Brand Management: Research, theory and practice

and the elements of the economic approach serve as a prerequisite for most
planning and execution of brand management still today. The economic approach
is therefore of great importance, but since brand management has evolved drasti-
cally over the years, the approach has also been subjected to criticism as new
perceptions of consumption and new theories have evolved. The chapter will
hence be rounded off with a discussion of the key points of critique, which serves
as a natural point of departure for understanding the development of the forth-
coming approaches in brand management.

Assumptions of the economic approach

In the economic approach, it is assumed that the brand can be controlled and
managed by the company. If management gets the marketing mix right, then the
brand will be successful and strong. Consumers in this approach to brand
management are perceived to be more or less passive receivers of marketing
messages, who analyse and evaluate brand messages rationally. This perception of
the consumer is associated with how the concept theeconomic manperceives
exchanges of goods and consumption.

Microeconomics and the economic man

The assumptions and premises of the economic approach have their origin in the
theoretical model of exchange derived from micro-economic theory and
marketing. The model of exchange in micro-economics is a purely theoretical
model, which means that the assumptions and key models are the result of theo-
rizing rather than empirical research. The basic premises of the economic
approach go back to a neoclassical micro-economic perception of market forces in
society. In The Wealth of NationsAdam Smith argued that if one would let market
forces govern the allocation of resources and the exchange of goods, then an
‘invisible hand’ would allocate resources in a way that optimizes both the indi-
vidual and societal beneficial use of available resources. In this perception of
market forces lies an assumption that individuals pursue self-interest and attempt
to maximize revenue or utility function.
The principle of the ‘invisible hand’ assumes that resources are allocated
according to where they will give the highest possible functional outcome or
revenue because efficient methods of production will be adopted by manufac-
turers in order to accommodate the utility-maximizing behaviour displayed by the

The economic approach 31

Company Marketing mix Consumer

Figure 4.1The brand–consumer exchange of the economic approach