Why Is Branding Important?

In the book Principles of Marketing (Philip Kotler/Gary Amstrong) a brand is defined as a "name, term, sign symbol (or a combination of these) that identifies the maker or seller of the product". Examples of brands are Starbucks, McDonald’s, Coca-Cola etc.

Branding is a marketing practice is which the company establishes an image of the company in the eyes of its consumers. Branding helps to distinguish a brand’s product or service from its competitors’ products or services. It helps a company stand out in its industry from others. It is a communicating tool for the company towards its consumers. It also helps the stakeholders to understand what to expect from the company when they want to avail a company’s product or service.

Branding is crucial because of the overall influence it can have over a company. There are various reasons why branding is important which will be discussed further in the article.

Recognition and Perception of the Brand

Branding can help get recognition in the market. Take for example, the McDonald’s famous golden arches. Even a person who does not eat at McDonald’s can easily recognize the logo. That is the power that a branding holds. Over years McDonald’s has been successful in developing excellent branding strategies that have given them an edge over their competitors. If a brand is easy to recognize, a consumer is more at ease while purchasing from the company.

Another great example is that of Xerox. It has become so popular as a brand that now people don’t say photocopy, they say I want a Xerox of something. That is the power of a brand.

Branding can also help change the perception of the brand in the consumers’ minds. Consumers would be willing to purchase from brand which they are familiar with. If a brand is known to provide quality services/products, it is likely to increase the repeat purchase of the product/service.

Customer Loyalty and Referrals

Customers are likely to become loyal to a brand if they can associate with a well-established brand and its values. This customer loyalty can also help bring new consumers through referrals as a company’s loyal consumers will have a positive impression and are likely to suggest the brand to others. People are constantly discussing the brands they love and use with others.

Value of the Company

A brand is an asset for a company. Branding can increase the value of a company. A strong brand provides value to an organization way beyond their physical assets.

A company like Apple is worth much more than its physical or tangible assets that it owns. Today, it is one of the most valuable companies in the world.

Trust Value

As the consumers start to recognize and associate with a brand, it increases the trust factor in them towards the company. Consumers are willing to purchase from a brand that appears legitimate and professional.

Diversification of Products

With a strong brand in place, it is easier to launch new products. When the company’s logo is placed on the diversified products, consumers can instantly relate to the values that the brand holds. Even when it’s a new product, they are likely to develop a positive image of that product.

For example, when it comes to shampoos, if Pantene launches a new variant, people who are very fond of the brand are likely to try the new launch with much ease than a new non branded similar shampoo released in the market.