Yes, there is an ROI in branding, and it’s enourmous!

This is part two of my 3-part series, which talks about why you should consider investing in Branding. As always, these articles are deliberately short to entice rather than overwhelm. Future articles will feature some of these concepts more in-depth to understand them better.

Ah yes, Return On Investment, a.k.a ROI. Possibly the most talked-about metric in business. 

The concept is relatively simple: spend a (hopefully) small amount of money on your business’ product, service, or project to gain a maximum return for growth. A small percentage of that return is then re-invested into the company to repeat the process.

A simple example would be investing $1000 in ABC stock and closing your position at $1200.00 two months later. 

While you could say you made $200 in two months and be correct, we calculate ROI as a percentage, so you made 20% on your investment. 

ROI = (Current investment – initial investment outlay / Intial investment outlay) x 100

($1200 – $1000 / $1000) x 100 = 20%

Not a bad return, but this article is not about financial planning.

It’s about Branding and why you, the CEO of your business, no matter the size, should consider it carefully.

Why? Because, as we shall see, when you invest in Branding, the payoff can be pretty substantial.

What is Brand Value? 

How do we measure a company’s brand value? After all, as we saw in the first post, a brand is a feeling the consumer feels towards your product, service, or business; it’s not something they hold in their hand; it’s something that occupies a space in the consumer’s mind. In other words, it’s not a tangible asset.

Well, let’s change our perspective a little – what’s the difference between a strong brand and a weaker one?

A strong brand attracts many customers who are very happy to pay more and usually more often, which has favourable effects on your business, such as lower costs per acquisition as one example. This creates brand loyalty which, over time, translates to higher revenue and profits consistently for the long haul. Strong brands command pricing power, which Warren Buffet has often stated to be an essential factor when investing in a company’s stock.

It also makes the shareholders pretty happy.

A weaker brand becomes part of the noise and usually struggles to compete. That may be harsh, but it’s true. 

Study after study proves this. Here are two of my favourites to illustrate my point. I think you’ll like them too.

Ocean Tomo, a leading Financial Expert, Management Consulting, and Advisory firm that provides intellectual property (IP) services and other intangible assets, came out with a landmark study that made my jaw drop.

In the study, they determined that, over time, Intellectual Capital or “intangible assets,” which, as they put it, “generally refers to traditional Intellectual Property assets – patents, trademarks and copyrights,” has grown from 17% market cap representation in 1975 to 90% in 2020 on the S&P 500. 

Wait. What? What does that even mean?

It means that, over time, companies went from having tangible assets to intangible assets represented in the market. In a nutshell, a company’s brand value is worth quite a bit.

How much? Here’s another study that happens to be my absolute favourite.

Interbrand is a brand consultancy firm that has been around for some 40 years, so they know a thing or two when it comes to Branding. According to their website, the Best Global Brands are worth over $2 trillion, with tech being the leading sector (the top 10 make up 62.3% of the total brand value).

Every year, Interbrand comes out with a “Top 100 Global Brands of the year” with 2021 available now. 

Care to guess who is number 1?

Apple

Care to guess what Apple’s Brand Value is?

$408 251 000.00

Not quite half a billion. But close. 

Take as long as you want to reflect on this. I’ll wait.

Interbrand believes that brand is more important than ever before. I concur (you can download their full report here).

And the trend seems to agree with this. In the past, many CEOs thought that marketing tactics alone were enough to propel them forward. However, more and more small, medium, and giant corporations are investing in Branding to be more relevant.

I will be the first to say that marketing is a (very) critical component in any business. However, the sky is the limit when you add Branding to the mix. 

Strong brands prove this over and over.

Ok, what are the KPIs of Branding? 

If you’re to invest in your brand, there needs to be something that we can use to measure its performance and maybe even course-correct if need be. I hate to burst your bubble but measuring brand value, or equity is not that easy. Different companies across many categories use many Key Performance Indicators (KPI), and it is beyond the scope of this article to go through all of them.

However, I don’t want to leave you empty-handed so here are (just) a few that go beyond revenue and profit:

Branding Power

  • Brand Culture – growth happens from the inside out. Employees of the business are critical in expressing a brand’s philosophical value to clients. Just how engaged are your team members in your business?
  • Brand awareness is a KPI that calculates customer awareness or perception of your brand.

Business / Financial

  • Customer Lifetime Value (CLV) – This is an important metric to measure for some businesses. Depending on who you ask, it can cost anywhere from 4 to 6 times more to acquire customers than retain them. Remember, strong brands create brand loyalty, quickly bringing the Cost Of Acquisition down.
  • Cost Per Acquisition (CPA) – While we’re at it, let us look at CPA. How much are you spending to acquire leads and convert to paying customers? Depending on your campaign, it may be too little or too much. 

As I said, these are just a few as there are tons more. In future articles, I will touch on one or two and elaborate more on them.

So what now?

Well, hopefully, I was able to describe just why developing your brand can be the best investment you can make for your business (especially for the long haul).

In part three, I will go into the how. Here’s a sneak peek:

  • Brand strategy – If you want to become relevant and stand out from the crowd, you need a plan. We’ll cover some of the critical concepts needed when developing your brand.
  • Brand Identity – Yes, we are talking about logos, colour palette, and more. From posters to your website, every single touchpoint should be easily identifiable in your customer’s journey.
  • Brand development – Time to craft a story that involves you and your customer. It’s time to build a relationship—hopefully, a long-term one.

I hope you are enjoying this series so far. I look forward to seeing you as we put it all together.

Until then, I will include additional resources below that further illustrate Brand Value’s subject. Please enjoy.

As always, I welcome your comments and look forward to reading them. 

Resources

The Brand is back: Staying relevant in an accelerating age – McKinsey & Company

What is branding ROI – Forbes

Can you measure brand? Yes… – Databox.com

Brand awareness ROI: The KPIs you need to be tracking – Market Enginuity

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danplumadore@skybourne.ca