Branding is defined as the durable attribution of higher value to an objectively identical offering that arises from historical information about the seller. Put more simply, a customer is willing to pay more for a product with Branding Power than an objectively equal product without it. 

Branding Power typically takes A LONG TIME to build, often decades, but it can evaporate very quickly - Blackberry’s fall during Apple’s ascendancy or Yahoo!’s decline as Google dominated.

While startups rarely have Branding Power out of the gate, the largest companies in the world have it in spades - Apple, Amazon, Google, and Microsoft have a combined $1.1T in brand value alone.

Benefits of Branding 

Affective Valence - Built-up associations with a company’s brand elicit positive feelings about the offering, distinct from the objective value of the good. A Tiffany’s ring may be indistinguishable from a local jeweler’s, but that little blue box can command a significantly higher price. 

Uncertainty Reduction - Customers attain comfort knowing that the branded product will perform just as expected. Think of your local pharmacy, buyers are willing to pay a premium for branded products they have experience with, given the uncertainty reduction, even though a generic pharmacy branded product with the same exact ingredients may be sitting right next to it on the shelf

Barriers of Branding to challengers

Hysteresis - The simple definition of hysteresis in business is when some advantage or disadvantage persists long after the factors that lead to said (dis)advantage have run their course. For example, Tiffany’s spent decades building amazing products and developing their brand. Today, their products may be indistinguishable from a great local jeweler but they still command a huge price premium. So, how does this hysteresis make a competitor unable to challenge? Simple, the cost of developing the brand power that Tiffany’s has would be very high AND it is highly unlikely that a competitor could develop that brand power even if they spend a lot of money. 

Startups never have Branding Power out of the gate and rarely truly have it until , though nearly every bet on a consumer product startup is a bet on them developing Branding Power. My investments in MUD\WTR, Cece’s Veggie Co., and Golden Rule Spirits are all bets on potential Branding Power.

Up next, last but not least - Process Power…