Is Brand Consciousness, Hurting You Financially?

We all own several items of utility and leisure of different brands. Many similar items tends to meet the same basic need, however, their costs differ on account of several reasons. One of them being the Brand of the item. When we are Brand Conscious, we assume that our other concerns like quality and reliability shall be fairly met by the chosen brand. Without going further, I would like to mention an old anecdote.

There was one small businessman who used to buy cloth from a neighboring state and sell at his native place. During one such movement of goods, there were strong rains and the consequent flooding led to death of his camel. Per force he had to buy another camel. His helper commented that it was really bad for business that his camel died. The businessman replied that there was nothing to worry. As it was not his, but his customer’s camel that had died. The helper took time to understand till he saw how the businessman passed on the cost of the dead camel to his customers. This anecdote highlights that the costs of providing goods and services, will always be passed on to the customers to the extent that they are willing to pay.

How Much of Something does One Need

We also need to understand the concept of marginal utility. This concept relates to the change in satisfaction levels with incremental consumption. The first glass of water for any thirsty person has the highest utility. The second one is also satisfying, but with relatively lesser satisfaction. The third or fourth glass might have no utility at all and this explains the concept of diminishing marginal utility. Everything beyond a point, might not be of much use.

The Marketing Blitzkrieg-Aimed at the Brand Conscious

All firms work on a marketing strategy which involves producing something which satisfies a particular need of the targeted segment. Beyond the basic need, it attempts to add value by aiming at the intangible needs like status. For eg. all mobile phones fulfil the basic needs of communication. But the variety and cost levels today have relegated this basic function to be of no concern while making choice. Some brands have been successful in positioning their products as distinct status symbols. Further there is also a trend of compatibility. Wherein once we buy a product, it is almost a compulsion to buy associated ancillaries, or integrated products of the same brand. Even after buying one item, if the consumer does not buy the subsequent new launches/high end ancillaries, he might end up feeling/looking poor.

Mis-selling by Popular Brands

There is a huge amount of mis-selling through misleading advertisements which one needs to guard against. Firms tend to highlight some feature not related to the basic requirement as the uniqueness of a product. On detailed examination, one finds that that feature/characteristic is of no consequence at all towards fulfilling that particular need.  The most commonly targeted psychology of human beings is Fear. Most ads exploit this vulnerability and make every consumer with some money in his pocket feel bad. Not buying their product would imply that one is not adequately caring for himself and his family. In the case of financial products, it is the psychology of greed along with fear which they aim to exploit.

What are You Paying For ? 

 It is important to understand the breakdown of costs that we are paying for while buying anything. We need to be able to define our basic/add on requirements. The quality parameters including warranty/guarantee, and the estimated life of the item. After identifying different brands meeting the requirements, we can examine the add on features which are causing the cost difference. There are also many intangibles like looks, design and feel etc, which are contextual to each consumer. Having done this, we would often find that there are several brands fulfilling the same need, albeit with large price difference. The consumer needs to take a conscious decision with this brand associated cost. Big brands spend high amounts in advertising. This expense naturally increases the costs which the consumer pays.

When we buy something positioned as being a possession of high-status society, we are inadvertently paying for the associated advertising costs also. Here I will relate this aspect to our discussion on lifestyle inflation in “Monetary & Lifestyle Inflation- The Killer Combo” . We had talked how it is difficult to reverse a particular lifestyle, and consequent financial costs.

Financial Impact of Being Brand Conscious

Every purchase involves a financial outgo which depletes our corpus. A series of such purchases will certainly have a larger aggregate effect. If  one has planned for all these purchases as commensurate to his/her earnings and accumulated corpus, without impinging on any of the future financial objectives/imperatives, then he/she is fairly justified in such indulgence. However, any habitual extravagance, at the cost of future financial plans is sooner or later, bound to cause financial stress.

Recommendations

I would suggest the following:-

(a) Try to define the qualitative requirements of the intended purchase. It might be as simple as giving five mins of deliberate thought in case of small items, to detailed research over months in case of big-ticket items like car etc.

(b) Define a budget, which should be extended only after conscious and deliberate consideration.

(c) Consider all items fitting your requirements and budget. Rule out from the lower end till you reach a fairly satisfactory balance of all tangible and intangible needs.

(d) Deliberately evaluate the additional cost on account of a particular brand of choice, and its effect on the overall budget and financial plans.

(e) Avoid overspending only on account of superficial status concerns. Do so only if you are very sure of your present and future financial capabilities.