Last Updated on 6/11/2020
The Connection between Brand and the Bottom Line
Years ago, management guru Peter Drucker said, “Because the purpose of business is to create and keep a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
While most executives understand marketing ROI, an organization’s brand value is often viewed as being less tangible to calculate. BrandZ Top 100 Most Valuable Global Brands report quantifies brand value using a formula based on current demand, price premium, and future demand and price, relative to competitors.
In 2019, their 100 top ranked global brands increased 7% in brand value, more than twice the growth rate of global GDP. Stocks for these 10 brands grew 2 ½ times faster than the S&P, “proving that investment to create and sustain strong brands delivers superior shareholder returns. Brand building is an investment, not a cost.”
Find the Hidden Wealth
Branding affects sales for companies of all structures and sizes. While most B2C companies understand the importance of investing in branding and a strong brand, B2B companies are less enthused. A 16-year study, detailed in "Hidden Wealth in B2B Brands," found that “billions of dollars are locked up in B2B brands, yet managers consistently skimp on B2B brand development. That’s an expensive mistake.”
In an increasingly homogenous global market, your brand is one of the few ways to separate yourself from the pack. Brand essence—the heart and soul of your brand—expresses to prospects and customers what it is that sets your organization apart, how it shines, and allows you to communicate who you are loudly and proudly. Your brand is predicated upon that single most compelling need your consumer has, and how your brand fulfills that need. For Nike consumers that translates into “Nike: Authentic Athletic Performance,” or as their tagline more succulently puts it, “Just Do It.”
Brand Equity's Bottom Line Impact
How much essence is brand about and how does a company’s brand impact sales? A strong brand communicates the core value proposition of your organization. When the brand essence is consistently reinforced—both internally, as the “brand mantra” that, according to Strategic Brand Management “reinforces the role of brand essence in internal communication”—and externally, your brand and bottom line, grow stronger.
A strong brand impacts, not only customer loyalty and sales, but market value as well. Attracting and retaining customers is easier when they perceive a brand to be prestigious or of exceptional quality—and a product with strong brand equity generally commands higher prices. Brand equity impacts sales volume as consumers are attracted to brands that promise great things. Brand equity also helps keep costs down—it costs less to retain a loyal customer base than it does to acquire new customers.
Brand also drives purchasing decisions. A McKinsey study of more than 700 executives found that B2B purchasing decisions were less value-driven and that suppliers’ brands—their value propositions—were key in their decision making. U.S. executives cited that 18% of a purchasing decision was influenced by brand, compared to 17% they attributed to the sales effort.
The Buck Starts Here!
The “Hidden Wealth in B2B Brands” study states that “every corporation reaps the value of brand equity in two ways: as revenue, when it drives customer purchases, and directly, as a rise in market capitalization.” They ranked the brand equity of 450 B2B companies across 47 industries and found that “the corporate brand is responsible for, on average, 7% of stock performance.”
According to Best Global Brands, the value of the world’s top 100 brands was $988 billion in 2001. This value has more than doubled to a whopping $2.13 trillion in 2019. “For decades, the entire discipline of brand-building was based on the concept of brand positioning, but in today’s accelerating markets, customer expectations outstrip static brand positions. Brands can no longer be considered separate to businesses and will be judged on what they do, not just what they say; it is about trust, not just delivery,” says Interbrand’s Global CEO Charles Trevail.
Now more than ever, a strong brand—driven by robust, real and relate-able brand messaging—is essential to healthy and profitable growth. For B2B organizations, especially those in less traditionally “branded” industries, there has never been a better time to invest in brand development process and strategy to help fuel growth and innovation.
Our Boston-based B2B branding agency, Grant Marketing, specializes in helping companies find their brand essence. We can help you turn your brand messaging into actionable strategies for strengthening customer loyalty, increasing sales, and improving the bottom line.