The reality of brands: towards an ontology of marketing

American Journal of Economics and Sociology, The, April, 1999 by Wolfgang Grassl

I

Introduction

Consumer goods, and particularly brands, are part of our common-sense world. Yet marketing, the discipline that studies these phenomena, has so far taken little notice of attempts to develop theories of domains of common-sense reality by investigating its own ontology. Received marketing theory holds that "only philosophers can afford to define products in ontological terms, and that is only because for them it makes no operational difference what the definition is" (Levitt, 1969:11). This view betrays some basic misunderstandings.

If ontological analysis has been applied to geographical space, linguistic categories, real estate, visual perception, intellectual property rights, 'naive physics', cyberspace, ethical values, technical artifacts, social relations, and economic objects, something as central in our lives as the domain of commercial products should certainly afford an equal degree of analytical scrutiny (see, e.g., Smith, 1995, 1998, 1999; Smith and Casati, 1994; Simons and Dement, 1996; Smith and Varzi, 1999a; Smith and Mark, 1999).

The ontology of the commercial world is of great complexity. This has been recognized in the few attempts to reconstruct or model the categorial framework in which we consider market relations. Economic theory is based on primitive concepts such as: economic good, commodity, money, value, price, and exchange. But it permits only few implications for purposes of marketing, which studies objects not only under the aspect of their specific utility for consumers but, going beyond the domain of economics, also in regard to the opportunities, strategies and techniques of influencing utility and exchange relations. One single project to develop an ontology of business enterprises within an artificial intelligence framework has thus far been undertaken, using the notion of brand as one of its primitives (Uschold, King Moralee and Zorgios 1998).

One of the problems every ontological investigation encounters resides in the fact that we can, at one and the same time, classify a region of common-sense reality as comprising (physical or immaterial) objects, economic goods, products, and brands. The subject areas of chemistry, physics, cognitive psychology, economics and marketing overlap, and ontological clarification is needed to identify why and how we deal with the same object differently in marketing than, say, in microeconomic price theory.

Over the past two decades, much of marketing theory has focussed on explaining brand equity. It has been recognized that brands are often the most valuable corporate assets, exceeding less dominant products both in terms of consumer awareness and of financial valuation. The question remains, however, what exactly constitutes brand equity. What causes products such as Coca-Cola, the Hershey chocolate bar or Campbell's soup to be 'deep' brands and to profit from a price premium while other colas, candies or soups do not? More precisely, the challenge is to find "a way of bridging the gap between the intangible perceptions of a brand and the revenues realized from it" (Dyson, Farr and Hollis 1995: 10). Only this will adequately explain why companies founded on strong brands are often acquired for a multiple of their book value.

There are theories that see brand equity as being anchored in consumer awareness, as intangible assets of companies, or as a theoretical construct which is functionally dependent on brand management (Aaker, 1996; Keller, 1993, 1998). Consumers perceive brand equity as the value added to a product by associating it with a brand name and other distinctive characteristics. Customer-based brand equity, then, depends on the degree to which consumers are familiar with products and "hold some favorable, strong, and unique brand associations in memory" (Keller, 1993: 2). Considering the matter from a financial perspective, companies view brand equity as the net present value of the future profit stream that can be attributed to the price premium of the brand. This conception has gained importance in several countries by the admission of brand equity as a depreciable asset on balance sheets. In a managerial perspective, the equity of a brand is determined by an ontologically peculiar set of properties - including brand awareness, brand loyalty, perceived quality, and brand associations - attached to the outward presentation of a brand by means of a name, symbol, design, packaging, or delivery.

Most approaches see the nature of brand equity as revolving around the relationship between brands and other products in the same competitive set (Kapferer, 1992: ch. 7). What needs to be explained, therefore, are the conditions that demarcate brands from other members of their respective product class.

Two conceptions of this relationship will be compared and it will be shown that there are good reasons to accept the ontological reality of brands as special kinds of products (Section 2). This is followed by an exposition of the sense in which brands are to be regarded as real (Section 3). The rudiments of an ontology of economic goods, products and brands will be presented (Section 4), followed by a sketch of an ecology of brands (Section 5). In the concluding part, the relevance of this model for business, particularly for understanding brand equity and for strategic brand management will be discussed (Section 6). Further work will be needed in order to define the precise ontological structure of brands in formal fashion, to derive from this the set of necessary and sufficient conditions for successful branding, and to test the results against empirical data about brand choice, consumer behavior and the balance sheet asset value of successful brands (Section 7).