Brand investment

As we approach a new financial year and a large number of businesses are focussed on finalising budgets I thought it would be worth exploring a business case for brand investment.

While many marketers and business owners recognise the importance and benefits of investing in brand, it can be challenging to draw a direct line between the power of brand and its impact on business and bottom line.

Brands have come a long way over the years and have evolved from being a single logo and a tagline to serve a whole range of other purposes. These expanding functions of brands make them difficult to assess, however, there is evidence that supports the notion that a strong brand is more compelling and therefore important than ever.

The impact brands have on business, by the very nature of their expanding purpose, are not simply limited to marketing metrics but can be felt all the way through businesses.

I wanted to explore a few ideas that reflect the value of brand:

Getting closer to your customers and stakeholders
Any brand development programme should start with research and insight. This phase provides a great deal of opportunity to talk to and understand your customers (past, present and potential) and internal stakeholders. By engaging these key groups in the process you will be able to understand their individual needs, perceptions and opportunities and what they want and need you business and brand to do for them. By understanding these key aspects you will be able to differentiate between the perceived and actual needs ensuring you align your brand more closely to each group and provide greater relevance and engagement. This will ultimately help to extend the life and value of internal and external stakeholders.

Driving Corporate Value
Admired brands have a well-documented ability to raise company share price and value. A recent report by the US Economist stated, “brands account for more than 30% of the stock market value of companies in the S&P 500 index.”

Additionally, a survey conducted by the World Economic Forum and public relations firm Fleishman-Hillard revealed “three-fifths of chief executives said they believed corporate brand and reputation represented more than 40% of their company’s value.”

Enhancing Reputation
Brand is closely tied to a company’s reputation. The most effective brands work to enhance reputation using it to serve as a promise to stakeholders and as a way of limiting damage when a company is unable to deliver on this promise. We have seen examples of this recently, with the like of Volkswagen, that when a company with a strong reputation makes a misstep its brand can mitigate against and/or limit damaging effects.

It is also considered that strong brands are more effective at launching and driving adoption of new products. Kasper Ulf Nielsen, an executive partner at the Reputation Institute said, “People’s willingness to buy, recommend, work for and invest in a company is driven 60% by their perceptions of the company, and only 40% by their perceptions of their products.” A good example of this is Apple, their product launches have people queueing for days to be among the first to get hold of their latest innovations regardless of product features or capabilities compared to competing products.

Additionally, brand strength can enhance company performance. A customer’s loyalty and advocacy for a brand are powerful outcomes of successful brands. A recent study by branding consultancy Siegel+Gale found that 69% of consumers are more likely to recommend a brand because it provides simpler experiences and communications. In a busy world, a brand that makes life easy for its customers can result in a commercial benefit.

Building Trust
Similar to its reputational benefits, brand can also have a significant impact on trust, which in turn generates positive business outcomes. Trust is built through consistent delivery, a core principle of successful brand management. Companies that invest in delivering exceptional brand experiences and communicating with thought and a clear purpose produce positive associations around each touchpoint. The end result of this is achieving customer preference and loyalty which makes conversation of prospects easier and extends the lifetime value of customers.

Commanding a Price Premium
One impact of successful branding can be the ability of the company to command a price premium and/or increase prices. Legendary investor, Warren Buffett has been quoted as saying, “The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10%, then you’ve got a terrible business.” Having the trust and loyalty of your customers is a crucial factor in the ability to achieve this and as we’ve heard, both are heavily influenced by the strength and relevance of your brand.

Engaging Employees
A company with a strong brand will usually have a more engaged workforce and typically finds it easier to attract, motivate and retain talent. By communicating a clear vision and purpose brands will provide employees with a clear, credible and compelling reason to come to work everyday and ensure everyone is working towards the same collective goals.

Purpose has tangible internal repercussions because it improves employee engagement. According to a study conducted by the Corporate Leadership Council, purpose translates to the bottom line as it states that a company with engaged employees grows its profits three times faster than competitors.

Connecting in B2B
It should never be forgotten that brand is an important asset for B2B companies as well as B2C. The old adage, “no one ever got fired for buying IBM” speaks to the power of brand to persuade purchase decisions. According to a McKinsey & Company study, enterprise organisations now view brand as a “central rather than marginal element of a supplier’s proposition.” The study revealed that B2B companies with robust brands perform 20% better than companies with weak brands.

Worthy Investment
I appreciate that some of the examples above reflect large corporations but the principle is the same across all types and scales of business. The organisations referenced above haven’t achieved the successes they now celebrate by happy accident. It is because the CEO’s and management teams of these businesses understand that strong brands encourage employee engagement, enable higher pricing, increase share value, expand market share and secure lasting customer loyalty and therefore continually invest in building a strong brand. They understand that no matter which way you look at it, brands drive value right the way through organisations.

To discuss your brand and the opportunities it holds to build value in your business, please get in touch.
james.brooke@foggassociates.com
01925 226 139