How important is brand?

Brand influence is very important in some sectors where information is asymmetry. When customers do not have perfect access to information, they have to rely on the available suppliers’ brands (reputations). Brand or reputation contains mixed and complicated information. One key piece of information that the brand information contains is about suppliers’ specifically targeted customer groups. Such information tells much about the suppliers’ products. Firstly, target customer group determines the quality and price of the product. If a product targets high-end customers, the quality tends to be very good while the price will also be very high. Secondly, since different customer groups have different preferences, products with different targeted customer groups are differentiated. For example, laptops designed for businessmen are more portable than laptops designed for gamers, laptops designed for gamers and laptops designed for programmers and developers both have high specs but in different ways. Even GPUs used in these two types of laptops are specialised in different fields. Thirdly, suppliers target specific target groups based on their own production capacities. Suppliers which target high-end customers have to have the most cutting-edge technology as well as quality and quality control. And suppliers will be judged again and again on the brands and reputations they tend build for themselves.

However, in the field where information is perfect, brand and reputation are no longer so important. As customers have perfect access to information, they know everything about the products they potentially want, so they do not need to rely on the suppliers’ brands or reputations to make their purchase decisions.In addition, suppliers do not need to build their reputations or brands at all, all they need is to provide products to the market. Although such market is usually perfectly competitive, there is some room for the suppliers to make some profits, when the number of suppliers is small and all suppliers tend to differentiate their products.

Brands in the field where information is imperfect and asymmetry provides customers with a piece of processed and packed information that tends to direct customers to match their own types with the suppliers’ targeted types in order to make their purchases.