Branding: a profitable investment
By Adwright, 28 April 2022
Can branding bring in the dollar?
Regardless whether you’re a business owner, the head of strategy development in a local SME or the sales director in a global MNC, chances are that this niggling question has left you in deep thought before. This valid concern stems from the perception that as impressive as it may seem, certain KPIs of branding exercises such as “improved brand recall” and “stronger brand love” may seem to have little to no way of measurement. Put this against the quantifiable and real results from marketing campaigns measured by numbers and dollars, it is no wonder that branding is thought by many to be nothing more than a luxury in today’s world. Safe to say, nothing could be further from the truth.
Results of branding
According to a 2020 article published by McKinsey and Company, its in-house research team found that strong brands consistently outperform the market — and by no small extent. In fact, the world’s 40 strongest brands yielded almost twice the total return to shareholders (TRS) of an investment in a Morgan Stanley Capital International (MSCI) World index certificate over the course of the 20-year period ending in 2019. Of the 20 years surveyed, they outperformed the MSCI benchmark in 13 years. This underscores the undeniable power of successful branding when harnessed effectively and the financial gains it can bring about when companies are willing to invest into it.
A similar report in 2018 by global consultancy firm Prophet also revealed that the revenue growth of the most relevant brands had outperformed the S&P 500 average by 28% over the last decade, with profits (EBIT) rising 205 times more quickly. Once again, it is clearly evident that with the right marketing and advertising strategies, there are enormous profits to be reaped for firms with stellar branding.
Perhaps the most telling piece of statistic which proves the Return of Investment (ROI) of branding is that a superior brand preference or reputation is able to command price premiums of 26% on average, even when brand quality is the same, according to a study of 220 consumer products by the Marketing Science Institute (MSI). What this essentially means is that for a product or service of comparable quality, consumers are willing to pay around one-third higher the price simply for the brand name. This goes to show the importance of brand equity and proves that there is little truth in statements that devalue the purpose of branding to nothing more than an “image exercise”.
Now that the myth regarding branding is dispelled, let us understand why the above results are possible.
How branding can lead to profits
Positive brand equity accumulated from branding exercises will uplift the brand and make it more desirable to its target audiences. This translates to better sales volume and revenue. Brand equity refers to the intangible added value that consumers attach to products and services from a reputable company due to its well-established brand name. It is essentially a consumer perception that is formed via communication touchpoints; what they see, hear and experience.
When a company invests in branding and manages to build the emotional connection with their target audience, they are viewed more favourably by consumers. As a result, consumers do not mind paying a premium for their products or services, even if they can get a similar one at a lower price. This means that companies are able to command higher prices for their products even though their cost of production can be arguably the same as competitors, hence enjoying bigger profit margins.
An example of one such brand would be Coca-Cola. Placed sixth on Forbes’ 2020 100 most valuable brands list as the top beverage brand, Coca-Cola is a household name and probably the first name that comes to mind with the mention of “soft drink”. A large part behind Coca-Cola’s success lies in its positive brand equity; the winning formula in their drinks is accentuated by a unique and memorable logo, a creative tagline “Taste the Feeling” and consistent customer engagement through intelligent marketing and advertising spending.
Investment in branding will also lead to stronger brand loyalty which makes it extremely difficult for competitors to “snatch away” customers. This allows the brand to retain its consumer base for a prolonged period of time. Especially so in today’s world where marketing promotions centred on price are aplenty, the threat of losing customers on a whim is higher than ever.
This is why Apple takes the cake easily as one of the most influential brands of the 21st century. Despite the exorbitant prices of its products, it sees long snaking queues at its store year-on-year during the launch of its new products. Their customer retention is strong and many of their customers don’t just own one Apple product, but a few. All of this would not have been possible without its strong branding as an innovative brand which caters to and understands the needs of its customers through effective messaging (with quality products).
The branding process at Adwright
Here at Adwright, we take a systematic approach to branding. Our proprietary five-step branding methodology — Brand.AUDITOR, Brand.STRATEGEM, Brand.VISUALISER, Brand.AMPLIFIER and Brand.DIGITAL — is well-equipped to cover individual and also all layers of the branding process. To illustrate, our branding exercise with international bank ICBC which focused on building brand recall successfully managed to elevate their brand awareness. This led to significant savings on the marketing dollars as a result. Similarly, our brand-building journey with EV charging solution provider KED Energy Solutions which went from audit to strategy to execution also brought valuable improvements to their sales.
To answer the question this article started with, it is with a definite yes that branding can bring in the dollar. Branding is a long-term, continual process aimed at improving future sales, unlike marketing initiatives which can generate sales quickly. It lays the foundation and creates the brand equity needed for marketing to succeed. More importantly, with a sound branding strategy coupled with marketing communications strategy, a brand will yield significant presence in the market.
Adwright is an award-winning integrated branding agency in Singapore with over 25 years of experience in the industry and counting. We have collaborated with clients ranging from local SMEs to global corporations, spanning across many industries. We provide integrated solutions in branding, design, communications and beyond to help you bring your brand’s presence to market. Partner with us and embark on your unique brand journey today. To find out more about the services that Adwright provides, call us today at +65 6227 7227 or email email@example.com.