently creates a barrier to the entry of other brands into the market. This is due to the brand loyal customers that take a long time to switch to another brand or not at all.

Example: Gillette & Red Bull.

6. Branding builds Financial Value

Brands can be measured in financial terms and can be found on the asset side of the balance sheet. Strong and successful brands can be bought and sold by the organization.

Example: WhatsApp acquisition by Facebook. Facebook, Inc. announced it was taking over WhatsApp for US$19 billion on February 19, 2014.

At the time, it was the largest acquisition of a venture-backed company in history. Sequoia Capital witnessed an approximate 5000% return on its initial investment.

Facebook paid around $4 billion in cash, $12 billion in Facebook shares, and an additional $3 billion in restricted stock units yielded to WhatsApp’s founders Koum and Acton.

7. Importance Branding improves recognition

A logo is one of the significant components of the company’s brand. A professional logo design is simple to remember and catchy enough to give the desired recognition to the company.

Example: Logo of Netflix, World Wildlife Fund.