What is Branding - Essay Example

Branding is defined by the American Marketing Association as a term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers (Lake). The use of a branding strategy is a good and effective way for a company to increase the exposure and recognition of the name of the company and the products it offers. One of the advantages of a branding strategy is that it enables companies the ability to charge a premium price for its products.

An example of a company with a strong brand is Starbucks Café. Another company that has excelled due to its marketing strategy is McDonalds. McDonalds spends over $2 billion in advertising each year to solidify its brand value (O’brian). One of the greatest benefits of a branding strategy is that it improves customer loyalty. Customer loyalty is a great benefit because it provides companies with a steady inflow of income. Not all products are suited for the application of a branding strategy.

Commodities such as gold, silver, copper, petroleum, and rice are not suitable for a branding strategy because its price fluctuates daily in stock exchanges such as NYSE, NASDAQ, and LSE. Companies that operate in industries in which there is intense competition do not benefit from branding strategies as much as firms in other industries, but branding can be use to differentiate the company. Differentiation allows firms to operate in niche markets where branding can be effective. Another advantage of using branding to differentiate is that it reduces competition.

In the case of a pricing war the use of branding is not suitable because the cost associated with the implementation of a branding strategy will further deplete the operating margins of the company. Work Cited PageLake, L. 2013. “What is Branding and How Important is it to Your Marketing Strategy?” 8 February 2013. O’brian, K. 4 May 2012. “How McDonalds Came Back Bigger Than Ever.” The New York Times. 8 February 2013.