Tuesday, May 25, 2010

Ten Specific Ways Brand Investments Pay Back

One of the most frequent questions I get about measuring marketing is: “How do we measure the impact of our investments in brand development on the bottom line?”

If you’re really looking for an answer, here goes:

There are ten basic ways a stronger brand creates financial value.
  1. It can attract more customers, either directly or through stronger WOM.
  2. It can encourage customers to spend more with you, making them more receptive to other solutions you can offer, or just more likely to give you first shot at meeting their needs.
  3. It can influence the mix of products/services customers buy from you, since buyers normally hold strong brands in some degree of esteem and respect the “advice” of the brand.
  4. It can reduce the customer’s price sensitivity, allowing you to earn more margin from every dollar they spend with you.
  5. It can help you keep customers active longer, or at the very least act as a “safety net” to give you time or opportunity to fix problems that arise along the way.
  6. It can help you accelerate the customer’s buying process, reducing the probability that something happens to close the wallet before the spending happens.
  7. It can help you attract and retain better talent at lower recruiting and retention costs as people want to be associated with attractive brands.
  8. It can reduce operating expenses by influencing supplier concessions from companies who want to be associated with top-tier brand partners.
  9. It can attract more/better channel partners.
  10. And if that’s not enough for your CFO, tell them how stronger brands can actually help lower your organization’s cost-of-capital borrowing costs due to the lower risks of lending to a company with strong brands (all other things being equal). It’s not unlike how studies have consistently shown that taller people make more money than equally qualified people of average or lower height.
Most of the time, the business case for branding investments can be made in some combination of these ten elements. Of course, you’ll need some data (or at least some well structured assumptions) to make the case credibly. But it can be done with even just a little data.

You’ll also need some idea of just when you expect to see these effects begin to occur, and what the early indicators of progress might be (e.g. shift in perceptions, web site engagement, etc.). Setting up your marketing metrics to monitor these milestones becomes more crucial to the cause as your timeframe for payback gets longer.

Now if you’re NOT really looking for an answer, but just want to muddy the waters on marketing measurement to sufficiently to frustrate the people asking the question in the hopes they’ll go away, you can do that too (for a while). Just start rambling about how EVERYTHING is branding or related to the brand, and consequently NOTHING is measurable. This can work… for a little while. But eventually the other managers find ways to marginalize you so your budget winds up getting cut. So I’d only recommend this as a stalling strategy while you’re secretly negotiating for your next job.

For the rest of us, the case for brand investment gets clearer all the time. The tools are improving and the body of knowledge is growing fast.

In that vein, I’m sure I’ve missed something in my list above, so please feel free to remind me.


Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.

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