Branding is a company-wide effort that takes time, energy, and resources.
It’s not easy.
It’s not cheap.
We’ve talked about the many benefits of branding. But you might still be asking yourself where branding shows up in your revenue reports, and how you can measure the actual value of a branding effort.
The answer is multifold.
While marketing focuses on specific, targeted campaigns, branding is an evolution. In marketing, there are set points to measure your return on investment, but with branding, it’s not as clear-cut. In branding, it’s all about building value.
But what does that mean?
And if you can’t measure it based on income and expense, how do you know if branding is actually worth it?
Let’s break it down.
What do we mean by value?
There are two primary reports for measuring a business: profit and loss vs. balance sheet.
The P&L statement compares income and expenses, and then makes a simple subtraction of the two to determine profit. The balance sheet compares assets and liabilities and uses equity to force them to balance.
Marketing is on your profit and loss statement.
Branding is on your balance sheet.
Branding and marketing have different end goals. Marketing is about developing a return on investment within a set period of time. Branding is about building value over the long term.
Marketing shows up in your profit and loss. You can compare directly what a marketing effort costs and how much business was generated, and see if you made a profit.
But branding aims to build value and is more abstract. It’s located on your balance sheet. Unlike a simple income versus expense calculation of marketing, your brand is an asset, which means it can grow and change, as well as be bought and sold.
The same is true for the timeline of returns: marketing is short-term, and branding is long-term. Marketing creates sales in the moment, but branding builds longevity and loyalty.
Branding builds brand equity.
In short: just because branding doesn’t lend itself to a direct income vs. expense comparison like marketing, that doesn’t mean branding isn’t important. The benefits of strong branding resonate both internally and externally across consumers and employees. Measuring the impact of branding on your organization requires a different perspective, a focus on long-term value rather than short-term gains.
What is brand equity?
Brand value is also referred to as brand equity: the accumulated value of a company’s brand assets, both financially and strategically.
In practice, brand equity is the overall market strength of a brand.
What is your brand worth in the marketplace? High-value brands are memorable and authentic, and inspire loyalty in their customers. Brand value is a huge asset – it’s how you keep customers coming back in an ever-changing marketplace, even when you have a myriad of competitors.
When your brand is valuable, consumers trust you.
Think of a brand like Coca-Cola. The value of the Coca-Cola brand is most likely equal to, if not exceeding, the value of all the physical assets of the company, like warehouses, factories, offices, personnel, etc. Imagine if Coca-Cola sold its brand. The company that bought them would have an instant foothold in the market. And that’s not because Coke is delicious, it’s because people know the brand.
It goes to show that the power– the value– of the company isn’t just in its production capacity. It’s in the strength of their mindshare.
Brand Value in Action
Brand value isn’t all abstract. The impact of a valuable brand can be seen in concrete, measurable ways. A strong brand makes your sales and marketing teams, as well as your internal hiring practices, much more effective, directly increasing revenue.
Powerful branding supercharges your sales team.
- Consumers use a bold brand as shorthand, so your sales team doesn’t have to introduce everything about you in every sale.
- By developing a well-recognized identity that communicates an authentic concept, people feel a connection to the special offering you provide. That connection forges loyalty, which rises above features and benefits.
- Branding makes it easier for your sales team to close deals and get new business because their targets already know what the company is about and are connected to it through the brand.
Branding also boosts your marketing efficacy.
Marketing is a short-term investment and can reap great returns. But you will end up wasting time and money on disparate marketing campaigns without a solid brand identity and equity to base them on.
- When your brand is strong, your marketing efforts are more focused and therefore more effective.
- With a solid brand, marketing and branding work in a symbiotic relationship, each reinforcing the other.
- Your branding efforts create a loyal consumer base, while your marketing efforts strengthen your brand identity by getting your message out to the right people.
Further, there are internal benefits to building a strong brand.
- Your brand develops a sense of spirit among the people who stand behind them..
- Spirited organizations are highly effective because the hearts and souls of the employees, investors, and contractors are committed to their success.
- Recruiting and retaining top talent is easier when you have a great brand because your visibility and position within your industry are clear.
- With the right people in the right roles who care about your company, the business will run better– and generate more profit.
Brand Value: 5 Key Takeaways
1. Brand Equity is on the Balance Sheet
Executives tend to look for ROI on branding initiatives as a way to determine budget levels. But equity isn’t found on your P&L; it’s on the Balance Sheet.
Brand equity is an asset, so consider the budget as an investment. The ROI will be long-term, contributing to the valuation of the organization
2. Brand equity is often greater than book value
In many cases, the value of a great brand can eclipse the value of a company’s tangible assets.
Brands like Coke and Google drive valuations far higher than the sum of their facilities and inventory. Taking an investor’s approach to branding opens up the opportunity for high rates of return.
3. Branding drives more than revenue
Branding does increase revenues by making your sales, marketing, and hiring more effective. But it’s also more than the sum of its parts– a strong brand can drive up the entire value of your organization.
Branding is a long-term, capitalized investment that delivers benefits over time.
4. Brand value is largely emotional
The degree to which your customers form an emotional connection with your company has huge ramifications for your longevity in the marketplace and ability to capture mindshare.
It is through branding that customers form an emotional bond with your company, elevating the interaction from a simple transaction to something much more meaningful. That’s what gets them to return, choosing you over a competitor. This translates to strong brand loyalty even when your offerings change.
5. Branding is a strategic investment
Branding is an essential element of your strategic plan, requiring an integrated consideration from leadership. Attempting to assemble piecemeal funding from the marketing department alone is like leveraging investing for retirement with loose change.
With a solid understanding of the value of branding, it’s clear why you need to allot funding and energy to such a critical initiative.
Branding is an all-encompassing process that reverberates internally and externally through your company over time. The accounting complexity required to develop a strong ROI formula for branding makes it difficult to project returns. But that’s not a reason to discount the value of branding.
The results for companies with strong brand equity speak for themselves. If you’re dedicated to building long-term value in your company, it’s important to keep an eye on your brand.
If you’re ready to build value in your company through branding, we’re ready to help. As a top branding agency in Los Angeles, we’ve helped hundreds of companies across industries sharpen their position and clarify their place in the market.
Branding aligns your team and connects your customers. The value of that cannot be overstated