Lenz on Marketing

Branding Is the Invisible Hand of Business

Coke and Pepsi; Target and Wal Mart; CNN and Fox News. Each brand carries an emotional punch, baggage perhaps, and often strong loyalties and opposition.

Your brand is the first thing your customers think about you and the lasting memory they carry away from an encounter. It’s what they say about you behind your back.

Your customers own your brand, but you can shape it—with the type on your business cards and the voice that answers your telephone. Your web site helps communicate your brand across the world just as the physical sign over your door brandishes it to passersby.

Intangible, unseen and largely misunderstood, your brand is the greatest influence on your company’s success or failure.

That’s because it impacts every aspect of your business from why customers choose you (or not) to what you can charge for your products and services. Your brand determines the employees you can recruit and retain, whether or not the media covers your story, and the effectiveness of your marketing spend.

When you understand the power of the brand, you understand that the quality, and relative quality, of your product is secondary. That’s why the best-branded products always win.

There is perhaps no better case study than Coke and Pepsi.

For years, Coke and its powerful brand (“The Real Thing,” Santa, polar bears) have dominated the cola category despite Pepsi’s countless reminders via The Pepsi Challenge that most drinkers prefer its product.

Thanks to neuromarketing, we know a little about why. In this field, researchers measure changes in brain activity when subjects encounter marketing stimuli. A famous study using this technique involved Coke and Pepsi.

In a blind taste test reminiscent of The Pepsi Challenge, half of the subjects chose Pepsi and half chose Coke. But when the choices were revealed ahead of time, three quarters of the group chose Coke.

Most telling was the difference in brain activity.

The Pepsi group had a stronger response than Coke in the part of the brain that processes feelings of reward. Those who chose Coke, however, displayed activity in the parts of the brain that govern cognitive powers and memory, indicating that the Coke drinkers were thinking about their memories and associations with the product.

The study demonstrates that Coke’s superior brand is more important than Pepsi’s superior taste.

Two and a half centuries ago, economist Adam Smith coined the term “invisible hand” to describe the self-regulating nature of the marketplace.

In business, the ultimate regulator of success and failure is the brand. It is the invisible hand of every business, including yours.

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