The importance of brands

Oliver Hartwich from the NZ Initiative writes:

One of the greatest advances of civilisation is also one of the least obvious: branded products.

We take brands for granted because they are everywhere. People do not just drive any car but a Holden, a Ford or a Ferrari. For fast food lovers, there is a world of difference between McDonald’s, KFC and Burger King. Fashion aficionados care about labels as much as techies do about smartphone brands.

The reason we care about brands is because they provide orientation in markets. People trading with each other have spontaneously found out how useful brands are in this process.

Part of the usefulness of brands is that they signal a certain quality. They become worthless if their products do not deliver. As they say in marketing, “nothing kills a bad product faster than good advertising”.

For companies, a brand is not just nice to have, but one of their biggest assets. Brands take a long time to build because they contain everything that consumers associate with a product. This is why Apple’s brand, for example, is now estimated to be worth $US118.9bn.

In a world of complex markets with millions of buyers, sellers and products, brands provide orientation. This is what brands contribute to civilisation. Imagine a world without them and how much more difficult it would be to navigate.

Unfortunately, this dystopian vision is where we are heading. When plain-packaging rules for tobacco products were introduced, the justification was to promote health goals. Fair enough, but these could have been achieved in different ways as well. The negative side effect of plain-packaging, however, was the precedent it set for other product classes.

In Australia, packaging and labelling limitations on pharmaceuticals are being discussed. If implemented, logos for pharmaceuticals would disappear, making it harder for consumers to pick their preferred painkillers. Meanwhile, confectionary producer Mars has voiced its fear that soon Mars, Snickers and Twix could meet the same fate. Who knows what will be next?

The International Trademark Association has expressed its concerns over the increasing reach of plain packaging rules for different classes of products. They rightly see them as an interference with property rights and warn of the detrimental effects on competition.

I would go beyond that. By limiting companies’ ability to brand their products, we are taking a backwards step on civilisation.

This is one of the best summaries I’ve seen of the dangers of having plain packaging as a precedent. You can be in favour of increased tobacco control measures, but against plain packaging due to the very bad precedent it sets.

I would support plain packaging for tobacco if it could be proven to work and guaranteed it would not create a precedent for other industries. But we know it will. Almost every tobacco control measure has now been endorsed or promoted for other industries such as alcohol, food, soft drinks, pharmaceuticals etc etc.