Brands … What matters the most

 

Brands!!! Companies spend billions of dollars in creating and establishing brands. Every product has a market leader with strong brand presence. Products with top brands dominate the sales in each sector. That makes me wonder why brands are so important and why they are relevant.

I am not a big fan of branding as a consumer. I believe many times established brands charge more just because of brand name. The brand associates itself with certain lifestyle and hence those products are priced higher than other products with similar application without offering any significant technological or material advantage. But still people buy those brands with huge price premiums. May be one reason is knowledge.

Compare two products a digital camera and soap detergent. Assume that you are buying these two products for same dollar value ($1000 each). What is your thought process? Do you care which brand to buy for soap? I personally do not care that much but I do care which digital camera I am buying. I am thinking why? As said if I am having same dollar value to spend then I must be spending same time on both the products. There comes the part of knowledge. We all know from years of experience that there is no special technology in Soap. Manufacturers may claim 100 different reasons but basic product is same and even if you buy unknown brand you are certain to get a usable product. (Provided you really don’t search for a bad one).

Digital camera is different. There are so many specification differences, feature sets and minute details that consumer is not aware of. You are not comfortable and confident to judge the product based on specifications only as you are not having detailed knowledge of the product. So the best way is to go for popular brand and assume market is right.

So brands benefit from lack of knowledge on part of consumer. If consumer is extremely knowledgeable then he will look at specifications, components used to build the equipment and decide which product to buy. This is another reason why brands usually do not work well in business to business environment. Businesses have skilled purchase managers who knows exactly what they want, who knows from experience what specs product should have and what performance is expected. 

So as consumers get more knowledgeable, the process of establishing your brand will get difficult, companies have to come out with truly innovative products to win over consumers and price premiums enjoyed by established brands will certainly come under pressure.

Signing off

Nikhil Parchure