How brands create value for consumers and companies

brands create value

TL;DR Brands take on multiple roles in daily life. All generate value for consumers of organizations in one way or another. Brands act as identifiers, reputation and building blocks of identity for the consumer. For the organization, profit is the main role of brands.

Brands serve a multitude of roles, both for the consumer and the organization. However, as with so many things in the branding world, the nature of the brand roles tend to be versatile and dependent on context.  Brand strategy consultants help brands shape and sculpt their messaging to have a cohesive narrative. It’s important to understand what roles the brand plays in your circumstances and how it creates value for you and your customers.

The role of brands for the consumer

Brands create value for the consumer in many ways. Both in individual and social contexts spanning functional and hedonic benefits. This ranges from acting as a simple identifier to contributing to and helping to build an identity of the self.

Brands are signals of identification

At their most primitive role, brands tell the consumer what he or she is buying. That is, they allow customers to identify and recognize products when they see them[1]. This also allows consumers to repeat purchases that satisfied them in the past.

Just think about the last time you tried a new brand of coffee or tea that you really liked. Without distinct packaging and brand identity, it is unlikely that you would be able to recognize it again the next time you were at the store. Or, placing items in your shopping cart online for that matter.

This function dates back many centuries to the very inauguration of the term brand. Starting with the branding of livestock to the branding of products in the early 1900s[1].

Brands reduce perceived risk

Building on the previous point, brands also reduce perceived risk in consumer transactions. They do this by simplifying consumption choices and establishing trust.

In this sense, brands are not only signals of identification but also a reputation. A reputation made up of both individual experiences and societal consensuses that acts as a shortcut to decision making.

Consumers have a limited mental capacity when it comes to choosing products. For this reason, they use decision making heuristics to limit the risk involved in a given purchase. For example, you may have been pleased with your last toothpaste you bought and subsequently got the same brand again without any effort towards evaluation whatsoever. In the same sense, you might find yourself relying on a social consensus to ease a purchase decision. This can be recommendations from friends and family or observations of wider social trends.

When brands are reputable, they minimize transaction risk, save the consumer time and energy, and guarantee a certain level of quality[2].

Brands are a source of self-identity

Brands are symbols of meaning that are co-created by companies, consumers and communities over time. These meanings are in a constant flux and can express different things to different people.

Brands are aspirational devices

On that note, brands also help consumers distinguish who they want to be; where they want to go[4]. In this case, brands are intertwined with individual goals and longings. They help to paint the picture of the ideal-self.

Consider a person who wants to be a runner. That is not merely someone who runs, but a person that has running ingrained in his or her personality. Possessions play a part in this aspiration. For example, Asics running shoes, a Garmin fitness watch, Tracksmith running apparel and a healthy diet consisting of various organic produce brands could all be elements the consumers wants to possess to make this a reality.

The role of brands for the company

How brands create value is of course not siloed off as the structure of this article may suggest. When any of the above brand roles for the consumer create value, it is to the benefit of both the consumer and the company. That being said, there are functions on the corporate end that are not as explicit outside of the organization.

Brands generate profit

Strong brands produce higher returns at a lower risk[5].

This is the number one role of the brand; to generate profit. It is the single most important value creation of brands. If there is no profit, there is no enjoying any other benefits generated by the brand. Neither on the consumer-side nor on the company-side.

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