Filed under: Private Business

Branding is closely tied to any conversation regarding product differentiation. The stronger your company is in both of these areas, the greater the value of your enterprise. Coca-Cola represents a good example of this point.

When Coca-Cola was first introduced into the marketplace, there were many other soda producers competing for marketshare. The challenge for Coke was to convince consumers to reach for their product over any other choice. For over a century, they have been wildly successful in creating this market perception. Coke’s strong brand identity has shown that creating a successful brand is as much about buyers recognizing your product for its name or symbol, as it is about buyers associating that name or symbol with a product that is meaningfully unique – or differentiable.

Along with the “factual” evidence as to why some products are better than others, product preference is also often driven by a buyer’s emotional tie to the product’s name or symbol. Think of the Nike swoosh or Apple’s symbol of a partially bitten apple. Consumers often think of the brand first, before looking at the actual product being offered. Is the brand trustworthy, innovative, on-trend, or any of the other factors a buyer considers before making a purchase? Whether a buyer ultimately makes a purchase can have as much to do with the buyer’s association with the brand, as with the product itself.

So far, we have stressed the positive aspects of a brand. But in truth, the opposite also holds sway. When you think of Volkswagen, do you think of their long history of producing successful cars, or do you remember that they were caught cheating on fuel efficiency? Volkswagen’s bad deeds have not only cost them $14.7B in settlement fees, but also presented them with the long-term challenge of re-convincing the market that they will be trustworthy in the future.

Like many things, not everything is black and white. Take Whole Foods, for example. They enjoy a brand of excellence in providing natural and organic foods, but they have also been dubbed “Whole Paycheck” because of how expensive it is to shop there. Which of these presentations more prominently reflect your understanding of the company?

Ideally, the goal in all of this is to equate positive brand awareness with brand advantage. The stronger the connection is between the two, the stronger the business value. It is also important to try and quantify your actual brand awareness in terms of perception and effectiveness with active market research. Are people really willing to spend more for your brand? Do you really deliver on the promise of your brand? Talking to your customers is the only way you can find out.

A final consideration around brand is how well your brand is protected. If you have unique intellectual property, do you have patents to protect your product and your market position? Do you have essential trademarks? Do you track the market to see if your brand is being compromised? Recently, there has been a great deal in the paper about Trader Joe’s’ trademark infringement lawsuit against a Canadian grocery store, Pirate Joe’s. This issue is now being addressed in court and the seemingly small conflict is translating into millions of dollars of legal fees.

Branding represents an essential component in enhancing the value of a company and should be a constant part of any company’s strategic conversation.

© 2016 Clark Nuber PS All Rights Reserved

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.