Building a brand is like walking a tightrope that has no end

Consumers around the world, and none more so than shoppers in the Gulf, are obsessed with brands.

But what is a brand? First and foremost, a brand is a credible promise made by a company to its consumers. It promises that its products and services will satisfy their needs — whether they are practical, emotional, or both. For consumers, a brand is an abstract, but vivid, thing that they trust, like, or sometimes love.

A firm’s name, logo, or slogan, are simply elements that do not by themselves make a brand. Only when these features are filled with trustworthy promises, favorable memories, and compelling meaning do they become a brand. 

For customers, brands serve a range of purposes. A good brand is taken as a sign of quality, providing shoppers with confidence when making purchasing decisions.

But brands also have psychological or emotional features that help express consumer values and aspirations.

For companies, investing in a brand can create consumer loyalty, boost price premiums and increase marketing effectiveness to establish a significant competitive advantage.

What, therefore, might appear to be a somewhat fluffy offshoot of marketing, is actually one of the most important assets of any firm.

In a marketplace where products are quickly commoditized, brands are critical in being able to spot one item from another. They can erect significant barriers to entry and create brand equity for shareholders. But creating brand equity is far from simple.

First, a brand must have a clear identity that tells the customers what it is and which product category it belongs to. But importantly, it must convey its unique selling proposition, which tells a shopper that it is different to all the other products on the same shelf.

Second, once a brand has been defined, customers need to hear about it. Advertising can make a brand familiar, but this may not be the best way to convince customers of its USP. After all, consumers are increasingly skeptical about claims made by companies. Word-of-mouth and other non-commercial sources of information, such as the press and social media, are more effective than pure advertising in establishing a credible image. Social media, in particular, is increasingly important in building brands.

So powerful is social media, largely because young consumers regard it as not manipulated by business, that companies go to great lengths and expense to win over its influencers, which, of course, calls into question how free from commercial influence these young stars are. 

For many Gulf startups, establishing a unique brand identity will be crucial for their long-term survival.

Mohamed Ramady

Third, the total brand experience has to satisfy a customer’s needs with a high-quality product that is reliable and safe. But if consumers also believe that a brand helps them express their values and aspirations, it will be more powerful.

Fourth, a firm has to maintain a relationship with the customer through constant innovation of a product as well as how consumers experience it. This is a difficult part of the process that can lead to missteps on the part of a company. Also, changes in the marketplace and consumer taste can easily undermine a brand. This part of brand-building is like walking a tightrope and lasts for years.

Brand equity is crucial, but famously difficult to quantify. Generally speaking, analysts measure consumer thinking about a brand by using psychometric tests such as Likert scales, which attempt to measure things like brand awareness, image and attitude. This is used in conjunction with analysis of its market share, profit margin and price premium.

A brand valuation tries to place a figure on a brand’s equity for accounting purposes. In theory, investors can take a firm’s market capitalization, subtract tangible assets and measurable intangible assets, and what is left is brand equity. But, no matter what methods are used, these calculations are, at best, approximations.

For tighter control of brand equity, a firm should measure its product or service using a consistent method. Second, a company needs to constantly monitor its brand’s performance against competitors and wider market innovations. Third, a business must realize that it does not have sole control of the brand and that millions of customers in the real world can quickly redefine it, which can lead to it being damaged. 

Fundamentally, good products and services build brands. Some may argue a good brand is more valuable than having a good product, and there are examples of customers preferring form to substance. However, only in industries where the quality of the product is intrinsically ambiguous, such as the arts, or where customers do not make direct comparisons, such as between mobile network operators, can a good brand define perceptions of quality.

For many Gulf startups, establishing a unique brand identity will be crucial for their long-term survival.

• Dr. Mohamed Ramady is a former senior banker and Professor of Finance and Economics, King Fahd University of Petroleum and Minerals, Dhahran.