The Importance of Branding

Image Credit: Edgethreesixty branding on Flickr

The importance of branding has always been a highly debatable topic.

It is much easier to convince management to allocate money for a new promotional flyer than for a magazine ad.

No company, regardless of size, operates with an unlimited marketing budget. A commitment to branding requires balancing long term growth and short term results.

This article is dedicated to business owners, company presidents and all those in management positions who are doubtful that branding, this intangible concept, is worth investing in.

Investing in brand building initiatives has many benefits. A strong brand:

  • creates consumer preference for the product/service behind the brand. The multitude of choices in every category leads to confusion and uncertainty. One way consumers deal with these issues is by gravitating towards brands they know and trust. Well-known brands are considered less risky purchases and provide the piece of mind that the product will perform as expected.
  • generates increased revenues and market share. A company can leverage the power of their brand in many ways, such as entering new segments and geographical markets, co-branding, gaining new distribution or brand licencing.
  • increases the company’s market value. A company’s physical assets and number of employees play a limited role in its valuation. What really matters is brand equity. John Stewart, the former CEO of Quaker once said that “If this business were split up, I would give you the land
    and bricks and mortar, and I would take the brands and trademarks and I would fare better than you.”
  • helps the company survive temporary crises. Toyota, a brand positioned on superior quality, has had some serious product quality issues in 2009, which generated a PR nightmare. However due to the many years of delivering on its “quality” brand promise the company managed weather the storm and restore confidence in their product.
  • prevents new competitors from entering the market. A market segment dominated by well-known brands is a serious barrier to entry for most new competitors. Being the first to create the segment helps tremendously.
  • increases profitability by commanding a higher price. This is one of the strongest arguments for the importance of branding. Customers are in most cases willing to pay a premium for an established brand versus a no-name product.
  • helps create a unique and differentiated company image. A brand goes well beyond the tangible product or service being offered. Emotional attributes could be the perfect foundation of a strong differentiation strategy.
  • increases existing distributor’s loyalty. Independent distributors are in the “money making” business. For them brand loyalty always comes second. However if the brand is demanded by the end user the chances of it being dropped from their portfolio are pretty slim. It’s an easy sell after all.
  • helps the company attract new distribution for its products. A well-known brand with proven consumer loyalty will have little problems finding distribution partners, both locally and internationally. Everybody wants to sell a brand that consumers ask for and provides a high turnover.
  • offers the company more negotiation power with its suppliers. Vendors want to be involved in projects for a well-known brand, as their portfolio will be greatly enhanced. In order to get the business suppliers are usually willing to make deep concessions, which translates into cost savings for the company.
  • decreases employee turnover. Strong brands provides a sense of purpose and direction for employees, who tend to be more loyal to the company.

I hope this summary helps marketers and branding consultants make a better case for their services, by explaining why branding is important for any business.

Comments

  1. ermAN PERMADI says:

    Dear Michael,

    very useful. The big problem is in mind set. Branding is promotion and promotion is cost.

    regards

    Erman Permadi

  2. Hello Michael,

    Totalement d’accord sur l’interet pour une entreprise de developper son image de marque et celle de ses produits; meme si les financiers de l’entreprise ont des approches de retour sur investissement sur le court terme!

    Il est toutefois regrettable que certaines mutli-nationales évoluant dans les pays en dévéloppement, se rassurant d’une image de marque bien ancrée auprès des consommateurs, fassent encore de la ”triche” sur la qualité du produit! A savoir, trahison sur le goût, dilution, réduction de la quantité de produit dans les emballages…

    On en revient à dire qu’aucune “couche” de communication ne peut cacher assez longtemps la valeur intrinsèque d’un produit!

    La qualité d’un produit est la pierre angulaire de toute communication!

    Phil FAMIEN

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