The Purpose of a Brand

Over the years the word brand has been subjected to endless scrutiny by agency account planners, in house marketing teams, designers and business people. It has many meanings and definitions as it tries to objectively define something that is inherently subjective. It is thrown around in design discussions as both a justification to do something and reason to not do something.

The definition of brand is not that interesting to me. What is more interesting is the purpose of a brand. Endless hours are spent "building a brand" but rarely do I hear people ask why? It is accepted that a strong brand is an unalloyed good but if you build a strong brand, what does it get you? What is the cost of a weak brand?

The only purpose of a brand is pricing power.

The stronger a brand, the more pricing power the company has. This is why luxury goods manufacturers work to keep their brand at a perceived value that lets them sell handbags at 500% gross margins. A brand lets you enter markets with strong pricing power.

This is directly tied to the idea that an organization's values are a function of its gross profit margins.

For a period of time, Silicon Valley really misunderstood the purpose of a brand. They viewed brand and advertising somewhat synonymously. As Jeff Bezos said "Advertising is the price you pay for having an unremarkable product or service”. Well said, from the man who also said, "your profit margin is my opportunity".

Software that pursues low cost or no cost to attract scale would see very little value in a brand, since pricing power, is not a significant concern to them. But pricing power is also a proxy for trust.

A willingness on the behalf of consumers to follow companies in to new markets, sometimes irrationally. Strong pricing power acts as a sort of bank account that companies can draw from without having to be consistently remarkable. Since most first gen products are rarely that remarkable, a brand gives a company some breathing room (permission) to get it right.