Friday, November 04, 2005

When is branding necessary?

Note the use of the word necessary, as opposed to useful (good, important ... etc.) - I examine the question of when is branding needed. This may help answer when does branding add value, but that is an entirely different question, perhaps for another post.
My hypothesis is that branding is necessary when perceived product differentiation is low, either because of (a) low product differentiation or (b) poor cognition of product differentiation. (a) is easy to explain - if products are similar, might as well brand to differentiate yourself.
(b) is a little harder, so I will use two examples. Consider the iPod - essentially a commodity consumer electronics product, with many "me-too" devices available - yet, Apple commands a premium on the product because it's an Apple product. This is an example where the mass consumer has poor cognition of product differentiation - beyond the technical enthusiast, a bulk of iPod customers do not (and can not) understand the feature differences between Apple and the next guy's product - so they go with a name they trust, Apple. On the other hand, consider aspartame, a chemical ingredient that goes into low calorie sweeteners. The buyers in this case, chemists and chemical engineers at the firms that make table-top low calorie sweeteners, understand aspartame very well, and can easily make "feature" comparisons with other artificial sweetening products like saccharine and cyclamate, and therefore rely less on branding to differentiate products - they have high cognition of product differentiation. In general, the sophestication of the buyer in terms of their ability to compare products is inversely related to the need for branding.
If this model works, then a firm should ask the question whether either (a) or (b) are true for their upcoming product before committing to branding. If neither are true, perhaps your ad dollars are better spent elsewhere. Thoughts?
As a corollary, do sites like therefore transfer value from the seller to the buyer, by giving the buyer an ability to compare products that they otherwise could not?


Blogger Jas said...

Consider the impact of the decision to buy as the determinant whether branding is necessary or not (for case b).

On can leverage on the clout of his brand if the decision made by the consumer doesnot affect many lives. My take is when it does, "mere" branding does little because the product will be well researched. Other attributes of the product such as quality/performance, and Price will be the major determinants of the buying decision.

Whereas, when the purchase decision is only limited in its impact to a single consumer (or family), branding plays a role. What is important to know is what does the consumer consider before buying a product and what "means" he has to verify its performance. The fact that others are buying is a good indicator (when rest of the information is limited or the consumer does not have the means to acquire it - technical knowledge or otherwise).


6:43 AM  

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