Source: Liu Run's public account (ID: runliu-pub)
During Double 11, many products attract consumers through various promotional activities. At this time, some products are quickly sold out. Others, even at very low prices, sell only a few units. Why? Because some have brands, and some don't. In this article, we'll discuss the value of brands.
The Value of Brands
Let me tell a story first.
Coca-Cola is the happy fat-boy water that many people use to keep going. But did you know? Coca-Cola's recipe might be one of the most mysterious things in the world.
Since its founding in 1886, the secret of the recipe has been kept for over 130 years. It's said that the recipe is divided into three groups of processes, kept separately by three senior executives of the company, whose identities are absolutely confidential.
Since it's so secret, does that mean the recipe is what Coca-Cola relies on for survival? If someone stole Coca-Cola's recipe, would it deal a devastating blow to Coca-Cola?
Not necessarily. Douglas Daft, former president of Coca-Cola, once said: "If all Coca-Cola's factories around the world were burned down in a fire, as long as the Coca-Cola brand remains, it would rebuild all factories from the ruins overnight."
What does his statement indicate? It shows that for Coca-Cola, its brand value is higher than its recipe value. As long as the Coca-Cola brand exists, Coca-Cola can make a comeback.
Does the brand have such a big role? Where is its value reflected?
Specifically, it's reflected in three aspects: pre-sale, premium, and extension. Let's discuss them one by one.
First Value: Pre-sale
What is the pre-sale value of a brand? It means that before consumers have a purchase need, your product has already left an impression in their minds. This impression may be because they see ads every day, or because they visited a friend's house and happened to see the friend using it. Although they don't have a need now, the product's functions and features have been deeply implanted in their minds, and this implantation is actually pre-sale.
Then what? Because once they have a need, when the real need arises, they may first think of this product. That's the role of the brand.
Generally, we shop because a need first appears, then we search, learn, gradually build trust, and finally choose to buy. Now, because of the brand, it's equivalent to skipping the selection process: first knowing the product, then waiting for the need to appear, and then making the purchase. This is the pre-sale effect of the brand.
The pre-sale effect brings two more benefits.
- Reduce traffic cost.
If there's no pre-sale effect, and there are 10 products with the same function in front of the consumer, the probability of your product being chosen might be only 10%. But because of the pre-sale effect, the probability of being chosen is greatly increased. So when a brand forms a pre-sale effect in consumers' minds, it reduces your traffic cost.
What is traffic? It's potential consumers entering your sales funnel through some channel, such as entering your store, visiting your website, or consulting customer service on WeChat. These are all traffic.
What is traffic cost? Traffic cost is the price we pay for each customer we acquire.
For example, a consumer wants to buy shampoo. Recently, he visited a friend's house, and the friend recommended a shampoo called Head & Shoulders. So when his need arises, he directly types "Head & Shoulders" into the shopping website, and many Head & Shoulders shampoos appear. But suppose he doesn't know the Head & Shoulders brand; he just wants to buy an anti-dandruff shampoo. When he types "anti-dandruff shampoo," a huge number of shampoo brands appear. How do you make consumers discover Head & Shoulders among so many brands and increase the purchase probability? You need to increase the traffic for this product. If offline, you spend money on activities and promotions to attract more attention. If online, you invest in ads and campaigns, aiming to make Head & Shoulders appear in a more prominent place when consumers search for anti-dandruff shampoo, so more people know about it. To get more people to pay attention and browse this product, you have to pay a lot of traffic fees. But once you have a brand, the brand carries consumers' understanding, trust, and preference, forming a pre-sale effect in their minds. You don't need to spend money to guide them; they will actively search, saving you traffic costs.
Then what? With increased traffic, the conversion rate naturally increases.
- Increase conversion rate.
For example, you want to buy a drink. You walk into a supermarket and see a row of drinks, dazzling you. Just as you don't know which to choose, your eyes light up and you spot Wanglaoji. Without thinking, you pick up a can of Wanglaoji and pay. Why? Because you know this brand, and you trust that buying it won't disappoint. If there are 20 drinks on the shelf, and 100 people come to buy drinks, 80 choose Wanglaoji. Wanglaoji's conversion rate is 80%, while the other 19 products share the remaining 20%. Why is Wanglaoji's conversion rate so high? Because of the brand. Because its brand container is filled with understanding, trust, and preference.
Second Value: Premium
Let's look at the second value of a brand: premium.
For example, today you go to a home appliance store and see a refrigerator that suits you: Haier, with power consumption, capacity, and size meeting your requirements, priced at 2000 yuan. Just as you're about to buy, a salesperson rushes over: "Don't buy that! Their refrigerators are made by us as OEM. Look at mine: power consumption, capacity, size, even materials are exactly the same. We only sell for 1500. Buy mine." Which one would you buy? I believe most people would choose Haier. Why? Because you say they're the same, but are they really? To judge whether they're truly identical, I'd need to spend a lot of time learning like an expert, then build trust based on understanding, and preference based on trust. This process is the "transaction cost" of buying this refrigerator, costing far more than 500 yuan in money and time. Haier, through years of brand building, has put "understanding, trust, and preference" into the brand wallet called "Haier." When users see the word Haier, they feel trust. Although it's more expensive, compared to unbranded manufacturers, the transaction cost is lower. So this refrigerator: Haier sells for 2000, unbranded manufacturer sells for 1500. The extra 500 is brand premium. But buying Haier also saves consumers more than 500 in transaction costs. Therefore, premium must be based on benefiting the user as well. If you don't have the ability to benefit users, you can't obtain a premium. Treating premium as a goal, as taking more money from users, is wrong. Only by helping consumers reduce transaction costs do you qualify for a premium.
We've said that consumer purchase behavior is divided into three stages: pre-purchase, during purchase, and post-purchase. These three stages generate seven different costs. Pre-purchase: search cost, comparison cost. During purchase: testing cost, negotiation cost, payment cost. Post-purchase: transportation cost, after-sales cost. And brands can help consumers save many costs.
For example, search cost and comparison cost. Let me give an example. Suppose a consumer wants to buy a phone. He spends three hours visiting several phone stores, then spends another hour searching online, incurring search costs. After finally narrowing down to three phones, not knowing which is better, he calls friends and searches online, incurring comparison costs. If the consumer had a familiar brand from the start, the situation might be different. He just opens the official website, selects a model within budget, and clicks pay. After the phone arrives, if there's a problem, he can quickly find after-sales service and resolve it properly. Although there's a brand premium, it also helps consumers reduce transaction costs.
Third Value: Extension
Finally, let's look at the extension value of a brand. We said that the brand container actually holds three things: understanding, trust, and preference. These can be extended. What does that mean?
For example, if you're a loyal Xiaomi user, you've certainly gone through a process of understanding, trusting, and preferring the Xiaomi brand. If Xiaomi now wants to make a new product, based on your trust in the brand, you might also trust or even prefer the new product. So the brand actually carries a more abstract value, and this abstract value is the extension value. Because users' trust and preference are not immersed in the product but in the brand. But this trust and preference can cross over from the brand to the product. Thus, when you trust a brand, you also trust the new products from that brand. So launching a new product under the same brand is much easier than building a new brand from scratch. This is the extension value of a brand.
Final Words:
We say that a brand actually has three values: pre-sale, premium, and extension.
Pre-sale: implanting a brand into consumers' minds so that when a need arises, they think of this brand first.
Premium: brand premium is the added value of the brand. The premise is having the ability to help consumers reduce transaction costs. That is, the brand premium consumers pay extra for your brand should be less than or equal to the potential loss from buying an unbranded equivalent product. Only then will consumers choose to buy your product.
Extension: if consumers have trust and preference for a brand, they will transfer this trust and preference to other products under the same brand.
Today we've discussed the three values of a brand, hoping to give you some inspiration for building your brand.
Are you "watching" me?