Why Strong Brands Drive Big Profits

I’ll admit, when I used to get this question, I’d be a little tongue tied. Where do we start? To someone who’s been in the brand strategy space for more than 15 years, I have a broad and inclusive view of what branding entails. To my ears, it’s like asking “what’s the ROI of having an awesome product” or “what’s the ROI of having a rockstar team?”

Investing in your brand is investing in one of your company’s biggest assets. It can make or break everything.

Your visual identity, your verbal identity, how you greet someone at the door, your company culture,  even what products you offer, all intersect with and flow out of your brand. Calculating ROI requires that the effect of some particular effort is isolated, then compared to a baseline.

But how can we even begin to estimate what branding is worth monetarily, when a) new brands don’t have a baseline to compare to and b) re-brands affect everything about the business and also don’t truly have a control group to compare to?

Branding is not a marketing tactic. It’s not a promotion or a new loyalty system. It’s the beating heart of your organization and the complex mix of perceptions and emotions others have about your brand.

That being said it’s a valuable question. We can clearly see how it impacts ROI in several key way by boosting your brand’s valuation. There are several ways branding impacts ROI, but here are some of the juiciest ones:

Strong Brands Convert More
Strong brands drive purchases. A brand that is noticeable and meaningful to your audience will drive higher conversion rates in brand marketing efforts. Why? Because in a relative comparison to weaker or less relevant brands, a strong brand transcends pure rationality and elicits an emotional response. Higher conversion rates mean a higher ROI on marketing efforts.

Strong Brands Enjoy Higher Net Promoter Scores
Strong brands drive word of mouth (whether that’s the kind on your face or the kind on your phone). The percentage of who tell others about your brand is your net promoter score, and your brand directly impacts this percentage. Why? Because that emotional response and sense of meaning make customers into fans, and those fans are happy to identify with and promote your brand. That means a longer tail of benefit to your brand marketing efforts, which again boosts ROI.

Strong Brands Command a Premium
Strong brands win loyalty, and loyalty drives the price someone is willing to pay for your product. In spaces with thin profit margins, being able to sustain even a small price increase can make or break the viability of a model. Remember when Starbucks was the go-to example of people paying too much for something that’s cheap to make? Did that stop people from buying? No. For a while, they were the only brand that represented the style of coffee they sold. So every transaction contributes to the ROI of the branding effort that won that initial loyalty.

Strong Brands Build More Equity, Faster
Brands don’t just win dollars at the point of transaction, they’re part of the overall value of your company. Over the past few decades, intangible assets are overtaking tangible assets in terms of cash value. Of course, this value depends on a lot of factors and is most applicable to relatively famous brands. But even for smaller organizations, a strong brand could be the most valuable intangible asset you cash in on when selling your company (or your greatest leverage when securing additional investment).

The Right Brand Attracts the Right Talent
Have you ever noticed that strong, clear, focused brands seem to have a “type” of employee? Or how employees of that brand seem to effortlessly reinforce the brand’s personality? Brands that know what they stand for attract not only customers but employees who are happy to associate with a brand that represents them. People are people, and deciding where to work is an emotional choice that reflects on someone’s identity in a big way.

Inspiring Brands Elevate Your Culture
Speaking of employees, a true branding effort isn’t just about your presentation to the market, it’s about establishing a culture with shared values and goals. The more your organization understands the underlying purpose of your brand, the more they will row in the same direction. Is this hard to measure? Yes. Is it hard to see? Not at all. I love seeing the overall morale of a client’s team boosted by feeling aligned on what their brand is about. This can spell gains in efficiency in decision-making, more synchronized efforts, and less churn. The result? Returns, returns, returns.

The bottom line is that a strong brand, supported by an aligned organization, serves as your true competitive advantage in today’s marketplace. Investing in your brand isn’t only beneficial to having a return, it’s critically necessary.

This article is based on one I originally wrote for Vigor’s Insights blog.