Brands Are Machines for Delivering Quality Earnings at High Margins

Topics: Brand, Branding, Brand management Pages: 5 (2229 words) Published: December 12, 2012
"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...

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