Branding is the process of creating a name, design or symbol that identifies and differentiates a company from its competitors. A good brand reflects the benefits of a product or service and builds recognition and loyalty in customers. However, branding is an expensive process and is difficult to undo if the company's direction changes.
Advantage: Boosts Awareness and Loyalty
Branding helps consumers develop a specific image that contains the qualities and characteristics business owners want consumers to associate with their business and its products or services. For example, cartoon images of a happy dog may help a consumer feel more comfortable using a particular pet grooming service. A distinct brand can increase the memorability of a product and build repeat business. If consumers are satisfied after purchasing the product, a strong brand makes it easy for them to make repeat purchases without much reconsideration. This can all translate into a wider customer base, increased sales and revenue growth.
Advantage: Protection From Competition
Brands offer a certain amount of legal protection from the competition because of trademark law. A trademark can be any unique word, device, or symbol that distinguishes a company. Nike's swoosh and Apple's apple are both trademarked items. Companies can trademark their business name as long as they use it when advertising to customers. Registering a brand as a trademark allows the holder to bring legal action against any competitors that try to infringe on its branding.
Disadvantage: It's Expensive
One major disadvantage of branding is the expense. Designing a brand involves significant research, naming development, graphic design and brand identity integration, which aren't cheap. Business owners may feel pressured to increase the price of their products to compensate for the increased expense, which could cause customers to switch products. The increased expense of wages and professional fees to develop a brand may or may not exceed the financial benefits of branding.
Disadvantage: It's Tough to Change
One of the major benefits of a brand is that it creates a strong product association for customers. However, this can also be a disadvantage in several situations. If a company wants to change direction with its products or target a new segment of consumers, an established brand can make it difficult to change the image of the company. If a company undergoes a public scandal, a strong brand only makes it easier for consumers to associate the business with past wrongdoings. While brands and even company names can be changed, it's an expensive and time-consuming process.
Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.