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Branding Basics: What It Is, How It Works and Benefits

written by: Laurie Patsalides•edited by: Jean Scheid•updated: 6/1/2011

The first step in brand marketing is to understand what a brand is, how branding works, and what it can mean to a business owner. Let's describe branding, categories of branding, and the benefits for the beginning entrepreneur.

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    What's in a Name?

    If you have wondered what branding is and how it works, use this example. What does one think about when he or she hears the word, Levis? The first thought is not the Levi & Strauss Co., but jeans. The name Levi Strauss is the associated product brand known as Levis the jeans. This equation of name to product is branding. A brand name establishes a level of trust, authority and favorable image. Levi Strauss & Co. has been successful in creating its brand name.

    Briefly, branding is the idea that anytime anyone hears the name of the product, they will know what that product stands for. It is rarely we come across an American reluctant to trust the product or brand, Levi. This is called brand-conscious or brand awareness. The consumer has an unspoken expectation about what that product will deliver. That is, the consumer expects the product to be predictable and reliable when she hears the name and when she buys it. How to Build Your Own Brand 

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    Different Categories of Branding

    Branding is a rather large term to define but there are differentiated categories of branding:

    • New product branding- when a new product is started with a new brand name. This can even be applied to the virtual world. Websites establishing a brand must also follow the steps of branding. Think of and you think of books.

    • Product branding- means branding of a product; for example, Mop -n- Glow; Wonder Bread and so on. Sometimes the product is most known by a symbol. Think for a moment about the Nike symbol; one must only see the symbol to know that the product is Nike.

    • Flanker branding- when a company adds a new brand to an existing brand or line. This is when a company markets a slightly higher or lower end brand to its current brand name. For example, Proctor & Gamble has Tide as its higher priced brand and Cheer as its lower priced brand.

    • Brand extension- when a company adds a new dimension to an existing brand name; for example, when Pepsi added Pepsi One. Even Amazon is expanding its brand by offering Kindle, a wireless reading device which reads like paper, and marketing its own e-books to go with the reader. If you trust Amazon, perhaps you will trust its reader.

    • Personal branding- means branding a person's name. A couple celebrities who have been able to brand their names are Donald Trump (Trump Hotels) and Oprah Winfrey (OWN- the Oprah Winfrey Network).

    • Service branding- when a service instead of a product is branded. For example, to the average consumer, "triple A" means AAA, but it is unlikely the consumer will think of the full name, American Automobile Association. Nevertheless, he or she is looking for a service- auto or discount rates on hotels.

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    How Branding Works

    Because branding is customer driven, understanding how branding works begins with understanding the customer, both existing and potential. There are three essential steps for the business owner to take when creating a brand. Ensure that the brand meets a need in the mind of the customer, firmly establish the brand, and elicit the favorable response of the customer to the brand identity. It involves asking four essential questions:

    1) What is the brand identity? This answers, is the consumer aware of the brand name? In other words, the brand name should come to the forefront of the consumer's mind. So, in our Levi's example, if a person is looking for a pair of jeans, what brand will they think to buy first? This is where a symbol can be useful to a brand, such as Nike.

    2) What does the brand mean? This answers, what will the brand stand for? This is the step of quality/performance and the mental image that the person has about the brand. The latter being more difficult to measure, but can be thought of in terms of popularity or frequency of use. It involves establishing a brand that is strong, unique and favorable in the eyes of the consumer.

    3) What is the consumer's response to the brand? This answers, how does the consumer judge the brand? The brand should be met with quality, credibility, superiority and action. That is, out of all of the choices the customer has, this brand is chosen because it elicits a feeling of trust in the consumer.

    4) How can further brand relationships be formed? This answers, are the customers loyal to the brand and why? Loyalty to a brand is more than just the customer liking it; it is the customer preferring it. Likewise, in today's virtual world with all of the competition, the consumer must not only be aware of the online brand, but compelled to use it over another.

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    Benefits of a Brand

    On page one we learned what branding is and how branding works, now let's discover the benefits of a brand name to a business.

    Branding is beneficial to a company who bears a brand name. There are several benefits of creating a brand for a business owner:

    • Trust, credibility and favorable image- the name has established a certain trust with the consumer. This makes the product or name favorable over another.
    • Consumer loyalty- when given a choice people may prefer to choose a brand name over a generic (lesser known) name.
    • Leverage/positioning- knowing this gives the company leverage over the competition; the business will likely be able to lead the market with pricing because people will pay more money for the brand name.
    • Profitability- stating the obvious, profit comes with a well-known, established and respected brand.

    Also, these factors are interrelated. Namely, trust loyalty leverage ↔ profits. The arrows show that in order for the loyalty to continue, the product must continue to be reliable to the consumer; keep the trust going and you will keep loyal customers. Brand perception can also be affected by societal changes, innovation, and brand competition. The Levi's name for example, lost some of its market share when it did not change with the times, but regained it when it offered different washes. Doing consumer research and adapting the brand to societal changes or trends is an essential part of keeping loyal customers.

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    In Conclusion

    Learning the basics of what branding is and how it works can be of great benefit to a small business owner. Branding will take time and investment. After all, most popular brands were not born overnight. Back to our original example, Levis was established 138 years ago! With the onset of social marketing and Internet media, there is a chance to reach a wider advertising audience with a unique product or service than traditional marketing methods of the past.

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    References/Further Reading

    Iowa State University. Maker, A:

    The Effects of Brand Name:

    Creating Strong Brands. Keller, K:

    Image Credit: Wikimedia Commons/tortarolo