Brand Bonuses

“You can get better quality than we offer, but you can’t find a higher price than ours.”

Oddly, that pitch works when not stated so bluntly. Known in marketing circles as the Mercedes Effect, it shows that people are willing to pay money for no added value aside from perception. Mercedes, Coach handbags, Apple computers and many other products have remarkably higher prices and margins than competing products of equal functional value. The difference is almost entirely because people want to own the brand and enhance their sense of self-worth by proxy.

There are other reasons for cultivating cult brands aside from getting obscenely rich. Great brands, well-crafted and relentlessly enforced can:

  • Create buyer/market/investor faith in the product/company/cause.
  • Bias purchase decisions, thereby increasing the number of conversions per promotional dollar.
  • Create a sense of mystic relevance (or as the authority on propaganda calls it, perceived hidden underground knowledge).
  • Allow you to charge vastly more money for similar functionality.

apple_mercedesA good example of the power of branding is in the allegedly dying PC market. A recent study by Asymco shows Hewlett Packard ships nearly three times as many personal computers as Apple, yet Apple has more than double the per PC revenue and six times the margin per PC than HP. In other words, HP is working harder and earning less. Soon HP may start losing money on each PC they make, though they claim they will make it up in volume.

Apple’s mystique, eroding as it may be, was not accidental. Any review of their advertising shows that Apple knows their market, understands buyer biases to which they offer differentiation, and how to subversively appeal to those buyer motivations. Apple has crafted a brand perception so strong that competitors mock it in order to do what good marketing people should – attack their opponent’s strengths. This has assembled an army of Appleytes fully devoted to the product line, as iEverything shoppers demonstrate.

Few companies ever bother to define their brand. Fewer still match brand to buyer motivations and differentiation. This is a major sin in marketing and especially for start-ups who need to capture market mindshare as rapidly as possible. Take the time to get branding right. It pays big over long periods and makes you worthy of mocking.


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