Marketers have long argued that a strong brand can induce customers to pay premium prices, increase customer loyalty, and drive growth. But until recently, it’s been difficult for marketers to explain exactly why and how a strong brand produces these results. Read on to learn why established principles of decision science can explain the power of a strong brand.

Numerous studies conducted over many years have demonstrated that strong brands produce significant benefits for their owners. A strong brand can make customers more willing to pay premium prices, increase customer loyalty, and drive revenue and market share growth.

While the benefits of strong brands are well established, we haven’t had a clear understanding of why or how they produce these proven benefits. But thanks to advances in the decision sciences, this mystery has now been solved.

Last fall, I reviewed and strongly recommended Phil Barden’s book, Decoded:  The Science Behind Why We Buy. In Chapter 1 of his book, Barden discusses several decision-making principles derived from cognitive and social psychology, behavioral economics, and neuroscience. Then, he uses these principles to explain how people make buying decisions and how brands influence those decisions.

The Science of Human Decision-Making

Barden’s explanation of how brands influence buying decisions is grounded in the model of human decision-making developed by psychologist Daniel Kahneman, who won the 2002 Nobel Prize in economics.

Kahneman’s model posits that people use two types of cognitive processes to make decisions.

  • System 1 (which Barden calls the “autopilot”) is fast, intuitive thinking that operates automatically, quickly, and with little or no conscious effort. System  1 essentially integrates perception and intuition.
  • System 2 (which Barden calls the “pilot”) is slow thinking that consists of processes that are reflective, deliberative, and analytical.
Together, these two cognitive systems determine all the purchase decisions that people make.
The human autopilot is “always on.” It automatically processes all the information that is perceived by our senses, even if we aren’t consciously focusing on those sensory inputs. And all of those sensory inputs have the potential to influence our decision-making and behavior.
The human brain uses sensory information to learn through a process called associative learning. Our brain builds neural connections between sensory inputs that occur repeatedly in the same context, creating associative memory. Or, to put it more informally, “What fires together wires together.”
These associative memories (many of which we aren’t consciously aware of) are the basis of human intuition, which can be described as our ability to “know” something without knowing exactly why or how we know it.
Associative memories also exert a major influence on what we buy, and this largely explains the power of strong brands.
How Brands Influence Purchase Decisions
In Decoded, Phil Barden argued that brands influence buying decisions because they provide “frames” that affect how we perceive products and services. Barden doesn’t provide a definition of “brand,” but it’s clear that he means more than just a product or service. In Barden’s model, “brand” refers to all of the perceptions and linkages relating to a product or service (or the business that provides it) that a person has stored in his or her associative memory.
To demonstrate the impact of framing, Barden used the illustration that I’ve reproduced below.

In this illustration, two large squares frame two smaller squares. When people see this drawing, most will immediately say the two small squares are different shades of gray. In fact, they are exactly the same color.
Our perception that the two small squares are different shades of gray is due to the differences in the color of the two large squares. So, the color of the frame changes how we perceive the color of each small square.
Barden argues that this is how brands work. He writes:
“The framing effect is crucial for marketing . . . We know that they [brands] have an impact, but how brands work is hard to grasp . . . Framing explains how brands influence purchase decisions:  brands operate in the background, framing the perceptions and, with it, the experience of the product.”
It’s important to note that many of the associative memories that are linked to a brand aren’t about the functional attributes of the product or service. More often, the most powerful perceptions stored in our associative memory are about psychological goals (e.g. security, autonomy, excitement) or past emotional experiences.
Barden’s explanation of how brands influence purchase decisions is compelling, and it provides two lessons for marketers. First, it reinforces the importance of effective branding and brand marketing. And second, it should remind us that most significant purchase decisions involve both deliberative/rational and intuitive/non-rational thinking.

Top image courtesy of Affen Ajlfe (www.modup.net) via Flickr (PD).