To the experienced marketer, the question posed in the title may seem ridiculous. Surely brand-building adds value to any product or service. But that assumption is not so easily accepted outside the marketing arena. Consider this comment from Stephan Dolezalek, managing director of the venture capital firm VantagePoint Venture Partners, “When I buy electrons, I don’t care what flavor they are. I do care a lot about what they cost.” But is Stephan really any different from the millions of consumers who claim not to be persuaded by advertising? I don’t think so.

Stephan was quoted on the Reuters Environment blog in a post that contrasted his views with those of SunPower’s Chief Executive, Tom Werner. Covering proceedings at the Reuters Global Climate and Alternative Energy Summit in San Francisco, Laura Isensee says that Tom is committed to his company’s brand-building strategy in a category that many regard as a commodity market. Brand carries weight for commercial customers and utilities, according to Tom, because when making significant capital investments they want to minimize technology risk.

In closing the post Laura asks,

Does brand matter in solar power systems? Does its importance vary, depending on whether the panels are used in a small roof-top system or large field installation? Is solar power just a commodity — or is it more complicated than that?

I think the answer is that branding is important to any product or service category. But the reason is not complicated; it is very simple. People need a basis on which to make a choice. And even a professional’s ability to know and examine every brand in a category like solar power is limited.

I don’t buy Stephan’s argument that he is uninfluenced by branding. For a start, he had to create a consideration list of brands before he could identify those that were most cost effective. Even with Google, technical sites, and colleagues offering advice,  he is likely to gravitate toward checking out the brands that appear more familiar and trustworthy than others. Why? Because time is money. Since he cannot afford to examine every single option that exists, he will probably focus on those that seem most likely to meet his needs. And even if he does not explicitly remember seeing a brand advertised, the name of a brand he has seen before will draw his attention more than others. He cannot avoid it. It’s the way our brains work.

Now let’s assume that Stephan has created his list of possible choices and is deciding which companies to ask to bid. His prime motivation is price, but he also wants an effective solution. He will check out product specifications in order to judge the likely suitability, efficiency and durability of the different contenders. And, of course, therein lays another means by which branding can affect his purchase decision. His understanding of what is important to the category depends on everything that he has learnt about it, including what he has absorbed through advertising, publicity, trade shows, and discussing issues with his colleagues. Even if he does make price the final criteria for his decision, his understanding of “cost effective” is going to be influenced by many different explicit and implicit criteria, including how well the winning company presents its case.

But in a category like solar power systems, the influence of branding does not stop at the selection process. As Stephan himself admits, the simple fact that someone else knows the brand’s name can have a substantial benefit. In defending his premise that solar power is a commodity, Stephan says that the only place where brand matters is when it comes to applying for financing, suggesting that banks may be unwilling to loan money for a project involving an unknown brand.

So though he might not be influenced by advertising, others are, and that will in turn influence his decision. Presumably the bank assumes there is a higher risk with a brand name that is not familiar. It leads them to doubt its efficacy even if Stephan has done his homework and identified the most cost-effective solution. It is one of the structural factors that helps ensure big brands are bought more often than small ones, as discussed in my previous post on Double Jeopardy.

Selecting a vendor of solar power systems involves more variables than choosing a brand of salad dressing, but that simply means that there is far more scope for branding to influence the outcome. Importantly, the power of branding relies not only getting a brand into the consideration set, but in justifying a price premium. The more a brand can differentiate itself from the competition to make it the only logical choice, the more likely it is to be chosen, irrespective of price.

So what do think? Does branding influence every step of the purchase process for solar power and similar technologies, or is it all down to product and price specifications? Please let me know.

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This entry was posted on Sunday, September 13th, 2009 at 10:12 pm and is filed under Brands. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Print this Page