Brand power: why investing in the irrational is entirely rational

Bryce Michelmore
January 23, 2013

A couple of incidents lately have had me pondering the mysterious and seemingly intangible essence of brand.

I have always known that branding was an important part of the bond between consumer and product, but who would have predicted the extent to which something as simple as packaging could affect people’s experience of a product?

The tobacco industry might have. And they would have been right.

As tobacco companies begin to comply with the Australian requirement for plain packaging, it’s been interesting to note that rusted-on smokers are complaining that their preferred choice of cigarette actually tastes worse when stripped of the visual elements of its branding.

For anyone who doubts the power of branding, herein lies an important lesson – branding can change a product (or at least the customer’s perception of it).

As a related observation, I have always been amazed by the fact that people will pay a premium to wear certain types of clothing because of the brand they conspicuously advertise. To me, it’s ironic that companies can make money from merchandise that is actually performing a promotional function.

V8 Supercar racing is a prime example. Not only are people fanatical about certain teams and their associated sponsors, but merchandise that advertises everything from auto parts retailers to telecommunications and alcohol frequently sells out at major race meetings.

But branding is powerful, and the loyalties it engenders are not always rational.

Sometimes those loyalties can even last a lifetime, as the Australian car industry neatly demonstrates. The challenges faced by manufacturers in this country are well documented, so the demise of locally produced cars should come as no great surprise to anyone. Yet there is a veritable public outcry at the thought of losing the Commodore or Falcon. These are both products of global companies headquartered in the US, but they have long since been adopted as Australian icons that are worshipped by their respective tribes.

So branding is often irrational in basis, but then much human behaviour is irrational. And for businesses, this has direct effects on the bottom line. The value of many modern businesses is primarily derived not from a product or service but from brand equity. And we’re not talking about some abstract concept here; brand equity can literally be worth billions.

If you seek longevity in business, you need to invest in building your brand equity. Without it, you’re just delivering another commodity in an increasingly competitive market.

Bryce Michelmore is an Account Manager at Wellmark.

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