The Effect of Branding and brand value on the profitability of companies

Here, discuss would be made about branding and how its important dimensions such as brand value directly affect profitability of a company. If you have heard of brand value but you are not so familiar with the term, it is time to get to know it more.


What are Brand and Branding?

Brand is considered as one of the most valuable hidden assets of a company and if it would be well managed, it can increase market share and profitability of a company. Brands can pave the way for achieving more market share and profitability. Brand value is one of the main brand-related concepts and one of the most effective factors on sales and higher profitability of companies, as a result.

The process of giving meaning to a name is called branding. Branding is considered as a set of mechanisms that assigns a specified identity to a brand and makes it distinguished from that of other competitors.

Branding mainly aims at inducing main specifications of the brand to the customers in a way that they feel good about it. For successful creation of a brand, a comprehensive branding program has to exist so that it would be introduced to people in the best way possible, in addition to information required by customers about that brand.

What is Brand Value and Why Considering it is a Must?

Potential customers’ feelings and perception towards a brand is called brand value; and, it is measured based on confidence level of customers in the brand.

For example, a company’s brand value is measured through comparison made between expected level of income of a branded product and the same product bearing no brand name. The difference is equal to profit gained based on brand value. In fact, it shows confidence level of customers and their tendency towards payment of higher price against brand credibility, compared to other products with lower brand value.

The most valuable brands in the world are mentioned herein under, respectively based on brand equities:

1-    Apple (117 Billion Dollars);

2-    Google (107 Billion Dollars);

3-    IBM (76 Billion Dollars);

4-    Microsoft (71 Billion Dollars); and,

5-    Coca Cola (65 Billion Dollars).

Brand from Producers, Consumers, and Business Environment Perspectives

Branding has different functions from various perspectives. From consumers’ perspective, it’s more important function concerns reduction of risk of purchase decision making process. From producers’ perspective, it is reduction of influence and competition power of competitors; and, from business environment perspective, it is creation of attraction for business environment and business boom.

Final Words

At the end and to better understand brand value, just one important statistic to be mentioned from among hundreds of them existing in this respect would be enough: Brand advocates probably spent four times higher in the future than other people for the brand they are interested in.

The same statistics shows brand value and branding value for a business. If you are among those people already not taking any action for branding your company, it is proposed to take action for making a successful brand as soon as possible so that your sales level would become increased.

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