Good times or not, brands mean profit

Home Inside FCNews Good times or not, brands mean profit

In this fast-paced world of constant change with a countless number of advertising impressions seen each day, the importance of offering well-recognized, highly trusted brands has become greater than ever. Every year, many research projects are done to test the theory of brand strength versus buying habits, the monetary value a brand has, and a host of other things. And, whether these studies are done by the companies that own the brand or an outside source, one thing is clear: Brands, whether you own them or sell products under the name, add to a business’ bottom line.

In fact, the importance of being affiliated with a top-quality brand is even greater during tough economic times. A recent report, “Beyond Trust: Engaging the consumer in the post-recession world,” noted despite the recession creating a new consumer mindset when it comes to spending, “With the shift in consumer attitude, brand leadership became more important last year…As life became even more stressful and complicated, [consumers] welcomed the signposts of quality and reliability that brands provide. Familiar and trusted brands that delivered on their promises provided an element of certainty in a turbulent time.”

As a result, “many brands maintained and grew their value, even when selling at premium prices.” The study was produced by Millward Brown and The Futures Co., and is based off data from BrandZ and its most recent Top 100 Most Valuable Global Brands report.

It was noted during the height of the recession last year with people worrying about keeping their jobs and paying their mortgages, most did not consider price alone when making a purchase. Extensive studies bear out that even during trying times such as these, brands that created a strong appeal still commanded a price premium. In fact, only 7% of consumers bought on price alone. “The most valuable brands balance quality and value, whether at a high or low price,” according to researchers.

Brief history

When talking about brands and what they do and offer, remember the whole concept of brands has been around for thousands of years. In the most basic concept, people—ranchers and craftsmen in particular—have used initials, a symbol or another unique mark to identify their work and would either burn or etch it into their belongings such as cattle, or handiwork, be it jewelry, silverware or some other creation.

Over time, consumers started to seek out the livestock, pottery, furniture, etc. bearing certain marks—brands—because they identified it with things they liked. Still, the concept of using a brand as a marketing tool really came into existence following the Industrial Revolution and, more precisely after World War II. New communication systems, and improved modes of transportation made it easier and necessary for companies to advertise their brands over larger regions.

Of course, the legal system followed with laws that recognize and protect brand names and, thus paving the way for branding to become part of life.

Top brands growing

According to BrandZ, which has been ranking the monetary value of brands on a global scale since 2006, the worth of the Top 100 has grown 40% to an estimated worth of $2.04 tril- lion. When measured against the S&P 500 over this five-year period, the brands portfolio has grown 18.5% in value compared to 11.5% for the stock index. “[This] positive performance…provides corroborating evidence that strong brands are resilient,” BrandZ notes. “They not only maintain their value but can appreciate significantly in value even during the most trying economic circumstances.” This should not come as a surprise. In 2007, as the recession was taking hold, Derrick Daye and Brad VanAuken of Branding Strategy, said, “In an over-complicated world, we search for simplicity wherever we can find it. And great brands provide that in spades.”

Why is this the case? Day and VanAuken feel brands are “simply an efficient means to an end. And powerful brands are those that stand for and represent a distinct category or con- cept in consumers’ minds.”

In the “Beyond Trust” report, the authors note, “Brands serve their owners by allowing them to cultivate customer recognition of, and loyalty toward, their offerings. Brands also serve the consumer by supplying information about the quality, origin and value of goods and services. Without brands to guide buying decisions, the free market would become a confusing, faceless crowd of consumables. An established and respected brand can be the most valuable asset a company possesses.”

These feelings and those of others who have studied brands appear to be correct as research on consumer behavior has shown. Dr. Ovidiu Moisescu, who has researched the importance of brand awareness in consumers’ buying decisions and perceived risk assessment, concluded most consumers “would prefer buying brands that are familiar to them.” While this is encouraging news to retailers who offer known consumer brands, not all brands are equal when it comes to perceived value, quality, trust and any number of other factors end users assign a product. Not to mention the fact there are more than a half million brands legally registered around the world—and the countless other generic names that inundate consumers on a daily basis.

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