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Why is Branding Important? Why Should I Invest in Branding?

Outline

  • Introduction
  • Branding Creates Economic Value
  • Branding Drives Recognition, Retention, and Purchase Intent
  • Branding Builds Trust
  • Branding Creates Affinity
  • Branding Constructs a Narrative for Consumers
  • The Benefits of Investing in Branding

Introduction

Each year, we speak with dozens of founders and CEOs, and many of them enter the conversation with a clear understanding of the value and importance of branding. These entrepreneurs know businesses with strong brand equity can charge a premium, whereas less recognizable brands cannot. Thinking longer-term, they see that brand equity empowers founders to negotiate a higher purchase price in a business merger or acquisition. 

We sometimes see conflicting thoughts and emotions around branding, particularly with new startups and small businesses. While the transformative nature of building an enduring brand may seem obvious, many early-stage founders are tempted to forgo brand building in favor of other pressing priorities. Running a young business takes considerable time and energy, and along with the high time investment, financial cost, and mental bandwidth branding demands, it’s easy to understand how it can get pushed to the back burner.

At the same time, these people see the impact branding can have on a company—from familiarity and affinity to sales volume and value—and they want that competitive advantage for their business. Branding is not inexpensive; it’s an up-front cost that is amortized over many years in the life of your company. That cost can seem daunting to a small business or may feel unnecessary to a larger company that currently holds a prime position in the marketplace.

As a branding agency with decades of experience and many big wins, we know the investment is insignificant compared to what a business stands to gain. But how much should you invest in branding, and what should you expect it to bring? Let’s look at the strategy and mechanics of how branding creates value.

Branding Creates Economic Value

The principle of value creation is the same across industries, whether you sell performance sneakers or manage travel agencies. Customers pay businesses money in exchange for future benefits from using the products and services they sell. Those can be tangible, like a marathon medal, or intangible, like the change in mindset that comes from a week in a foreign country. 

To create economic value, you need customers to buy your products or services over your competitors’—and do so repeatedly at a price that represents a healthy profit margin. For that to happen, people need to recognize your business, trust it, and like you. Branding is one of the most effective tools to influence consumer recognition, trust, and affinity. And thus, branding generates economic value.

Branding Drives Recognition, Retention, and Purchase Intent

As you go about your life on an average day, you come into contact with hundreds of brands and thousands of touch points for those brands. Think back over the past week—how many marketing messages, digital ads, social media posts, or retail packages do you truly remember? Do you recall the brand identity or company name? Market research shows the less a seller is recognized along a customer journey, the more likely they are to buy from another business, especially if the offerings are similar. You want to maximize recognition for your brand at every touch point—which is achieved through smart branding.

Branding creates product recognition and brand retention. A great example of recognition can be seen in Coca-Cola’s brand marketing campaign, created in conjunction with the company’s 100-year anniversary, by Turner Duckworth. Coca-Cola owns an identity boasting some of the most recognizable brand assets in the world, and you can see proof in the campaign strategy. Pairing only the cola’s distinct bottle shape and its signature color, the brand is immediately recognized by customers— even though they haven’t seen a logo or even read a single word. That enviable experience of top brand recognition comes through retention, built over years of consistent communication with an audience.

Branding drives purchase intent. When the time comes to make a decision, the brand a consumer recognizes is most often the brand they buy. Years ago, we built a new, spirited sparkling water brand. The water came in inventive flavors, like Jalapeño Pineapple, Chile Mango, and even Pickle flavor. Our brand strategy amplified the outrageous spirit exhibited by the flavors, and consumers loved it. Proof came in a surprising stat—while we knew the wild flavors would fly off the shelf, we didn’t expect the plain sparkling water to outsell even the grocery store’s inexpensive generic version—which was identical. They were even made in the same facility. The brand association with wild flavors, boisterous packaging, and witty copy drove purchase intent for plain water. Over and over, shoppers chose an identical offering at a higher price because of branding.

Recognition is a fundamental piece of the puzzle solved through branding, but it’s not the only one. Brand recognition is a first step in fostering a deeper connection with your audience—by building trust and affinity.

Branding Builds Trust 

Branding is a vital tool for fostering trust in your business and offerings. In today’s marketplace, customers are constantly receiving myriad marketing messages at once across a variety of media. Rather than getting the complete picture of a sales offer, people most often piece together a partial understanding of a product’s worth and benefits. In addition to receiving an incomplete information set, there is also a gap of time before making a purchase. Trust bridges the gap between an incomplete information set and purchase decisions. 

Whether they realize it or not, people make a leap of faith based on intuition every time they make a purchase. That gut intuition is greatly influenced by the level of trust the brand has developed through branding and marketing and the resulting perception of product quality.

Trust is built over time through strategic and thoughtful brand management, aligning your brand with your offering’s quality, dependability, and worth. People learn to rely on three factors in building trust: messages from the brand, experiences with the brand, and validation from other buyers. Branding and marketing create trust by linking consistent promises with positive customer experiences. This trust, combined with recognition, inspires stronger customer loyalty.

Branding Creates Affinity

Recognition links experience to customers’ long-term memories. If the experiences are positive, these links build trust for the brand. Branding strengthens and reinforces the associations of trust with your business versus your competitors. However, people can recognize multiple brands and trust that more than one delivers the same value. Apple and Google both deliver good mobile phones. BMW, Audi, and Porsche are all believed to deliver good cars. In instances with multiple brands offering similar items at similar prices and levels of trust, how do buyers decide? They go with the option they like more. Branding is a key instrument in building that affinity.

Affinity is influenced by three key drivers, and the benefits each brings a consumer. Each helps you connect with your audience on different levels. Functional benefits solve a problem or provide an opportunity for the buyer and seldom resonate in terms of mission and vision. Emotional benefits resonate with the attitudes and aspirations of shoppers, making them feel good about buying and supporting the brand. Social benefits are more outward-facing when an item or brand affiliation says something about the buyer and their personality. Brands with strong social benefits are often called “badge brands” or own devotees, sometimes referred to as their “tribe.” Branding communicates functional benefits, taps into customer emotions, and inspires the expression of shared attributes and mindsets. 

Customers develop preferences based on affinity in a market crowded with similar quality offerings. Are you a Yeti person or unconcerned with your cooler choice? What does your MacBook say about you versus a Dell? Would you actively participate in marketing and wear the brand’s merchandise? The more affinity a shopper has for a certain brand, the higher the chance of purchase, repeat shopping, and the ability to charge higher prices with better margins. Affinity can create organic brand ambassadors who champion you to new customers, sharing their customer experience and reasons to consider your goods over others in the marketplace.

Branding Constructs a Narrative for Consumers

As we’ve discussed, people deal with multiple information streams now more than ever when making decisions about what to buy. Fortunately, long ago, humans developed a strategy to simplify, process, and understand complex information: storytelling. Our brains continuously analyze and evaluate everything we encounter and construct a narrative pattern to organize the information. Branding, specifically marketing strategy and brand management over time, leverages the associations described above across multiple touch points repeatedly to fuel and shape that narrative. Without even realizing it, consumers build a brand in their minds. Strong branding is important in constructing the story people tell themselves about your company.

The Benefits of Investing in Branding

As we’ve stated, strong branding is built on a foundation of understanding consumer recognition and its influence on trust-building and affinity. A clear brand strategy is vital in defining your expectations for the performance of your brand. You want to create a brand that consistently advances your business toward those goals.

Creating a brand that communicates consistently across marketing, operations, customer service, and every other aspect of your business will yield results—from an immediate impact to enduring success and even intangible benefits. The matrix of benefits includes short-term sales, long-term equity growth and value, and increased consumer awareness and affinity. The definition of branding success varies across companies, and each organization sets criteria specific to its industry and business arc. 

Every equation for quantifying investment in branding involves measuring three aspects of business: revenue increase, profit margin increase, and cost savings. Charting each of these along a company’s lifecycle shows that the investment in branding is relatively inconsequential, and the return on investment is substantial. 


We hope this article helps answer some of your questions about what makes branding so important and why it’s an essential and worthwhile investment. Do you have more questions about the process of creating a brand? Give us a shout, share your thoughts, and let us guide you to find the best fit for your goals. Each week, we donate a free hour of consultation to new and aspiring brand-builders, so sign up via LinkedIn, or here by using our contact form!

Check out another recent article:

A guide to the value created through branding and the benefits of investment.

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