Brand Reduces Your Cost of Selling

I am sure most of the readers must be aware of the classic experiment done to know the value of the Brand. In this experiment business minded people were asked, what would happen to the ability of raising funds of the Coca Cola Company if its assets gets destroyed in a fire one day. Most of people said it would only cost time, efforts and money, as it would be very easy for the company to raise funds and re-create its assets around the world again. On the other hand, if because of some reason all customers of Coca Cola Company taken sick of partial amnesia one fine morning, the answer given by people was that Coca Cola would not remain Coca Cola despite its having all assets around the world intact. Therefore, the value resides in the minds of customers and not in company’s assets. This is value of the Brand.

Time and again, it has been proved that brand creates a business for a company and not a product. Products are only a means. There are instances in our life, proving to us that we buy only brand and not the products. Yes, sometimes confusion may arise when you buy a product which is ‘not-so-known’ to you or a product is sold to you by the shopkeeper, saying it is a good product or even better than the product you are looking for. Your not knowing about a brand does not mean that a brand does not exist. Possibility is there that the product you bought, represent the extreme end of ‘not-Known-to-you’ brand.

We do buy only a brand and not a product. Seems quite philosophical in nature, but it is the fact.  The challenge one however, can face in deciding whether it is a ‘Known’ brand or ‘Unknown’. You may be surprised by my creating a new category of something called ‘Unknown’ brand. Yes, there it exists. I simply mean here is that it is not possible for a customer to remember entire range of brands in a particular category. Bust as the product exist, so does the brand.  

Branding is the process of creating distinctive and durable images about products in the minds of customers. Therefore, branding does create a space in the mind of a customer. The real challenge is how to use the mind of customer which is a finite resource. On the other hand, market is flooded with enormous information. A customer is not capable to retain all brands related information and call the information at the time of requirement. It thus means companies need to do something which invariably - by design & even by default –its brand is recalled by its customers, time & again at the split of a second; as decisions, are taken so quickly by customers. Any slipping at the moment of customer’s taking a decision, will lead to switching of customers to some other ‘recently seen’ brand. Interestingly, it has been found that customers many a times end up choosing products that are easier to purchase rather than best for their purchase.

In a study it has been found that around 95% products launched in the world, fail within a year of their launch. Still, companies keep innovating and spending millions of dollars on R&D, every year. Reason of this spending is only one. A new product if at all succeeds in finding a place in the mind of customer, is much more than the cost incurred on it. But, the success is less on the product features and more due to finding a place in the mind of a potential customer. The companies do every bit & trick to get their brands registered within the mind of its customers. This helps companies, attracting to its products, every time a customer takes a decision to buy a product in a particular category.

If I put it in other words, it is a brand which change ‘me too’ commodity into a ‘must have’ purchase, helping your product to stand out in an increasingly cluttered marketplace.

Insightful is the thought that once established, a product gets sold on its own. It makes a company sale its products at lesser cost because company does start incurring lesser cost on buying space in the external world, like shop & retailer counters etc. So big is the gain, still companies do try doing all other things to cut the cost except investing in its branding and en-cashing it for many years; giving them  the benefit of lesser cost of selling and better profit margins.

My writing this note is one and only one. If branding helps in reducing the ‘cost of Selling a product’ than why CEOs are reluctant and see branding cost, as an expenditure and not an investment?  Generally, CEOs keep harping on the need of following Cost Leadership Strategy in today’s mostly ‘commoditized market’, but turn their face to some thing else to achieve it.  Isn't it the case, with you reader?

Secondly, each & every company strive to shift its products from ‘one end of Unknown category to the other end of Known’. It means, try converting a commodity product into a ‘Different Product’. Only reason of doing so is to lower the cost of product as more &more products will sell and sometimes intention is to get 'premium' on it too.

The branding gives a company a much stronger platform for growth through new products/markets and retailer distribution, once brand is established.  It leads to creating a brand that helps to build engaging, long term relationships with your customers. Although, looking at the brand value, many companies have started investing heavily in their brands. Top twenty brands in the world together valued around $ 800 billion. Coca-cola alone stands at $80 billion. Companies can’t even think creating a business of that magnitude. Although, companies have realised the importance of branding and even have started showing their brand values on their balance sheet, it is still to be used a weapon to make a profit.

CEOs, it is not only manufacturing a product, selling a product and try making some margin on it. But if you want to have a long lasting competitive advantage over your customers, create a brand – that will sell your products, continuously at lower cost; giving your companies better than average profit margins. I hope you look for that more than manufacturing & selling. Isn’t it?? So, start investing and create wealth for your stakeholders.