Types of Brand Risk you need to know about

Many still see a brand as just a name and logo but it is so much more. It is a businesses’ promise to its audience of the perceived benefits, value, credibility and integrity of their product or service which in turn instils confidence, trust and an emotional attachment.

A strong brand will retain existing customers for a business, attract new ones and will allow a business to more easily introduce new products: ultimately a strong brand can reduce risk.

This is why brands are highly valued as they can make or break a business and modern day is where brands are most vulnerable.

Social media makes a business’s brand an open discussion that is fully interactive and where viral posts and fake news can damage a brand’s reputation globally in seconds.

It is no surprise then that managing brand risk is becoming a hotter board room topic where management proactively consider and identify all brand risks.

So, what are the most common types of brand risks:

Risk to brand reputation a brand’s reputation is built over time due to the experiences and emotions customers have and it can motivate behaviour.

Problems with brand reputation happen when a gap appears when a business’s perceived values and behaviors don’t actually match their behavior. 

The real problem is that so many brand reputation threats are out of the control of the those impacted such as fake news, a disgruntled customer or a celebrity brand ambassador getting caught in a compromising situation.

Although of course many brand reputation threats come from within the business such as problems with culture or a scandal that was brushed under the carpet.

Risk to brand recognitionbrand recognition is the power of customers recognizing a brand from its visual symbols such as a logo, corporate colours or even a slogan. 

Brand recognition helps differentiate a brand from its competition. Think McDonald’s famous yellow arches and I’m Lovin’ It slogan or Nikes’ tick logo.

It is easy for brand recognition to drop if the market becomes more saturated or if the brand is redesigned, which is a real problem as brand differentiation drives market share and penetration. 

Risk to brand awareness – brand awareness is how customers associate your brand with a product or service type. The key one here is Hover who for many is the name they call their vacuum cleaner. 

Brand awareness is very fickle and can easily fall due to increased competition or an unsuccessful or a lack of advertising and promotion.

A customer’s brand awareness can be diluted if a company moves away from their main market and can result in the customer becoming distant from the brand.

Risk to brand positioning – brand positioning is the value and perception of your brand to customers. For example, Innocent smoothies position themselves as the pure, natural brand for kids.

Competition can cause a brand’s positioning to drop as other firms introduce similar products to compete or even when a business introduces a newer but cheaper model in their range and customers decide to buy the cheaper version rather than the costlier one.

Positioning can also be damaged through certain actions such as having lots of sales. There is a reason why John Lewis never have a sale but do have clearance or why you will never see Louis Vuitton in an Outlet Village but will find the likes of Burberry and Mulberry.

Brands can also position themselves wrongly by trying to enter ultraluxury markets and they find that the perception of their brand simply does not hold much credence in the newer market. This happened when Volkswagen tried to move into the ultraluxury car market in the US with the ill-fated Phaeton.

When launched the Audi of America boss at the time, Axel Mees said that the Phaeton’s poor sales were due to Volkswagen “underestimating the weakness of the brand,” he was immediately sacked, but he was right about Volkswagen’s brand positioning error.

It is very difficult for brands to find a balance between maintaining the value of your brand and gaining more customers.

Risk to brand legacy – brand legacy is all the history of the brand and for many brands such as Fortum and Mason it can be hundreds of years of history. 

However other than the obvious risk of brand damage a strong brand legacy can also be a negative when you are known for one product and therefore find it hard to introduce new, tailored product offerings. 

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