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242 PART 4 BUILDING STRONG BRANDS
Branding has been around for centuries as a means to distinguish the goods of one producer
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from those of another. The earliest signs of branding in Europe were the medieval guilds’ require-
ment that craftspeople put trademarks on their products to protect themselves and their customers
against inferior quality. In the fine arts, branding began with artists signing their works. Brands
today play a number of important roles that improve consumers’ lives and enhance the financial
value of firms.
The Role of Brands
Brands identify the source or maker of a product and allow consumers—either individuals or
organizations—to assign responsibility for its performance to a particular manufacturer or dis-
tributor. Consumers may evaluate the identical product differently depending on how it is
branded. They learn about brands through past experiences with the product and its marketing
program, finding out which brands satisfy their needs and which do not. As consumers’ lives be-
come more complicated, rushed, and time-starved, a brand’s ability to simplify decision making
and reduce risk becomes invaluable. 4
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Brands also perform valuable functions for firms. First, they simplify product handling or
tracing. Brands help to organize inventory and accounting records. A brand also offers the firm
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legal protection for unique features or aspects of the product. The brand name can be pro-
tected through registered trademarks; manufacturing processes can be protected through
patents; and packaging can be protected through copyrights and proprietary designs. These in-
tellectual property rights ensure that the firm can safely invest in the brand and reap the benefits
of a valuable asset.
A credible brand signals a certain level of quality so that satisfied buyers can easily choose the
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product again. Brand loyalty provides predictability and security of demand for the firm, and it
creates barriers to entry that make it difficult for other firms to enter the market. Loyalty also can
translate into customer willingness to pay a higher price—often 20 percent to 25 percent more than
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competing brands. Although competitors may duplicate manufacturing processes and product
designs, they cannot easily match lasting impressions left in the minds of individuals and organiza-
tions by years of product experience and marketing activity. In this sense, branding can be a
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powerful means to secure a competitive advantage. Sometimes marketers don’t see the real impor-
tance of brand loyalty until they change a crucial element of the brand, as the now-classic tale of
New Coke illustrates.
Coca-Cola Battered by a nationwide series of taste-test challenges from the
sweeter-tasting Pepsi-Cola, Coca-Cola decided in 1985 to replace its old formula with a
Coca-Cola learned a valuable sweeter variation, dubbed New Coke. Coca-Cola spent $4 million on market research.
lesson about its brand when it Blind taste tests showed that Coke drinkers preferred the new, sweeter formula, but the
changed its formula without launch of New Coke provoked a national uproar. Market researchers had measured the
seeking sufficient consumer taste but failed to measure the emotional attachment consumers had to Coca-Cola. There were angry
permission. letters, formal protests, and even lawsuit threats to force the retention
of “The Real Thing.” Ten weeks later, the company withdrew New Coke
and reintroduced its century-old formula as “Classic Coke,” a move
that ironically might have given the old formula even stronger status in
the marketplace.
For better or worse, branding effects are pervasive. One research
study that provoked much debate about the effects of marketing on chil-
dren showed that preschoolers felt identical McDonald’s food items—
even carrots, milk, and apple juice—tasted better when wrapped in
McDonald’s familiar packaging than in unmarked wrappers. 10
To firms, brands represent enormously valuable pieces of legal
property that can influence consumer behavior, be bought and sold,
and provide their owner the security of sustained future revenues.
Companies have paid dearly for brands in mergers or acquisitions,
often justifying the price premium on the basis of the extra profits
