The value of a brand

When many of us shop for products or services, we immediately think of brand names, such as Coke, Pepsi, Amazon and Hanes. How important are brands? And why do buyers use them? N.C. State University economist Mike Walden explains.

Well, they’re very important, and I think one piece of evidence here is that companies are willing to spend big money to get their brand name out there. For example, Levi’s Jeans just spent $200 million dollars to name the new stadium for the NFL San Francisco 49ers. And what the companies are trying to do here is … to develop brand loyalty. They are trying to make people think about them when they think about a particular product.

“And from the buyers’ point of view, the buyer uses the brand name, if they develop an affiliation with it, as a cheap screening device.

“They are going to say, ‘Yes, I’m going to go for a particular product line’ or ‘This company is reliable; it has got good quality, good customer service,’ et cetera.

“Of course, a brand name can turn into a negative if, indeed, the company does not deliver on those factors. But still, brand names are very, very important … as evidenced by businesses willing to spend big, big money to put their names out.”

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