In economics, branding serves an important purpose. Brands allow people to economize on knowledge, a scarce resource. We make decisions with imperfect information, and brand labeling and trademarks help us navigate these decisions. As Thomas Sowell writes:
When you drive into a town you have never seen before and want to get some gasoline for your car or to eat a hamburger, you have no direct way of knowing what is in the gasoline that some stranger at the filling station is putting into your tank or what is in the hamburger that another stranger is cooking for you to eat at a roadside stand that you have never seen before. But, if the filling station’s sign says Chevron and the restaurant’s sign says McDonald’s, then you don’t worry about it.
He goes on to add that “brand names are substitutes for specific knowledge.”1
You don’t know much about the particular bottle of ketchup you may be buying—the quality of the factory it was produced in, the farmer who grew the tomatoes, or the recipe used—but if it says Heinz on the label, you have a good idea of what you’re going to get. The need to economize on knowledge is so important that in the Soviet Union, people began to learn how to read barcodes to know whether or not they were getting products from reliable factories.2
In customer service industries, this is also the purpose of a uniform. Customers can quickly identify the person they need to talk to in a retail environment, and the uniform conveys certain expectations. The electronic retailer Best Buy dresses its computer technicians, called the “Geek Squad,” in comically cliché “geek” uniforms—white shirts and black clip-on ties—in an attempt to help customers distinguish the employees with specialized computer knowledge from those who sell televisions.