What is the Significance of Branding?

You might have heard about the importance of brands and branding. What exactly are they, and why are they so important?

Brands Have More Value than Physical Assets

Coca-Cola is one of the most cited examples of branding. Let us look at the value of this company.

As at the end of 2007, the company had shareowners' equity of nearly $21,750 million. Shareowners' equity generally represents the net assets value of a company. On the other hand, the company's common stock was quoting at a total of nearly $142,300 on that date, i.e. between 6 and 7 times the value of its net assets.

Where did this excess value come from?

It came from investor's expectations about the profitability of the company. And this high profitability resulted from the brand name.

Any drink that contained the same ingredients as Coca-Cola but was sold under a different name could not have achieved the same volumes and profits that Coca-Cola did. The Coca-Cola brand has become so embedded in consumer minds that a dominant percentage of them ask for Coca-Cola by name when they want a brown colored carbonated drink.

Any company that takes the trouble to build a strong brand commanding consumer mindshare can expect similar results - high profitability and a valuation that far exceeds the value of its physical assets.

So How Do You Build a Strong Brand?

Let us continue with Coca-Cola. They might have built their brand originally through advertising. However, advertising alone could not have sustained a poor product. Unless a product meets consumer expectations, it would disappear sooner or later.

Coca-Cola would have spent millions of dollars to find out the tastes that drinkers of carbonated drinks prefer. The company's range of drinks catering to different tastes testifies to this effort.

Coca-Cola also created a visual symbol consisting mainly of its name written in a distinctive way to attach its brand to. This visual symbol is seen everywhere you turn to, at distributor outlets, in the media, at sports venues, and so on. People the world over have come to recognize it for what it is.

Presently, the focus of Coca-Cola is on highlighting its sustainable practices, say, on telling the public about how it uses the water resource in a responsible manner. It is seeking to gain people's goodwill by portraying itself as a corporate entity that cares for the environment.

Key Elements of a Brand

We see the key elements of brand building here - a distinctive symbol, creating wide awareness, meeting consumer expectations and generating goodwill. Brands emerge from the totality of these efforts by creating a favorable image in the minds of consumers.

It is this psychological image that builds consumer loyalty and leads to continued success of the company. Consumers come to trust the brand, having found that it meets their expectations and associating it with many things that they enjoy - such as sports events, their favorite personalities, a pleasing jingle and so on.

Why Do People Go for Brands?

Products without such a strong brand might be quite good, and might even achieve market share through word of mouth and other publicity. But a consumer new to the product might not want to take the risk of spending money on something that might not satisfy, and go for a brand the person knows about.

In Summary

Summarizing, we can say that a brand is built by:

• Creating a product or service that meets consumer expectations
• Creating awareness of the product or service by associating it with a distinctive symbol and publicizing the symbol and the product extensively, leading to brand recognition
• Associating the brand with pleasing experiences in different ways and thus building goodwill for the brand.

Communication is the key element of the brand building exercise. You create awareness through different kinds of communications. Goodwill is also built through communications. The communications take several forms such as press advertising, outdoor advertising, events, social campaigns, news releases, personal experiences with company personnel, and so on.

Gopinathan has advanced professional qualifications, decades of senior manager level business experience and also formal training in writing. With this background, he offers business writing services at http://www.promotional-writing-services.com website. You can contact him at gopinathant@gmail.com