Last week we looked at how brands which are well known and trusted can serve as a shortcut for consumers trying to choose between competing offers. This week we look at the link between quality and brand performance.
Arnold (1992) says that three important principles have emerged from research into brand performance:
1. Market leaders and superior brand positions are interlinked. Top brands are virtually all leaders, or joint leaders, in their markets. This is not just because the companies spend a lot on advertising or because the brands have a good name or are inherently better quality products. It is the perception of quality by the customer which is important. That perception depends on how the product meets customers’ needs and wants.
UNICEF, the children’s charity, is able to encourage donations through a well-established image and a perception that it is meeting customers’ needs - both the children it helps and the people who give their time or money so that the organisation can carry out its objectives.
2. Market-leading brands tend to have higher proﬁt margins. Research shows that market leaders command a price premium and therefore make higher profits. Recent surveys conclude that in the USA the market leader returns a margin four times that of the number two in the market, and in the UK the margin is six times greater. Leading brands also demonstrate greater resilience during recessions or price wars. Perceived superior quality is reflected in consumers’ willingness to pay more.
3. There is no such thing as a brand life-cycle. Once a leading brand is established with a loyal customer base, there is no reason why that position cannot be maintained almost indefinitely. Brands are larger than products. They can be updated regularly and altered in almost any aspect to maintain their relevance to the market. As long as the brand is kept up to date there is no reason why it should not live forever.
This does not mean that brands will live forever, just that they may be able to if properly managed and looked after. There are examples of brands which have disappeared or run into trouble. One distinguished brand which has been in existence in the UK since 1894 — Marks & Spencer, a retail store selling clothing, home furnishings and food — went through difficult times in the late 1990s. Brands which have been around for over 60 years and show no signs of disappearing. All purchase decisions involve an element of risk, and buying behaviour shows that the drive for something well-known and trusted is often stronger than the drive for novelty.
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