Brand strategy that shifts demand: Less buzz, more economics/A report from INSIGHTS

05 Jun

Brand strategy

In many industries, it has become routine for companies to spend vast sums on advertising and marketing their brands. But with copious product information now available to consumers through digital channels, it’s worth challenging the routine. Should you spend your next dollar on making your brand promise through advertising or other marketing tactics, or on keeping your brand promise by ensuring that your products and company deliver what customers want? It doesn’t pay to invest in the brand if the business model is flawed or the product lacks customer appeal.

That’s because the ultimate point of a brand is not to create emotional appeal or to generate buzz. The point is to shift customer demand.


When is advertising a waste of money?Chinese executives: We should have been more agile


Customer Strategy & Marketing

Well-managed brands shift demand in several ways: by commanding a higher price, generating more volume or some of both. Too high a price will dampen demand and reduce revenues, but the stronger a company’s brand, the further out it can push this intersection of volume and price in order to maximize revenues and profits.

Bain & Company’s analysis of 21 product categories quantifies the power of brands. In the MP3 player category, for instance, the leading player captured 2.9 times the market share of the second-ranked competitor as a function of its brand alone—holding price and other product features equal. Put another way, the leading brand was so strong that the company could double its price and still have a market share equivalent to the second brand. We found a similar dynamic in most other categories, even in business-to-business industries (see sidebar, “The science of calculating how much a brand can shift demand”).

The power of a brand to shift demand applies whether a company pursues a low-price or a premium-price strategy. At the low end, for instance, discount retailer and grocer Wal-Mart excels by constantly wringing out costs and passing on the savings to consumers, earning operating margins of 5.3% in its express stores and 3.1% in neighborhood stores in the process. At the other end of the strategy spectrum, US grocer Whole Foods earns most of its profits in prepared foods, where it commands a substantial price premium. Whole Foods recently generated operating margins of some 6.9%, five times the US grocery average. For both companies, the brand plays an essential role in moving the business toward the point of maximum revenues. Wal-Mart’s brand reinforces the company’s “great value” strategy to increase volume while Whole Foods’ brand—rooted in its sophisticated in-store presentation, knowledgeable staff and an emphasis on organic food—convinces customers to pay a higher price on prepared food (see Figure 1).


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


We're already living in the future. It's just not evenly distrbuted yet.

The JAY Group

Insight, observations, and opinions on everything about loyalty marketing.

Lexicon Blog

Thoughts and insights on name branding.

Calling All Storytellers...

The new social network, Medium, is the perfect place for you.

#SocialMedia #Marketing #Technology


Silicon Valley news about tech money and innovation

imagine change

Just another site


Your source for news, information & resources


Business Process Modeling Software

Jeffbullas's Blog

Just another site

Gods of Advertising

We make you want what you don't need.


Business Development & Offshore outsourcing

White Elephant in the Room

random insight from an unwanted houseguest


Sonnhalter is the leading B2T marketing communications firm to companies that target professional tradesmen in construction, industrial and MRO markets.

Blog thoughts from Randal Dobbs of Framework Marketing

Thoughts on "marketing to people" and polls to share opinions

%d bloggers like this: