The Myth of Branding

Posted by: Rod Kurtz on April 16, 2009

Today’s exaltation of the word "brand" is based upon a widely held premise that brands create sales. This is bogus. Brands do not create sales; great products do.

The false premise that brand equity drives sales gives marketers permission to engage in an expensive and elaborate ritual that is totally quarantined from the objective of the organizations writing the checks: to make money now and in the future. For example, a marketer runs a promotional campaign with the intent of building a brand. He detects a resulting increase in brand equity (typically by measuring the change in market awareness of the brand) and concludes that this campaign was a success, and goes to work planning the next. He wonders occasionally why he needs such complex formulas to attempt to model the correlation between brand equity and sales revenues.

If this marketer realized that branding is a by-product of sales (and not an antecedent), he would apply himself to those activities that drive sales—and ignore brand equity altogether. His objective would be a derivative of his company’s objective: to make sales now and in the future. He would measure his success by observing the correlation between the money he invests in promotional campaigns and the resulting change in sales revenues.

The problem with using brand equity as a proxy for future revenue is that it’s almost impossible to measure. Accordingly, you will need to find a metric that reflects the correlation between promotional expenditure and future revenues. In our experience, the best indicator of the long-term effectiveness of a promotional campaign is its short-term results.

Justin Roff Marsh
President
Ballistix
Chicago

Reader Comments

Ignacio Jaramillo L

April 16, 2009 11:55 AM

I think this affirmation is not true. Brands are the basis of sales, without a strong brand you cannot expect growing sales just because of a good product itself. Take any example in the market and you will confirm that people are willing to pay lots more for just a tag.

Kostrebic Kemal

April 17, 2009 3:35 AM

Justin,

I think you misunderstood whole thing about brand equity.

Measuring brand equity is not just measuring brand awareness. Brand awareness is least important fact in brand equity.

Most important is that you get direction how to build loyalty among customers, so you can manage your brand right way.

Best regards!

Justin Roff-Marsh

April 17, 2009 12:12 PM

Loyalty is another interesting subject. Why would you want loyal customers? They are the smallest spenders.

Big spenders in almost every category are disloyal -- they buy multiple brands!

Kostrebic Kemal

April 21, 2009 3:34 AM

I don't think loyalists are small spenders. In most cases, they are biggest spenders.

And also, as Ignacio said, brand has price premium characteristic. If they spend less, they will pay more!

And also, when you have strong brand, you will have to spend less on communication to meet your goals.

nupur

April 21, 2009 11:50 PM

Brands are something which do not atract the consumers but it is the confort which atract the consumers. It is very difficult to say about the loyal customers that they spend more or less but it is very sure that they stay for long with one brand as they are very cautious for the money they spend. The consumers choose the brand based on the calculative cost of leaving or staying with brand.

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