Branding as a Long-Term Investment

When the going gets tough, the tough—well, sometimes they cut the branding budget. It’s a natural inclination, really. When you’re worried about your quarterly or end-of-year numbers, it’s tempting to redirect funds from initiatives that won’t realize their potential value for years to come toward programs that have a predictable and immediate effect on revenue and profit, like a price promotion. The problem with this approach is that your brand will likely suffer in the long run.

The Cash Quandary

Sacrificing brand building for the sake of your bottom line isn’t just a custom of a recession; it’s a habit of modern business. According to Tim Calkins, professor of marketing at Northwestern University’s Kellogg School of Management, cash is the single biggest challenge brand leaders face regardless of the economy.

“Executives who hit quarterly profit targets are rewarded, and those who exceed them are rewarded handsomely,” he wrote. “Although it is important to make headway on long-term initiatives such as building a strong brand, hitting short-term financial targets matters most.”

In short, he says, decision makers will almost always choose to hit their quarterly or yearly numbers over investing in branding (which, initially, only delivers a small return as a percentage of its total lifetime value) if forced to choose between the two.

The Branding Long Game

Short-term decision making can boost sales and profits in the weeks and months to follow, but it can also backfire down the road. That’s because, as you siphon funds from branding initiatives, you inevitably weaken your brand. In the absence of a strong brand, which governs how people perceive your product or service, price will become your primary differentiator, and you will have to continuously undercut your competitors (especially those with stronger brands) to win over prospective customers, which continually drives down profit margin.

In theory, that could work for you. Some companies’ entire business model is based on being the cheapest option, and their brand naturally takes on all of the qualities we associate with discount brands. But my guess is, you don’t want to be perceived as the cheapest; you want to be thought of as the exceptional choice. And if you succeed in convincing your prospective customers of that, they will be willing to pay more for what you’re selling. Cultivating that perception is branding, and it takes sustained, concerted effort.

Branding’s Big Payoff

Branding is the process of influencing, over time, the characteristics people assign to and associations people make with your brand. In effect, your brand becomes a concept with (hopefully) positive connotations that you purposefully shape to your advantage. Your name, logo, colorway, font, and other attributes of your visual identity become shorthand for the concept your brand represents.

With focused attention and adequate resources, the payoffs of branding can be significant:

It communicates your value.

A strategically developed brand makes an authentic and convincing case—whether implicitly or explicitly—as to why your product or service is superior. In turn…

It commands a higher price.

Brand perception is an important determinant when it comes to consumers’ purchase decisions, and research shows they are willing to pay more for something they perceive as higher value. In some cases, brands become status symbols, and consumers will meet a higher asking price because the purchase reinforces what they believe about themselves and signals to others something about their lifestyle or values.

It sets you apart from your competitors.

The marketplace is cluttered, and consumers have a lot of choices and messages thrown at them every day. A strong brand differentiates your product or service from others on the shelf (literal or metaphorical), makes you memorable, and helps you stand out from the noise.

It zeroes in on your ideal customers.

An important step in branding is identifying and defining the consumer audience most likely to purchase and derive satisfaction from what you’re selling and then fine-tuning your identity and messaging to speak to your target audience’s wants and needs in a way that fits with your brand’s values and mission. Finding and acting on this overlap helps you attract the best prospects, which is a more efficient use of your resources.

It Promotes loyalty.

Good branding infuses every purchase with meaning and provides emotional as well as functional benefits to buyers, making them more likely to buy from you again and refer others to your brand in the future—two things nearly every business relies on for longevity.

These are just some of the reasons it behooves you to keep up your branding efforts. But payoff won’t come overnight. While you’re almost sure to see some benefit of branding in the short-term, it will be years before a brand realizes its full value—assuming you’re willing to stick with it that long.

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