Getting to the Heart of the Financial Benefits of Branding

We’ve talked a lot about the myriad benefits of branding and design in general. In those discussions, we’ve touched on how good branding helps you attract both customers and talent, drive sales, differentiate you from your competition, and more. But we’ve only touched lightly on the question we know you’re really asking when you inquire: why does my branding matter? What most actually want to know but are too (Midwest) polite to ask is: how does brand impact my bottom line? So, we’re diving in and getting to the heart of the financial value of branding, to better help you understand what kind of a return you can expect on your brand investment.

Good Branding Increases Company Value

Brand value is directly tied to company value. Four years ago we covered Slack’s $2.8 billion valuation, citing their meticulous attention to design and brand as the driver behind their rise to the top of the enterprise chat application mountain. This focus continues to pay off as their valuation passed $7 billion and approaches $10 billion while their (stale-branded) competitors are barely eeking into the billions.

And what is Slack doing with this financial clout? Investing even further in their branding. It’s no wonder. If the company had ignored branding and simply focused on building a well-designed tool for software developers used to staring at screens like this all day, chances are they wouldn’t be in a position to surpass both Google and Microsoft in this space.

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Good Branding Commands Premium Prices

When it comes to prestige and premium pricing, you’re no longer simply selling your product and its benefits. You’re now selling the brand experience and creating equity in the brand itself. In fact, brand is so powerful, it can be used to turn a commodity into a sought-after prestige product.

Consider the bottled water market. Nestle charges 1 cent/oz. for their basic Pure Life water while Fiji charges 6 cents/oz. for their Natural Artesian water. What’s the 600 percent difference between these products? You could argue that Fiji sources better tasting water, but the reality is both do the same job, equally well. All Fiji really brings to the glass is a premium brand experience. The secret to their success lies in their iconic packaging, carefully curated brand story, and over-the-top (and impossible to prove) brand promise of delivering Earth’s Finest Water.

Good Branding Minimizes Sales and Marketing Costs

While the initial investment in a brand foundation isn’t exactly cheap, a solid brand will work harder for you, reducing your long-term sales and marketing costs. Once you’ve distinguished your brand in the mind of your customer, your products will start to sell themselves, even as you introduce new products. The impact brand has on the decision making of buyers is so important, BrandZ uses brand contribution as a key metric in developing their Top 100 Most Valuable Global Brands report every year.

If your customer is already primed to buy, you don’t have to spend nearly as much time, energy and budget moving them down the funnel.

They’ve found that brand contribution drives not only premium pricing, but also volume. When you peel back even beyond these numbers, you can see how brand contribution can reduce your sales and marketing costs. If your customer is already primed to buy, you don’t have to spend nearly as much time, energy and budget moving them down the funnel. Not only with existing products or even new products, but when breaking into all-new markets as well.

Consider Amazon — a brand that boasts a four out of five on the brand contribution scale. They earned their reputation in consumer retail markets, but in recent years they’ve launched a suite of successful B2B-focused services and even a B2B marketplace that reached $1 billion in sales the first year out of the gate and $10 billion before they hit their five-year mark. Growth at that level would have been nearly impossible to achieve without the strength of their existing brand foundation.

Good Branding Amplifies Your Ad Spend

A solid brand helps you develop relationships with your customers, turning them into advocates for your brand. Essentially they become volunteer marketers, going out in the world and doing your selling for you. Word-of-mouth is one of the most effective ways to convince new customers to try your products, especially when you consider 80 percent of Americans seek recommendations before making a purchase.

When you have existing customers speaking favorably about your brand in their natural habitat, you’re able to amplify your reach without spending a dime. And you’re able to do it through a built-in network of trust, reducing the sell-through costs.

Good Branding Reduces Employee Turnover

On average, talent turnover costs companies $15K per employee. When you get up to executive levels, that number creeps upwards to more than $100K. In the same way that great branding cultivates loyal customers, it can also cultivate loyal employees and save you money as a result.

A great brand foundation makes it easier for everyone in your organization to do their job. As we mentioned earlier, marketing and sales can do so much more even with small budgets when your brand is on point. Customer service conversations go much more smoothly when customers are attached to your brand. R&D will have more success with new products when customers already trust your brand. All of this makes for a better work environment and a more attractive company culture, reducing costly turnover in the process.

While the price tag of branding can appear overwhelming as a single line item, you have to consider the full picture. As you start to see the impact branding has on every area of your business and the financial difference it makes, you’ll soon realize you can’t afford not to invest in your brand.