theory of transaction costs builds on the same assumption as the principle of the
‘invisible hand’ that all actors involved in the exchange of goods will display
behaviour of optimization. From a manufacturer point of view, not only is it
hence important to supply the best deal, but from a marketing perspective it is
equally important to reduce the transaction costs associated with the search,
purchase and consumption of a product. It is on these assumptions of behaviour
of optimization and minimization of transaction costs that the theories of the
economic approach to brand management are based. These assumptions define
the relationship a company has with the market focusing on price, demand and
supply. The theoretical origin of the marketing mix concept in neoclassical
micro-economics and transaction theory is reflected in how the exchange
between brands and consumers is perceived.
The transaction costs the economic consumermight have when finding the
best possible deal can however be a barrier that, from a rational perspective,
makes it difficult to choose the right brand or product. If transaction costs are too
high – if e.g. it is too difficult to find and buy the product – then the consumer
might choose another product even though it might not deliver maximum utility
compared with other products or compared with the price. In the economic
approach, it is therefore crucial that transaction costs are minimized. The
marketer can do this by ensuring that the right product, at the right price, is made
known and accessible to consumers through adequate brand management. This
will ensure that consumers are always aware of the product whenever they need it
and that they have easy access to purchasing the product. Hence it aims at mini-
mizing the transaction costs consumers might have and facilitates consumers’
decision process because it aims at diminishing the barriers to an ‘economic man’
brand choice behaviour. The exchange between the brand and the consumer is
hence perceived to be of a transaction-like nature, where the consumer acts as an
‘economic man’ who rationally evaluates all available choices and chooses the
best available offer. The communication between the brand and the consumer is
perceived to be linear and rather functional, because once a certain frame has
been set by the marketer it is expected that consumers will respond with a certain
brand choice behaviour.
Consumption is hence perceived to be the result of consumers’ insatiable desire
for goods and services and is not influenced by social interaction, culture or the
well-being of others. This is why very rational factors like awareness, price and
income are perceived to be key factors in the economic approach when consumers
make consumption choices. Brands are regarded as signals that can reduce the
uncertainty that will always be present in any transaction, before consumers make a
brand choice. Hence the economic approach does not, like the other approaches
described in this book, include consumers’ hedonic consumption that satisfies more
emotional and irrational wants and desires. The brand–consumer exchange is
perceived merely as an exchange of goods consisting of one or more transactions,
as opposed to the other approaches, where the exchange between brand and
consumer is perceived more broadly as a relationship with different characteristics,
depending on the specific approach. So what does this difference in the perception
The economic approach 33