Advertising and Branding
Advertising and branding are important tools of competitive strategy. In this chapter I explain why they have been essential to some successful firms, while others have been equally successful while using advertising and branding little if at all. The main function of advertising and branding is to support competitive advantages which are based on the distinctive capability of supplier reputation. The information directly conveyed by advertising with this purpose is generally low. The value of such advertising rests principally on its demonstration of the supplier's continued commitment to the market. Producers of long-term experience goods--those commodities whose quality emerges only after repeated trial--use advertising as a signal of commitment. There are other kinds of advertising, and advertising can help in exploiting other types of competitive advantage, but this support of reputation is the most important way in which advertising contributes to corporate success.
While advertising creates brands, there are some differences between the functions of advertising and of branding. Brands are more often discussed than defined. A brand is established when an item sells for more than a functionally equivalent product. It is that characteristic which distinguishes a brand from the name of a product. The most usual reason for a price premium--and the most profitable reason--is that the customer is uncertain about the attributes of the product and is reassured by the supplier's reputation. But brands have other purposes. Some brands are little more than labels, although labels have their uses. Brands may be used by consumers to signal information about themselves to others--these are what is usually meant by brand images. Yet other brands may be attached to distinctive recipes or incumbent positions. The greatest corporate successes built around advertising and branding are those based on brands which have established several of these characteristics.
Advertising may seek to inform, or to persuade. The classified columns of a newspaper are full of what is intended to be informative advertising: