Brands take on multiple roles in daily life. All generate value for consumers 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. 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.
#1 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. 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’s 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.
#2 Brands reduce perceived risk
Building on the previous point, brands also reduce perceived risk in 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 includes 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.
#3 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.
Apple, for example, may stand for innovation and creativity, Patagonia for responsibility, Soundboks for rebelism and Prada for prestige.
Simply because in a world that is bewildering in terms of competitive clamour, in which rational choice has become almost impossible, brands represent clarity, reassurance, consistency, status, membership – everything that enables human beings to help define themselves. Brands represent identityWally Olins
Through ownership and consumption, people use these meanings to establish and express their self-identity to others. We remind ourselves of who we are by looking at what we possess and the associated memories, and what we had and have now lost. Brands, thus tell the tale of who we are, who we were and where we come from.
#4 Brands fulfill aspirations
On that note, brands also help consumers distinguish who they want to be and where they want to go. 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.
Another example is cars. How many people do you think aspire to own a Mercedes? A Porsche? a Tesla?
The answer is a lot and for a lot of different reasons. All have it in common, though, to represent an aspiration to be someone. It could be a person of a certain statue, for example. In a similar fashion, a Volvo could represent being a responsible father or mother. At the same time only having a car could stand for independence or moving up in the world
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.
#1 Brands generate profit
Strong brands generate profit. 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.
If a brand does not contribute to the bottom line, it makes no sense to invest in its development. This is a point many brand purpose idealists often fail to consider. Don’t get me wrong. I fully support the notion of social responsibility. I believe brands should generate a responsible profit. On the other hand, I don’t buy in on the idea that a brand’s primary purpose needs to be linked to a social cause. But that’s a matter for another article.
#2 Brands eliminate risk
Strong brands eliminate risk.
There are effectively two functions of advertising: direct sales and brand building. Direct sales (also known as direct-response, brand activation and performance marketing) are linear. It’s effectively a gas pedal that returns revenue at a certain ratio compared to your hypothetical gas, i.e., the advertising spend. No gas, no sales. Quite a risky situation.
Brand building is more long-term and ensures consistent demand. That’s because over time it builds strong brands. Strong brands have built plenty of relevant memory associations that make sure that it still pops into consumers’ heads at the point of purchase.
#3 Brands are legal instruments
Just as brands act as identifiers for consumers, they are a legal instrument for organizations. That is, in addition to providing visual distinctiveness, brands also designate legal ownership and protect against emulation and other infringements to intellectual properties from copycats.
The brand itself is not a legal term. The legal mechanism is rather embedded to it through its trademarks, copyrights and patents.
#4 Brands attract and retain talent
Brands don’t exclusively address consumers, they speak to a wide audience of stakeholders. One of which are the people that live and breathe the brand: employees.
This is a crucial role of brands today. An ongoing liberation of borders and other barriers has intensified the competition for talent. As a consequence, effective hiring and retaining of employees has become a necessity to organization growth. This is for the most part due to the intensive costs associated with recruiting and training new people. Departing employees also leave a significant financial burden on the company.
A brand that develops a good employer image will do better at attracting and keeping talent. In doing so, it will save large sums that can then be invested into other value generating activities.
#5 Brands act as a behavioral compass
Last, brands take on the role as a compass of behavior for the entire organization. All the way from the leadership team on the top to the front line employees at the lower levels.
A well-defined and communicated brand strategy will guide daily life within the organization in the same sense that a moral compass guides people’s behavior in their lives. It will determine what strategic actions can be taken and, more importantly, what can not be done. It will tell where to be consistent, where to adapt and refresh and which tactics to take on. It will protect against short terminism and support long-term profitable brand building.
As I touched upon in the beginning, everything is contextual when it comes to brands. Thus, the roles covered above may not fit wholly to your own brand. At the same time you may be thinking: “But what about consumer loyalty?” and even the grand jewel: “Aren’t brands supposed to differentiate?”
First, some brands absolutely do inspire their customers to be loyal. That is, however, rarely a core function of a brand whereas it needs employees to carry on about its business. As for differentiation, that or distinctiveness at the very least, can take place on any of these dimensions. This is true for the consumer facing roles in particular. But it is also bound have halo effects throughout the entire brand.
If a differentiation is created on the basis of identification, reputation and identity, it is probable that this will influence talent as well. Together, the two may reinforce the brand as a behavioral compass. This then in the end leads to greater profits through this or any other trajectory.