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The Value Proposition of Identity and Brand Management

Written by: Andrea O'Neill

Article Overview: No successful business leader would take on a significant strategic endeavor without first understanding the value, the expected results, and the anticipated return on investment. Everything must have a value proposition. This is especially true for evaluating an investment into brand management and the visual identity of your business and products.

The Value Proposition of Identity and Brand Management

No successful business leader would take on a significant strategic endeavor without first understanding the value, the expected results, and the anticipated return on investment. Everything must have a value proposition. This is especially true for evaluating an investment into brand management and the visual identity of your business and products.
In the course of conversation on this topic, we hear a recurring set of questions that are common regardless of industry group. Below we have provided simple, value-based answers for each. Of course, you may find you have other issues that are specific to your particular business. We encourage you to continue this conversation with us directly. We can help you evaluate the brand you manage and ensure that you are making the most of this valuable asset.
Ten Recurring Questions:
1. What do you mean "brands"? And what does it have to do with my business?
2. Why bother with branding?
3. Does effective branding increase customer retention?
4. Does branding support customer targeting?
5. Does a strong brand lead to lower information costs in the purchase process?
6. Can strong brands create “imperfect” markets and reduce competition?
7. Does brand awareness increase the value or liquidity of a company’s stock?
8. Can effective branding result in business growth?
9. Is branding right for my business?
10. What kind of resource should help me with brand management?
1. What do you mean "brands"?
Branding today is a broad term used to describe the charisma of your business. It is the gut-feeling your customers and employees feel about the company or product. Because your market is human -- made up of emotional, intuitive beings, the value of branding is found beyond the traditional logic of business management. A brand is built over time, by the impressions one has of the company, its products or services, and is confirmed (or destroyed) by experiences.
Experience with your brand begins with visual identity: trademark, taglines, signs, displays, literature, etc. It continues through all forms of communications, to interaction with employees and service delivered and culminates in customer satisfaction. In the last few years we have seen tremendous growth in brand awareness. From Nike’s swoosh and the simple Apple logo to the basic brown of UPS, we see successful businesses in all sizes and industry groups using visual design and comprehensive marketing communications to build and maintain their markets through effective brand management. Transparency helps businesses establish, re-discover and build their own identity and charisma and use it to effectively build their bottom line.
2. Why bother with branding?
The fundamental benefits of branding are many.
> Top of mind customer recognition
> Customer loyalty
> Reduce barriers to sale
> Increase value of the business
The basis of branding is in the business’ ability to build trust with the market. This is created through reputation, user experience, and carefully crafted messaging to communicate and reinforce the brand promise.
A strong brand authenticates the source of the goods, and also promises the value of goods sold. By providing a promise of value the consumer is assured in the purchase decision process that the risk-to-reward ratio of purchasing a strong brand is higher than that of purchasing a similar unbranded good. This creates consumer preference and loyalty for brands that in turn enables pricing flexibility.
For the business, this results in:
> Lower vulnerability
> Higher profit levels
> Larger market shares
Brands are business assets. In addition, they are legally protected and therefore shielded from duplication throughout the industry. Brands are valuable, rare, and non-substitutable. They provide sustainable competitive advantages—and therefore superior financial performance.
Additionally, we live in a time of sensory assault. Competing for "eyeballs"—which is to say, customers—is more than just an Internet phenomenon. The challenge for companies everywhere is to attract consumers to their products and services and keep them in the face of fickle markets.
The answer to this challenge starts with each company's people, products and services, but it doesn't end there. How companies communicate to their markets and constituencies is becoming the primary means of differentiation today. Never, in fact, has effective communication been more important in business. And it has increased the pressure within companies to establish environments and attitudes that support the success of creative endeavors, internally and externally. More often than not, companies that value design lead the pack.
3. Does effective branding increase customer retention?
Customer retention rate is an important metric used in marketing. It is estimated that the cost of acquiring customers is at least five times greater than that of customer retention. Thus creating customer loyalty is extremely valuable.
Effective branding increases customer loyalty through:
> Lower perceived risk
> Emotional attachment
> Promise of quality
> Top of mind recognition
4. Does branding support customer targeting?
Strong brands have the ability to retain and attract customers. An effective brand is carefully positioned on price, lifestyle, value, and features to appeal to a targeted audience. Customers will self-select based on the demographic of who they are currently or who they aspire to be in the future. This self-select process supports the continued appeal to the target audience at large, and reduces the cost of acquiring new customers.
In addition, once the value of the brand is established, the customer trust is typically transferable to:
> Cross selling
> Solution selling
> Product extension selling
5. Does a strong brand lead to lower information costs in the purchase process?
Costs associated with making a choice among competing options include search and evaluation costs. This is particularly relevant among high-ticket services and products such as home builders, cars, consultants, and most business-to-business services. Strong brands that are more familiar and that have positive associations lower information costs for prospects. The lower information costs reduce perceived risk, and result in enhanced purchase likelihood and market share.
6. Can strong brands create “imperfect” markets and reduce competition?
For businesses “perfect” markets, are not ideal. Perfect competition is characterized by many sellers, each selling similar products. In perfect competition there are few barriers to market entry, and prices reach equilibrium. A perfect market is a commodity market. Price elasticity is high and thus a small increase in price will be met with a large decrease in demand. In a perfectly competitive market the low cost producer wins, but profit margins are at a level that is less than desirable.
The central role of marketing strategy is to make markets imperfect providing opportunities for differentiation and price leveraging. Effective branding does just that. Brand loyalty is evidence that customer preferences are not determined by the lowest price. Customers are affected by emotional connections and expectations that can set similar products apart from each other. Brands make markets imperfect. They reduce price competition, and doing so lower price elasticity.
7. Does brand awareness increase the value or liquidity of a company’s stock?
Businesses with strong brands are associated with higher awareness levels. That high awareness not only helps support sales of the firm’s goods, but also creates awareness of the business as an investment, thus increasing the demand for the stock. Broader ownership of stock enhances liquidity and thus enables a business with strong brands to convert assets into cash.
Through the years, we have seen an effective re-design of a company visual identity serve as a catalyst for acquisition. Brands with life and movement extend their worth beyond the black and white of paper into the minds of the public.8. Can effective branding result in business growth?
Strong brands lead to cash flow acceleration due to more rapid market penetration. Strong brands improve market penetration because brands reduce the perceived risk for the customer. When the brand is a trusted source there will be:
> Faster new product trial rate
> Higher referral rate
> Faster time-to-adoption
9. Is branding right for my business?
Because each business has an inherent charisma – positive or negative – branding is an essential aspect of any business endeavor. People use brands to categorize their choices. Ultimately, your brand is not what you say it is, but what they say it is. If you want to grow your business, get an edge over your competition, and have the ability to charge a higher premium, then your business will definitely benefit from a) gaining an objective opinion about your own brand impression and b) carefully managing the brand experience one has with your product or service.
The real question is what is the appropriate brand investment for your business and what form of brand development will create the greatest return for my business? The answers to these questions are as individual as your fingerprint and can best be answered by objective research and analysis from a qualified brand advisor.
10. What type of advisor can help me with Brand Management?
The disciplines of Identity and Brand Management have historically been lumped into the larger term “Advertising”, but it is valuable for you to know more about the field of communications so that you can find the most cost effective and efficient resource for your needs.
Advertising firms have traditionally built themselves as a one-stop shop, and the bulk of their profit is made in the placement of ads. Identity and branding issues are, generally, approached with the primary use of purchased media channels: print, radio and television. Public Relations firms have traditionally centered on the management of brand impression in the press and public gatherings.
Businesses who manage their brand identities effectively know that there are consultant resources, such as ourselves, who serve in a central, strategic role in the cohesive management of corporate, product and service brands. Resources like ourselves specialize in strategic positioning and the cohesive execution of brand communications. To create seamless communication of the brand's messages across all media formats, from print to digital to broadcast, we serve as an executive consulting group - an extension of your management organization. In this position we can bring objectivity and insight necessary for growth.
The primary difference in our approach is the fact that a senior partner guides every one of our engagements. We find great satisfaction in establishing and maintaining key roles in our clients’ organizations.
In summary, the question is not whether to develop your business’ brand identity, but how. Give us a call to further discuss the role of identity and brand management in your business.
Reference:
Parts of this article are based on a seminal article titled “Market-based Assets and Shareholder Value: A Framework for Analysis” published in the Journal of Marketing by Rajendra Srivastava, Tassaduq Shervani and Liam Fahey in January 1998.

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