Why invest in branding?

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Question - What will be my payback for investing in my brand, and how much do I need to invest?

Answers

1. As with any other investment, you have to do it right - invest in order to get a payback. There are both negative and positive aspects to this payback:

   • Negative - developing a brand is becoming a business norm. Almost everyone nowadays invests something in building their brand. If you invest less, or less wisely, than your competition, they will most likely get your business
   • Positive - if you invest in the elements of your business that are of most interest to your target audience, there should certainly be a payback. Ultimately in branding, there are two questions:
     1. Are you delivering a proposition that is compelling to your customers?
     2. If so, are you exploiting your inherent attraction to your target customers through your business and communications processes?

2. How much should you invest? This depends on how big you want your brand to be. If you want it to be a strong local brand, you can do it on peanuts. If you want it to dominate your market globally, it is going to cost you, in all likelihood, a minimum of $50m a year. Probably the best advice is to make sure that you measure the impact of every investment. Nowadays, there are many tools available to allow you to do this, although, given the many confounding factors of time, threshold effects and cross-dependencies, business measurement always delivers far less than it promises at a far higher cost in terms of the money and effort expended

Key points

In an increasingly competitive global market place, strong branding can help businesses achieve their main business goals:

1. increase the total worth of the business (some brands account for over 50% of the value of major global corporations)
2. drive revenue growth
3. promote employee loyalty
4. make the company more attractive to the right sorts of new recruits
5. improve the effectiveness, efficiency and economy of internal process
6. reduce procurement costs from suppliers and improve their customer service

In more detail…………….

The main justification for developing a branding strategy is that a strong brand gives you 2 levels of profit:

1. On-going sales & profits

Profit from income from loyal customers because:

• you protect your current level of sales to those customers
• you get additional sales for other products/services to those customers
• you get recommended by loyal customers, and so attract new customers
• loyal customers value you more and are therefore prepared to pay a premium for your products/services

Product differentiation gets eroded, patents expire, prices get undercut, services get copied, but brands last forever if you manage them properly.

2. Capital growth

You can sell off your brand at many times the capital asset value.

Several internet-based brands are already worth $ billions having only existed 2-3 years and only made massive losses (even after the 2000 shake-out).

Employee loyalty

It has also been demonstrated that the level of customer loyalty to a brand correlates positively with employee loyalty and creates a virtuous circle from which the brand benefits. A compelling brand should be as motivational to the workforce as to customers. If the employees feel proud of the brand, they are more likely to deliver a consistent, compelling experience to the customer. The customers, in turn, will be reinforced in their feelings toward the brand, which will make employees feel prouder of the brand, and so on.

Recruiting and selecting potential employees

Potential employees will compete to work for powerful brands, not least because it will look better on their CV. Therefore, the cost of recruitment becomes less because they will either apply directly to the organisation, or respond in greater numbers to job advertisements. In markets where the right skills are a scarce resource, the brand may well be a conclusive factor in whether people ultimately choose to work for that company or not.

Process optimisation

If you have clearly defined your brand, and the processes that are critical to its delivery, your internal processes are likely to be more effective, efficient and economic. They will be more effective because you are doing the right things; more efficient because you are doing them right; more economic because you are not investing in a multitude of other processes that would make your business model exponentially more complex, more expensive and more confused.

Suppliers

Suppliers often sell products and services to big brands at a discount in order to be able to quote them as customers. They are also more likely to provide better customer service.

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