Friday, April 6, 2012

The Economics of Life: The Evils of Branding

If you’ve ever taken a course in economics, marketing, or management, you’ve probably learned about branding. And unless you’ve spent your life on a remote island without any human or technological contact, branding has had a huge impact on your life.

A “brand,” as defined by the American Marketing Association is a "name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other seller’s.” From Kellogg’s to Armani Exchange, brands have an immense impact on the psychology of buying.

In Theory: Why brand?
So why do companies spend millions of dollars on advertising? The reason is simple: they want you to think of them when you are ready to make a purchase. They do this by using an advertising strategy that makes you associate them with a very specific and distinctive characteristic – whether that is low price, or high quality, or a unique product. For example, when you think of soda, your mind automatically jumps to Coca Cola or Pepsi, two of the leading brands in the soft drink market.
There are countless advantages to establishing a brand, including lowering marketing costs, quick identification and recognition, gaining market share, and our all-time favorite, premium pricing.

In Practice: When branding goes too far
Now don’t get me wrong, branding is great. It helps us make quick and easy decisions about what products or services to use. But often, companies take their brand names too far and charge exaggerated prices for average goods. And this has a huge sociological impact.

It is human nature to want nice things, and strive for a greater social status. Also, as social beings, we are constantly being judged by our appearances, our jobs, and our wealth. We want all of our friends to think highly of us. “Look at my new Rolex!”

The process of being “branded” starts when we are children. In school, every kid is desperate to fit in and be “cool.” Brand names prey on this vulnerability. This creates a social hierarchy based on brands. So the boy who wears Jordans will be way cooler than the kid with the unrecognizable brand of sneakers. Or the girl who has a Coach bag will be higher up on the social ladder than the girl with the Nine West bag. Come on; how is this fair? It’s not like these kids are out there busting their behinds to pay $300 for a designer bag. The way your peers perceive you doesn’t depend on your personality or the kind of person you are, but rather on your parents’ incomes? So in essence, brand names are just creating and reinforcing income discrimination? Am I the only one who finds this absolutely ridiculous?

The problem is that this cycle doesn’t stop after school. At that point, we’re so brand-sensitive that we believe the label on our clothes is somehow a determinant of the value of our life, and how people perceive us, because apparently our wealth and social standing are what really matters.

I’m not really a buyer of brand names. I just find it absurd to pay $200 for a pair of shoes that I can buy for $20 without the fancy label. I find that I have better things to do with my money. But I can’t tell you how many times friends have commented on that. “Oh, I don’t shop there. Their stuff is cheap.” Or “My bag is better than yours because it’s so-and-so brand.” Let’s be honest. Your designer label clothes may be slightly better quality than my generic brand clothes, but do you really think that difference in quality is worth an extra $100? I can guarantee you that it’s not.

So the question is: why are we letting brand names brand their labels on us? Why are these so-called “luxury goods” becoming a necessity in our lives? If someone can slap a fancy name on a pair of shoes, does that really mean that we should create holes in our pockets so we can show the shoes off to our friends? The only reason these brands are able to maintain such high prices is because people want to buy the brands (the name, not the product), and these people are keeping the demand high. If people stopped paying the inflated price, the value of the brand would lessen, and the company would have to decrease its prices.

We need to be smarter shoppers. The purpose of life is not to look cool in front of our friends. Outward appearances are really just superficial. There is so much more good we can do with the money we throw away on designer goods. So next time you pick up an outrageously overpriced shirt, think to yourself, is this really worth it?

After all, as the great Shakespeare once said, “What’s in a name?”

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