What Is Brand Awareness And Why It Matters For Your Business

Brand awareness is a measure of how familiar a customer is with a brand. The greater the brand awareness a business enjoys, the more their products and services are recognizable to their target audience, thus, in theory, augmenting its long-term strength on the marketplace. Brand awareness is a key element of an effective marketing strategy.

Breaking down brand awareness

Brand awareness is a broad and sometimes vague concept, but this does not decrease the relevance or importance of brand awareness to the success of a business.

  • Brand awareness describes the familiarity of a consumer to a specific brand.
  • Brand awareness allows organizations to dominate competitive consumer markets through differentiation and the usage of brand names in daily conversation.
  • Creating and maintaining brand awareness can be costly and a function of success.

How does brand awareness work?

For better or worse, consumers are spoilt for choice when making a buying decision. Overwhelmed at the thought of having to choose from multiple products, consumers often stick to brands they know. This is brand awareness at work. Awareness breeds familiarity and familiarity breeds a purchasing decision that the consumer is comfortable with.

Brand names that have turned into nouns are also great examples of brand awareness in action. Band-aids were originally made by Johnson & Johnson, but the term is now widely used to describe any small bandage regardless of manufacturer. 

Kleenex is a brand of facial tissue made by Kimberly Clark, but kleenex as a noun now denotes a generic term for any kind of facial tissue. Regardless of the product, brand names that have infiltrated the English language are so familiar to consumers that they do not have to think twice about purchasing them.

Why is brand awareness important?

Brand awareness is important because it is almost impossible to defeat. It is difficult to imagine that band-aid or kleenex will ever disappear from daily usage and be replaced with something else. Indeed, these brands enjoy what Warren Buffett called an economic moat. Businesses who enjoy an economic moat are so recognizable that their market share and profitability are protected from competitors.

Brand awareness is also important in industries where there is little scope for product differentiation. 

For example, soft drink is largely indistinguishable from one brand to the next. Companies such as Pepsi and Coca-Cola rely on brand awareness to beat their competition – even if their soft drink looks no different from their competitors.

Brand awareness also builds a brand’s value through brand equity. When consumers have positive experiences from brands they trust, brand equity increases. For the business, this means that:

  • They can sell their products or services at a higher price because of a higher perceived value.
  • They can expand their product or service offerings based on products that sell well.
  • They have a greater social impact because of the attached value of their brand.

Costly in the short term, a valuable asset in the long term

Brand awareness has the potential to be costly and time-consuming. Start-ups or smaller businesses hoping to emulate the reach of Johnson & Johnson or Coca-Cola will need to develop a robust brand that has the potential to appeal to a large group of people. 

Popular brands also attract further costs associated with maintenance as competitors seek to take advantage of their popularity.

For example, a restaurant bearing the name “Little Mac” was threatened with legal action by McDonald’s if they did not change their name.

Aside from the obvious trademark infringement, maintenance is important to ensure that a brand is not tarnished or sullied by copycat competitors.

Brands can also suffer from negative awareness when they are attached to people who act in contrast to the brand’s values or attract negative attention in other ways.

The impending death of Steve Jobs, for example, caused Apple share prices to fall.

This is because consumers believed the next CEO would be unable to maintain the product quality they had come to expect from Jobs.

Brand equity and premiums

The brand equity is the premium that a customer is willing to pay for a product that has all the objective characteristics of existing alternatives, thus, making it different in terms of perception. The premium on seemingly equal products and quality is attributable to its brand equity.  

Brand awareness and switching costs

Another key element of brand awareness is about switching costs. Once a brand is recognized, it becomes harder for the customer to switch to another brand.

As the familiarity with the existing brand helps the customer reduce the cognitive workload of getting to know another brand for that same product.

Therefore, brand awareness might work as a sort of friction mechanism, preventing existing customers familiar with your brand to switch to another brand.

Of course, in order to make this mechanism stick, the customer experience needs to be aligned with the other aspects of the marketing strategy.

Brand building and demand generation

Brand building is the set of activities that help companies to build an identity that can be recognized by its audience. Thus, it works as a mechanism of identification through core values that signal trust and that help build long-term relationships between the brand and its key stakeholders.

Brand awareness and marketing strategy

A marketing strategy is the “what” and “how” to build a sustainable value chain framed for a target customer. A powerful marketing strategy needs to be able to manufacture desire, amplify the underlying value proposition, and build a brand that feels unique in the mind of its customers.

Brand awareness, share of mind and moats

Economic or market moats represent the long-term business defensibility. Or how long a business can retain its competitive advantage in the marketplace over the years. Warren Buffet who popularized the term “moat” referred to it as a share of mind, opposite to market share, as such it is the characteristic that all valuable brands have.

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