The continuously increasing range of available products means that individuals are rarely in a position to compare all products with each other before making a purchase decision. Purchasing behavior is therefore often characterized by shortcuts designed to shorten the decision-making process. Many consumers intuitively reach for well-known brands because they see them as a kind of promise to customers and associate their products and/or services with an adequate standard of quality. Given this background, it seems all the more important for organizations to invest in building up their own brands and visibility in order to stand out from the competition. Thus, the question arises to what extent establishing a brand has an impact on the overall success of organizations. This post will look at how brand awareness affects consumer buying behavior, what elements influence brand equity, and why establishing a brand is a key success factor for many organizations.
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To create a brand, it is no longer sufficient to develop an attractive logo or a catchy slogan. Rather, a brand emerges from the totality of all representative actions of an organization to the outside world. Building a brand yourself involves significant costs, and many large organizations are expanding their brand portfolios through strategic acquisitions, for which they sometimes pay a substantial premium. One reason for such overvaluation is that in practice it is difficult to adequately assess explicit brand equity. Organizations thus accept paying a purchase price that is (actually) too high in order to integrate an external brand into their own portfolio.¹ Even if the purchase price is significantly higher than the actual value of a brand, such an acquisition is often profitable because brands have value for both the owner and the customer. However, many organizations are not even in a position to take over existing brands but are faced with the challenge of creating their own brand. It is important to remember that it is always the overall package that counts and that the focus should not only be on individual elements such as the name or the logo. A high brand value can only be achieved if all representative elements are brought together in a coherent construct. It should also be taken into account that different approaches are required depending on the situation. Different measures are needed to build brand equity than to maintain an existing brand equity.²
The importance of brands for organizational success essentially results from the fact that consumers perceive the individual brands as the first distinguishing feature between the various products. In order to differentiate from other brands, it is necessary that both establishing and managing the brands is done strategically. A key challenge within organizations is the different terminology used in different areas. An accountant understands the term brand equity differently than a marketer. Thus, it takes effective communication within the organization to create a strong brand. It is undisputed that brand equity always results from the perception of customers. Regardless of how the brand is perceived by the owners or other stakeholder groups, the brand is only linked to a monetary value if it triggers an increased purchase intention in the customer through positive associations. When it is said that added value is created by the existence of a brand, different understandings exist here as well. On the part of the organization, added value can mean that a branded product can be sold at a higher price, whereas a consumer benefits, for example, through a simplified purchasing decision or the expected standard of quality. However, the central function of the brand remains differentiation from other products and the creation of a unique offering.³
Even organizations that are in a monopoly-like market environment invest in establishing their own brand in order to create even higher entry barriers for potential competitors. However, since most suppliers are in a situation where they are competing with other organizations for market share and customers, effective differentiation from competitors’ products and/or services is essential. An unknown brand will always have a harder time achieving sales success than a well-known brand. The only exception that seems conceivable here would be a situation where a brand is strongly associated with negative aspects, so that customers actively avoid using its products and/or services. People are creatures of habit and in many situations it can be assumed that purchasing decisions are also made on the basis of established patterns. If a consumer has a specific need, they are likely to go for products and/or services from brands they know and have a positive image of. Even if there is little or no difference in quality between the offerings of different brands, brand presence could lead to a perception bias such that an already familiar brand is preferred. Organizations would thus benefit from the fact that they are already present in people’s minds and hearts.
However, building one’s own brand presence is an extensive process that involves a great deal of time and considerable costs. Therefore, practitioners should always be aware that the creation of brand equity is a long-term process. The high level of resources required could also lead to an organization’s financial success being compromised in the short term. In particular, organizations that prioritize the financial interests of their stakeholders could face problems here, as they have to justify the high expenditure to the owners. However, a strong brand benefits all stakeholders in the long run. Branding allows organizations to manage external perceptions and create a public image that positively influences long-term success. A brand that manages to generate emotional value for its customers creates an appeal that will be reflected financially in the medium term. In addition, a strong brand identity can also promote the expansion of the brand portfolio by transferring positive associations to new brands and consumers granting them a leap of faith. However, it must also be emphasized at this point that many organizations fail in their attempt to build a strong brand.
Branding is an effective tool for organizations when it comes to standing out from the competition and creating a unique brand. However, explicit brand equity can only exist if the brand manages to positively influence consumer purchase intent. In particular, when customers attach emotional value to the brand, organizations can generate long-term competitive advantages, as competitors find it difficult to duplicate this emotional connection. However, building one’s brand presence requires a great deal of resources and can have a negative impact on the organization’s financial success in the short term. Managing external perceptions and establishing a foothold in the minds and hearts of customers requires a great deal of effort and time. Thus, when organizations invest in establishing a brand, they should always be aware that this is a long-term process that will have a positive impact on future market position, not short-term success.
¹ Cobb-Walgren, C. J., Ruble, C. A., & Donthu, N. (1995). Brand equity, brand preference, and purchase intent. Journal of advertising, 24(3), 25-40.
² Farhana, M. (2012). Brand elements lead to brand equity: Differentiate or die. Information management and business review, 4(4), 223-233.
³ Wood, L. (2000). Brands and brand equity: definition and management. Management decision, 38(9), 662-669. https://doi.org/10.4236/ce.2010.13026.