The performance of a Brand
Everybody loves brands (well, most do!). As humans we tend to admire, follow, worship those who we aspire. Brands are the aspirational reference in capitalism. A medium for users to make purchasing decisions and establish a relationship with companies.
In the corporate world, a strong brand has always being considering one of the key differentiating factor between winners and losers in the marketplace. Business success was not possible without a strong brand.
Branding (the practice of bringing a brand to the market) is not limited to traditional cases such as Coca Cola, Nike, Apple. Branding is very much present in today’s digital world (i.e. Instagramers, Apps, Netflix Shows). Everybody aims to build a brand that differentiates them in the world.
However we may agree that Brands and Branding have changed significantly in the past 10 years. The role of traditional mega-brands has shifted. New companies have disrupted entire industries creating brands in unconventional manners: Amazon, Facebook, Google, Uber, Netflix, Airbnb…
It is not required anymore to hire a top agency in New York to create a brand or spend a year on research to test routes, develop a super expensive ad and launch in the Super Bowl. Just have an idea, give it a name, design a logo so people recognize you and you are ready to go.
In this context we may ask ourselves if Brands are still effective.
- Do they play the same core role?
- Branding reflects on a company’s performance?
- What is their real value in today’s world? (if any!)
THE OLD ROLE OF A BRAND
In the old world, building a brand was critical. It was the only way for a company to bring your product to the public. Companies had few expensive channels to get to consumers and they had to invest carefully.
Any initiative had to be tested due to the high costs of media. Companies would spend months or years building the right brand, the right concept and creating a solid identity to be encapsulated in an expensive thirty seconds ad. That was it.
Brands were the kings, creatives that had the magical idea were gods and everybody was waiting for that Superbowl ad. A company would bet it all on a single campaign that would make it or break it for them in that year or their survival.
Companies such as Apple, Nike or — way before — Coca Cola were built like that. A great brand, a brilliant concept, a beautiful ad and millions of dollars behind.
THE NEW WORLD
Today companies and professionals enjoy tools and technology to connect, track and measure all user´s interactions. Companies even know what people are looking for as they are searching and may change the offering in real time.
These new possibilities have expanded the horizons for many. Growth has been the mantra in the past 10 years witnessing companies like Amazon, Google, Facebook emerge in this new reality. All of them tech based, user centric and data driven (branding?).
In this new reality, media costs are accessible to anyone, to the point of paying cents for one click. Companies may test multiple alternatives with users for free. They can measure business and track results with tools only available to large corporations just a few years ago.
Legacy brands that have spent millions of dollars to build awareness and branding see their cake eaten by brands launched overnight with zero dollars.
In this new context, we may wonder: is Branding valid anymore?
TECHNOLOGY CHANGED EVERYTHING FOR EVER
Different to what many think, data and performance was always the foundation of Brands. Companies would spend good money in consumer tests, concepts would be developed to create engagement and relevancy, advertising agencies would run multiple campaigns to measure which one would win the market. Sales after launch would be tracked on a daily or weekly basis.
Results have always been the ultimate goal, but digital marketing and its technology brought real-time performance, faster time to market and lower entry costs. Companies finally have the tools to measure accurately and in real time.
In the 90s or 00s you could get significant readings from the market in terms of the results of your brand investments but they were super expensive and not real-time. Most arrived a month after things had happened, so you could do a decent postmortem but hard to react on time.
Methodologies were simple and functional. For example to test purchase intention. A group of users would be called to a meeting in the numbers required for the market size. They would watch a film and in the break a number of commercials would be presented. Users were asked before and after the film which products they would buy from a list provided.
With that information you could get purchase intention and additionally those users would be asked questions about the ads displayed. Measuring how engaging or convincing the ad was, you could compare those results with proven successful ads.
Companies would decide whether to launch the ad and create a sales forecast based on the purchase intention and other factors.
Today you have that information in one second, from hundreds of users with any online ads platform (and it´s free!).
Source: NS Technologies
PERFORMANCE AND THE ROLE OF BRANDS
Digital marketing is entirely focused on performance. It’s easy to present alternatives to users, evaluate results and the one with better performance is the best one. Performance is everything, no more discussion.
It´s over all the work that had to be done to guess which option would be preferred, to invest hundreds of thousands of dollars on a single bet. You spend a few hundred dollars, get the results and run with the winner.
On top of that, reaching thousands of eyeballs is correlated with the ability to generate relevant content and position my business in the search engines. The role of the Brand here is weak and search engines will not give you extra points for your Brand — at least not in the conventional terms.
So why do we need a Brand? Should we keep investing in Brands and Branding?
Source: Forbes
BRAND AND PERFORMANCE
Brands are absolutely critical to any top performing company and it is closely connected to performance metrics.
In fact, Brand building has always been about data. There is nothing more democratic in market dynamics than a brand. Strong brands are those backed by sales and performance. A good brand is reflected in numbers.
In the old world there have been countless attempts to measure the value of a Brand. Brands have always been associated with financial success. However this is an intangible and is very complicated to measure.
There are several agencies that are devoted to calculating the value of a brand. Some start by forecasting potential future revenue generated by the company. Then subtract those parts that are not brand related to arrive at the branded operating profit.
We respect and recognize the work of these agencies (hard work!). It is not our intention to discuss the validity of those methods. What we want to surface is the need to find a better connection between Brands and companies performance. To establish the value of a brand as an asset makes sense from a financial perspective (a valuable asset). But we are more interested in the actual impact on performance.
If a Brand is so valuable, it must have a crystal clear relationship with performance.
In our digital world, we can to be more sophisticated and find the connection with performance. The Brand value approach in our view misses the point disconnecting the true value of the Brand with the actual performance of the business. Presenting the brand as an “static asset” to add add or subtract value from. Instead of a real time connection with the real performance of the business.
There are multiple areas where a Brand role must be quantified and has a direct impact on performance:
- Brand Awareness & CPC. A proper analysis establishes the actual impact of your awareness in reaching a lower CPC.
- Understanding Brand Purchase intention will drive lower CAC (interesting article on this)
- Brand Status to drive higher retention (a +5% in retention increases profits by 25% to 95%)
- Brand Loyalty direct impact on LTV and LTV/ CAC ratio.
It is essential to move away from vanity metrics or complicated financial calculations to assign a value to a Brand.
This will finally provide business value to your “Brand” based on the real impact it has on the companies performance. Data provides the real value of a Brand and its true impact on the business.
Brands must have a direct impact on your business performance. If not, you simply don’t have a Brand.
