What the Economic Man can teach us about branding?
Nowadays micro-economic theory may not seem the most likely place to go looking for brand management insights. Perhaps you’re more likely to turn your attention to consumer behavioural analysis or cultural dynamics.
It is, however, the foundation on which a lot of brand management concepts are based. The question is: is it still a useful concept in todays markets?
The Economic Man
Micro-economic theory gave rise to the idea of the economic man. He sounds like a figure from a 1950’s film noir movie. A character with a gaunt minimalist look. A practical down-to-earth figure driven by logic, precision and economy of thought, speech and action.
Indeed, in classical micro-economic theory, the economic man is said to be rational, focused on what he can get out of a deal and he abhors the idea of waste; financial or otherwise.
What is more, the economic man is in control. How? Because he has perfect information on what’s happening in a market place. So he knows when he can drive a hard bargain and when not to.
As you might guess, he’s not the emotional type or prone to sentimental attachments. For him, business transactions are one off affairs. Based solely on their individual merits.
Looks like you might have your work cut out if your company is selling to the economic man.
Brand Management Insights
What’s fascinating about this character is that he helps to highlight what we currently understand by brand and its’ appeal to both consumers and businesses.
For him the pay-off for any deal is assumed to be financially measurable. It’s how he knows if he’s got a good deal or not. In many markets this is as true today as it has ever been. The proliferation of price comparison websites is a testament to this.
What is doesn’t take into account are other factors that might align to his needs as well. Such as the influence of society around him, his personal cultural value system or whether the well-being of others may be of concern.
In a way, this movement away from being a price-based seller is what branding is all about. It is a movement away from the herd. It is differentiating your company and its’ products or services. As the famous marketer Philip Kotler put it:
“ The art of marketing is the art of brand building. If you are not a brand, you are a commodity. Then price is everything and the low-cost producer is the only winner.”
This was only ever an economic theory. No-one really had perfect market information. However today, with the advent of the world wide web, market information is much more readily available than ever.
It still isn’t perfect. But market information is now a lot more transparent in both business and retail markets. This information isn’t limited to price. It also includes other factors like support services, terms and conditions, ingredients, business policies, environmental practices etc.
This is another area which branding seeks to influence buyers. The economic man theory makes no mention of relationships. Each new transaction is an opportunity for a new and better deal for him.
This is hard work for both buyers and sellers. It ignores the time and effort that this would take, and time is a resource just like money.
So from a company’s viewpoint, developing a trusted brand not only helps their bottom line, it also helps buyers to reach faster, more reliable and easier decisions.
If you’ve studied marketing at all, you will have met the Marketing Mix at some point. This became known as the 4 P’s, and it was derived from micro-economic theory too.
In case you’re unfamiliar with them, the 4 p’s are Product, Price, Promotion and Place. They help to formulate marketing strategies and tactics, and have been the bedrock of many traditional marketing campaigns.
These four factors neatly sum up what marketers need to focus on and where data can be collected.
From a branding perspective, despite its’ many benefits, it does have some weaknesses. One of these is the focus on product.
Ideally, a brand should be at company level, not at an individual product or service level. This allows an organisation to add new product streams, update current streams and to delete ones which are no longer viable.
The other weakness is that it can focus too much attention on short term goals such as quarterly sales figures. Too much attention to these short term goals can result in tactics which move a brand away from its’ core values.
The economic man and micro-economic theory may not be able to tell the whole story about brands and their management. But their theoretical and practical limitations do shed light on the bigger branding picture and why branding matters to organisations and consumers.
Tilde Heding, Charlotte F. Knudtzen and Mogens Bjerre, Brand Management Research, theory and practice, Routledge, Taylor & Francis Group, 2009.
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