Price advantage is often the single biggest lever that a company can employ to boost margins in profits. The promise of branding is that it can sustain price advantage. However, branding is a defensive act. Today, more than ever, branding is used to wall off competition. Brands often compete against rivals under the name of keeping the brand fresh. What brand managers have missed is that the mass market of limited communication is over. New entrants can launch with little money invested in advertising, or for that matter, none at all. Word-of-mouth or "word of mouse" is an effective media of influence. Today, the brand is viewed as value extended above and beyond; a transcendent entity as a law of enduring qualities. People will come and go, but brands will stay forever. The brand becomes a fetish of value add and brand equity, justifying untold dollars of tribute.
Very few products are able to defend this lofty market position. Some products, like Tide, have endured and command a premium price. However, after decades of promotion and advertising, the best predictor of detergent purchases is the brand your mother used when you were child.
The center of the market has increasingly lower profit margins. More customers are increasingly attracted to being provided what is right for them. Fact-based assessments will override the height of emotional appeals and will protect very few companies; hence the branding fiction of advertising is eroding.
Branding becomes important because of the prolific choices available to consumers. The unspoken assumption is that there is not much difference between products. Vance Packard first noticed the way advertising increased importance inversely proportionate to product differentiation when he listened in on an annual conference of advertising agencies. He heard an appeal for more gifted artists to help cope with the problem of "the rapidly diminishing product difference."
Packard highlighted the challenge made by the Chicago Tribune research director, Pierce Martineau, to advertisers: "What is the advertising direction going to be when the difference between rival products becomes trivial or nonexistent?"
The answer, according to David Ogilvy, was the "greater the similarity of products, the less reason plays in brand selection."