Role of Brand for Consumers and Firms

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Brands identify the maker of a product and allow consumers to assign responsibility for its performance to that maker or distributor. Brands perform a number of functions for both consumers and firms.

Brands Role For Consumers

A brand is a promise between the firm and the consumer. It is a means to set consumers’ expectations and reduce their risk. In return for customer loyalty, the firm promises to reliably deliver a predictably positive experience and set of desirable benefits with its products and services. A brand may even be “predictably unpredictable” if that is what consumers expect, but the key is that it fulfills or exceeds customer expectations in satisfying their needs and wants. Consumers may evaluate the identical product differently depending on how it is branded. They learn about brands through past experiences with the product and its marketing program, finding out which brands satisfy their needs and which do not. As consumers’ lives become more rushed and complicated, a brand’s ability to simplify decision making and reduce risk becomes invaluable. Brands can also take on personal meaning to consumers and become an important part of their identity. They can express who consumers are or who they would like to be. For some consumers, brands can even take on human-like characteristics. Brand relationships, like any relationship, are not cast in stone, and marketers must be sensitive to all the words and actions that might strengthen or weaken consumer ties.

Brands Role For Firm

Brands also perform valuable functions for firms.10 First, they simplify product handling by helping organize inventory and accounting records. A brand also offers the firm legal protection for unique features or aspects of the product.11 The brand name can be protected through registered trademarks, manufacturing processes can be protected through patents, and packaging can be protected through copyrights and proprietary designs. These intellectual property rights ensure that the firm can safely invest in the brand and reap the benefits of a valuable asset. A credible brand signals a certain level of quality so satisfied buyers can easily choose the product again.12 Brand loyalty provides predictability and security of demand for the firm, and it creates barriers to entry that make it difficult for other firms to enter the market. Loyalty also can translate into customer willingness to pay a higher price—often even 20 percent to 25 percent more than competing brands.13 Although competitors may duplicate manufacturing processes and product designs, they cannot easily match lasting impressions left in the minds of individuals and organizations by years of favorable product experiences and marketing activity. In this sense, branding can be a powerful means to secure a competitive advantage.14 Sometimes marketers don’t see the real importance of brand loyalty until they change a crucial element of the brand, as the classic tale of New Coke illustrates.

For better or worse, branding effects are pervasive.16 One research study that provoked much debate about the effects of marketing on children showed that preschoolers felt identical food items—even carrots, milk, and apple juice—tasted better when wrapped in McDonald’s familiar packaging than when in unmarked wrappers.17 To firms, brands represent enormously valuable pieces of legal property that can influence consumer behavior, be bought and sold, and provide their owner the security of sustained future revenues.18 Companies have paid dearly for brands in mergers or acquisitions, often justifying the price premium on the basis of the extra profits expected and the difficulty and expense of creating similar brands from scratch.19 Wall Street believes strong brands result in better earnings and profit performance for firms, which, in turn, create greater value for shareholders.
Coca-Cola: Battered by a nationwide series of taste-test challenges from sweeter-tasting Pepsi-Cola, Coca-Cola decided in 1985 to replace its old formula with a sweeter variation, dubbed New Coke. The company spent $4 million on market research, and blind taste tests showed Coke drinkers preferred the new, sweeter formula. But the launch of New Coke provoked a national uproar. Market researchers had measured the taste but failed to adequately measure the emotional attachment consumers had to Coca-Cola. There were angry letters, formal protests, and even lawsuit threats to force the retention of “The Real Thing.” Ten weeks later, the company reintroduced its century-old formula as “Classic Coke.” Efforts to resuscitate New Coke eventually failed and the brand disappeared around 1992. Ironically, the failed introduction of New Coke actually ended up giving the old formula measurably stronger status in the marketplace, with more favorable attitudes and greater sales as a result.