All those involved with a company, its products and services - customers, distributors, employees, management, suppliers, strategic partners, investors and lenders - have perceptions. These produce different beliefs and feelings, which result in more, or less, preference for your company, its products and services.
Strong brand preference results in economic benefits throughout a business. It builds an 'economic moat' (as coined by Warren Buffet).
This moat protects against the following:
- Price-based competition, where your products or services have weak pricing power due to lack of perceived positive differentiation
- employee and management indifference and churn, reducing quality and efficiency, as well as increasing recruitment and compensation costs
- distributors threatening to de-list or replace you and squeeze your margins
- suppliers and strategic partners reluctance to do business unless paid more
- investors and lenders who are not convinced, thus increasing the cost of capital
Strong brands establish beliefs and feelings that positively differentiate, ideally so people consider your company, its products and services as irreplaceable. As Coco Chanel observed, "in order to be irreplaceable one must always be different".
In accounting terms it protects against goodwill impairment.
Brand preference is good for the bottom line right across a business. Which is why brand building strategies cannot only be the responsibility of marketing and must be part of a CEO's responsibility.
While brand preference is driven by beliefs and feelings, these are themselves driven by the numerous ways people experience a brand; these experiences can only be effectively influenced and guided by top management policies throughout all departments and business units.
In addition to advertising, public relations (on and off-line) packaging design etc. people build up their beliefs and feeling about a brand through (1) management and staff behaviour, policies and governance, (2) actual product and service performance, (3) Who and what the brand associated itself with (4) word-of-mouth (on and off-line). Here (4) is powerfully influenced by (1), (2) and (3).
The legendary Jeremy Bullmore, previous Chairman of JWT London, has put it thus: “People build [their perception of] brands like birds build nests, from scraps and straws they chance upon."