Economic Nonsense: 23. Too much economic effort is wasted on branding and advertising


People tend to say this because they cannot see any value added by branding and advertising, assuming therefore that the resources put into them must add to the costs of items without adding to their value. It is true that branding and advertising cost money, but not true that they have no value. Both convey information that is important to consumers. Advertising is used to make customers aware that the product or service is available, and to indicate how it differs from similar products or services available from rival producers. It is an essential part of competition, and it is competition which keeps producers anxious to keep quality high and prices low. Advertising can tell potential customers details of both price and quality making them able to choose between rival offerings. It can serve to remind customers that the product is out there and available.

Branding serves to reassure people about quality. Companies take good care to protect the reputation of their brands because they know that their ability to sell goods depends on how people perceive them. When analysts calculate the value or a company, they include a price they estimate to be the worth of its brands.

Brands do more that that. Companies use them to convey an image that people might want to be part of. The boy who buys Nike trainers acquires more than the shoes. He acquires the knowledge of their quality, and the feeling he gets by being seen to be one of the circle of Nike wearers. He might gain the thrill of being seen to be cool and stylish, a person of discrimination and taste. Scotch malt whisky is branded in India as an aspirational drink, so young Indians determined to make good can drink it and feel they are part of a group that is on the way up. Long after the whisky has gone, they might remember and savour that feeling. These intangibles are among the most durable of consumer goods, and it is branding and advertising that attach them to the product.