How A Brand Is Powerful

When Disney+ launched in 2019, the price was $6.99 a month. Now it’s $10.99. However, those of us that subscribe to Disney+ pretty much ignored the price pop. Although during December 2022, they offered an ad supported cheaper alternative, 94% of us stuck with the more expensive option that cost $3 more a month.

I wonder if we were willing to pay more because of the power of their brand.

Global Brands

A brand is a personality that distinguishes a good or a service from all others. It can relate to a taste, a texture, or a technology, and shape what consumers perceive. As a result, employees and stockholders care about the profit from a well-managed brand. Investors want brands to create value. Consumers use brands to judge what they buy.

When a brand is doing its job, it adds to the value of the good or service. And of course, brands help firms compete.

Looking back to 2000, we could have placed Coca-Cola in a #1 spot for the most valuable global brand. But then Apple starts to move upward in 2011 as it passes Disney and McDonald’s and, by 2014, we have Amazon grabbing our attention as it climbs the top brands list.

The following is a top brands animation for 2000 to 2018:

Because the numbers represent the value of the brand in millions of dollars, you might wonder (as did I) how to value a brand. Some say you can calculate the cost of creating the brand. Others suggest pricing the brand as though you were selling it. A third possibility is the income generated because of the brand. While no method can be precise, still they let us identify the top brands.

According to Interbrand, the average value of a best global brand is a mind boggling $3 trillion+ USD. In addition, they’ve concluded that 2022’s rate of brand value growth was at an historic high.

Below you can see the Interbrand line-up and the numbers for 2022:

Our Bottom Line: Demand

As economists, we could also say a successful brand continually shifts our demand curve to the right. The utility it creates can give us more satisfaction and more pleasure. If it can make us believe that a new good or service is healthier, more useful, or stylish, then our demand curve shifts to the right.

In addition, when brands promote loyalty, our demand becomes inelastic. Defined as a relatively minor response to a price change, inelasticity means that purchases slip only slightly even when price substantially goes up. With the brands we love, we are happy to pay more.

Below, a somewhat inelastic (more vertical) demand curve shifts to the right because of newfound extra utility from a compelling brand:

All of this returns us to the Disney+ price hike and the inelastic demand displayed by its consumers. As a powerful global brand, Disney was in the top 10 for 2022.

My sources and more: It’s always nice when a new story matches an old idea. Today’s new story was about Disney from WSJ while, the timeless idea was the value of a brand. Next, you might enjoy (as did I) going to Interbrand’s report to see the ranking of the top 100 brands. Then to see a slightly different ranking, the Forbes list is a possibility.