Saturday, August 7, 2010

Why do you buy branded products?

Depending on industry, companies expend a great deal of resources on branding. The nature of these expenditures and their effects have important implications for how firms compete. For example, Coke and Pepsi have enormous advertising budgets, which have established widely-recognizable and appealing brands. These brands are so recognizable and have such great appeal that it is hard for any other competitors to profitably enter the soft drink market.

These reputation effects are important in other industries as well. For example,
  • Pharmaceutical companies expend money to cater directly to doctors (a practice called detailing), but they also advertise directly to consumers. Both activities cultivate their brand.
  • Textbook companies maintain a brand with professors and other academic buyers as providing rigorous review of book content before the professor even sits down with the book.
  • Cleaning products (such as soaps, detergents, and stain removers) are often branded while generic store brands are available.
  • Even cereal manufacturers invest a great deal of money to brand their product in an effort to differentiate their cereal from the other cereals out there.
These branding efforts would not be successful if consumers were willing to go with the unbranded alternatives (after the patent expires, of course). As an alternative to branded soda or cereal, try the generic store brand. As an alternative to the leading book published by a textbook company, try a self-published book.

If branding is successful, consumers are reluctant to try the generic counterpart. This reluctance means paying more. So, there's a tradeoff that comes with buying branded products. They're better (or at least perceived to be better), but they are also more expensive. That brings me to my poll question of the week.

Why do you buy branded (rather than generic) products?

(a) I don't. Generic products are just as good for a lower price.
(b) It depends on the product. Some branded products are better than the generics. Others are not.
(c) There's no substitute for quality. Branded products are just better.
(d) Branded products have their reputation on the line. I like being able to hold my products accountable.

As always, the poll is open for a week. So, vote early and often (on the side bar). Tell your friends and your favorite brand spokespeople to vote. This includes Mrs. Butterworth, Mr. Clean, the Old Spice Guy, the Brawny man, Justin Case, the Aflac duck, and any other brand leader you adore. Regardless of how many people you tell, please vote. I eagerly await your responses, eagerly.

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