Below is a picture of Mercedes-Benz’s GLA and Infinity’s QX30. Just by looking at the picture, how much are you willing to pay for each of the car? Most of you are willing to pay much more for the Mercedes, right? However, the Infinity QX30 is a model based on Mercedes’s GLA, meaning that they share the same platform, same engine, and even same materials used for the interior. Then why are you, the consumer, willing to pay more for the Mercedes?
Interbrand, a subsidiary of Omnicom Group, has just released its best global brand rankings. In this list, brands are ranked in order of their brand value. According to Interbrand, brand value was calculated in a function of products or services’ financial performances under the brand, how much brands affected consumer’s purchasing decisions, and how well brands did in making customers loyal to them. However, I think when measuring a brand’s value, financial performance should not be counted.
On the list, the top four brands are all technology makers, with Coca Cola comes at the fifth. This makes sense because the top four brands on the list are also companies that reap hundreds of billion revenue every year. Therefore, they performed extremely well on the financial part of the function. However, when you take the logos off, the products are highly likely to do well on the market. For example, if there is an unknown search engine that can show searching result as accurate as Google does, I am pretty sure that Google’s market share will be diluted. The competitive advantage of these technology giants is not their brand names, but the algorisms and ecosystems that they built. On the other hand, for consumer package goods like Coca-Cola, its brand might be its competitive advantage. There is relatively little difference among merchandises in the same category, and consumers buy from the brand they are familiar with and loyal to most of the time. The famous failure of Coca-Cola’s New Coke is a good example of this. Before Coca-Cola introduced the New Coke, they tested whether people like the taste, and results revealed that consumers like the tastes more than the classic Coke. However, when the New Coke was finally introduced to market to replace the classic Coke, consumers did not take it and asked for the classic Coke back. This shows that people buy Coke not only for the taste, but also for the brand. Thus, I think brands like Coke should be more valuable than brands like Microsoft and Google.
On top of the lists are also many luxury brands. Comparing a diamond ring from Tiffany and Costco, they are exactly the same in functional value, but the ring from Tiffany might be thousands of dollars more expansive than that from Costco. This is because luxury brands endow their consumers with great psychological value, meaning that those who wearing Tiffanys feel better of themselves and are more likely to talk about their rings with friends.
Although many marketers indicated that they did not care much about the ranking, it is always better to have strong brand power or brand equity. Firstly, strong brand equity enables brands to develop quickly and effortlessly. Consumers are more likely to recognize brands that have strong brand equity and therefore, when these brands are developing to a new market, consumers would go after them instead of these brands spending a significant of their marketing budget to promote their product or services to the consumers. Besides, strong brand equity allows brands to charge a premium price comparing with others. As shown in the Mercedes VS. Infinity case and Tiffany VS. Costco example, consumers’ willingness to pay (WTP) for brands with strong brand equity is much higher than their WTP for an ordinary brand. Therefore, brands with strong brand equity will have higher gross margins and eventually better financial performances.
What brands do you think are valuable and what are some other benefits brands with strong brand equity gain? Also, how do you think brands should build their brand equity? Please share your thoughts below. Thank you!
Souces:
https://www.worldwidemotors.com/clp-2019-mercedes-benz-gla-250-vs-2019-infiniti-qx30
https://www.coca-colacompany.com/history/the-real-story-of-new-coke
https://www.pinterest.com/pin/765893480351222027/?lp=true
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