Branding, an Anomaly of Economics

You surely pay 10 times more for a brand pair of pants than for a local made stuff. It may not be better, but you must show off, as this signals how trendy or sophisticated you are, what's in your mind and what are your aspirations. A brand name displays prestige and social status.

"Big name brands are an integral part of our lives", said Davide Ravasi, associate professor in the Institute of Strategic Management of Bocconi University, Italy.

From jeans to cars and mobile phones, brands represent symbols. But this is still not well explained in the context of business management. Management theory and practice focus on business processes: the most efficient and economic method to come with good quality products, but branding skips this.

"Branding is just one way of endowing products with meanings. But there are others, such as product design or even process innovation. However, little research has been done on how business processes and activities, like customer service and production, can systematically create symbolic value in products. This is such an unexplored field that we don't even have our terms and definitions and methodologies agreed on yet", said Ravasi.

For example, Europe has lost some competitive advance in what concerns cost, quality or product innovation, as cheap and (sometimes) good quality goods from China and other emerging economies are flooding its market. These new manufacturers are now developing new goods, innovating, and not just copying western goods.

Not only price and technology matter. The good design can overcome ergonomics. The simple redesign of the outer shells of hearing aids, like coming with sleek lines, translucent plastics and an array of colors and patterns, made Oticon, a Danish leader producer of hearing aids, to help children bypass the psychological burden related to carrying a hearing aid. For 10 years, OtiKids is still the hearing aid of choice for most hearing impaired children.

"You can encode meaning into products through careful design that will elicit certain interpretations in people, and we want to understand the business processes that enable this encoding to happen and how to increase the likelihood that certain forms will be decoded in particular ways", said Ravasi.

"Cultural capital" refers to how goods are connected to cultural conventions, expressions and lifestyles. But it's hard to say how cultural capital is linked to designing new products. Consumers too play a crucial role in creating symbolic value.