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Advantages & Disadvantages of Branding

Updated March 23, 2017

A brand is a name, symbol or a combination of both that identifies a company and its products. Companies often allocate a significant portion of their marketing budget to promoting their brands, differentiating their products and increasing market share. A brand may have local significance, such as a well-known restaurant in a city, or it can have an international presence, such as Coca-Cola, Intel, McDonald's and Kraft.

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When promoting a brand, companies sometimes choose to follow a multiproduct branding strategy, similar to automakers Ford and Toyota. In this regard, a company's name is an umbrella brand for all its products. Coca-Cola, Apple and Intel have focused their energies on branding their corporate names and images rather than individual products. Grocery chains and big-box retailers use private-label branding to attract value-conscious customers.


Companies use branding to differentiate their products based on value, quality and other attributes. A positive brand image creates a halo effect that affects existing products and makes it easier to introduce new products. The "Intel Inside" campaign, for example, was designed to brand all Intel microprocessors as high-performance and high-quality products.

Apple has followed a somewhat different route because it relies on its corporate name and unique product brands. A mixed-branding strategy can leverage a company's reputation for innovation to carve out profitable market niches, such as Apple's Mac computers for graphics-intensive operations, while developing entirely new markets, examples of which would be iPods and iPads. Kraft consumers know they are getting a quality food product, which makes it easier and more cost-effective for Kraft to introduce and gain consumer acceptance for new products.


The main disadvantage of branding is the high advertising and related public relations costs. Establishing a local or international brand requires years of sustained advertising, high levels of quality and exceptional customer service. A brand image and reputation cannot be established in a few weeks. Companies must continue their promotions even during economic downturns or when sales stagnate, because if they do not, competitors might fill the void and be in a better position when the economy turns around. These expenditures can reduce margins, especially if sales volumes are being affected by price competition or changing customer preferences. Also, there is the risk that poor customer service by wholesalers or retailers in the distribution channel might reflect poorly on the brand itself. Manufacturing issues that lead to product recalls, such as Toyota's well-publicised problems with brakes from 2009 to 2011, can also affect a brand's image, which usually requires additional expenditures to repair.

Considerations: Co-Branding

Co-branding refers to a joint branding arrangement between multiple companies. The "Intel Inside" campaign was a co-branded campaign because it tied computer manufacturers, such as Dell and IBM, to Intel. Marketing consultant Steve McKee points to grocery store aisles for co-branding examples, from cereals to ice cream. Small businesses can explore dozens of opportunities in local or regional markets for co-branding opportunities that reduce cost while increasing market penetration. McKee cautions, however, that co-branding can have a dilutive effect because the credit for a positive experience is spread across at least two brands instead of one, and a negative experience with one brand could harm the partner brands.

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About the Author

Based in Ottawa, Canada, Chirantan Basu has been writing since 1995. His work has appeared in various publications and he has performed financial editing at a Wall Street firm. Basu holds a Bachelor of Engineering from Memorial University of Newfoundland, a Master of Business Administration from the University of Ottawa and holds the Canadian Investment Manager designation from the Canadian Securities Institute.

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