Our psychological relationships with brands and the resulting brand equity is one of those amorphous concepts that’s always been hard to quantify. Nevertheless, successful investors know the benefits of a strong brand are undeniably real. A brand is a company’s most enduring asset. Properly nurtured and leveraged it has tremendous financial value. A powerful brand can enhance valuation, improve transaction multiples, lower the cost of capital and grow revenue.
In 2003, Read Montague, a neuroscientist at Baylor College of Medicine, put the power of emotional brand relationships to the test by recreating the Pepsi blind taste challenge from the 70’s and 80’s (here). As his test confirmed, people overwhelmingly preferred the taste of Pepsi. Drinking Pepsi produced a stronger response than Coke in the brain's ventral putamen, a region thought to process feelings of reward. Montague then tested again with a simple variation. He told the subjects which was Coke and which was Pepsi. Remarkably, almost all the subjects preferred Coke. And brain activity changed. The medial prefrontal cortex, the area of the brain scientists say governs high-level cognitive powers, lit up, the area of the brain most affected by brand influence. Montague had demonstrated, “…with a fair degree of neuroscientific precision, the power of Coke's branding efforts to override our taste buds”. The emotional attributes of the Coke brand dominated over the rational attribute of Pepsi taste. A strong brand created the preference, not the product.
Brand equity is built by delivering brand experiences and messaging with precise consistency over time. The strongest brand relationships are built through intangible, emotional attributes like how the brand makes consumers feel, its engagement experience, its image and personality, its corporate social responsibility, and what it stands for and believes in. Brands also build equity through conveying the brand's tangible elements (rational attributes) such as product features, what core benefits it supplies, what needs it satisfies and the product’s superiority. While rational elements are important to the purchase decision, the emotional side of a brand is often the dominant driver for building affinity. It’s why Coke’s brand beat Pepsi’s taste.
The benefits of owning a unique and unassailable place in the minds of consumers are indisputable and abundant. Here’s a few of the perks of a strong, well-crafted brand:
The importance of a strong brand can’t be overstated. Building brand equity contributes directly to financial success, market dominance and increase transaction returns. If you want to build your business invest in your brand. Go at it with the right mindset. Recognize that there is a process, a right way to think it through. To get it right, you gotta do it right. Here’s ten rules and you will keep you on track:
1. First, Commit To The Process
Approach the process knowing a brand is, while somewhat intangible, a financial asset that has real value. A strong brand is aligned with, and central to, achieving business goals. Strong brands scale better. Know that a brand requires ongoing nurturing, keeping it strong and relevant takes vigilance. Prioritize your attention and set your budget accordingly. Be committed to the process.
2. Think Like An Investor
For PE/VC’s, be sure to align the process of developing brand positioning with investment criteria, stakeholder objectives, timing and exit strategies. All of that needs to be aligned with market opportunity. Got to shake the mindset that branding and positioning is about design. It is first, and foremost about strategy and maximizing return on investment.
3. Pull Back The Curtain
Be prepared to pull back the curtain on the business, hold nothing back. A good brand strategist will want to know the driving elements that define the business and its IP. What does the company stand for, what is its vision, where will the company be in five years, what’s in the pipeline to drive growth, new products, new sectors, new IP, areas of disruption, potential threats, how will the current space change…? It demands intimately knowing the business and its stakeholder – whether investor or owner. It often requires balancing strategic goals against what the markets presents as opportunity. Remember, it is a strategic process before long before it is a design process.
4. Lay A Solid Foundation
Start with the foundational elements, be prepared to do the groundwork first. That means being sure the mission and vision are clear and aligned with business objectives, market opportunity, and stakeholder desires. Only then can you intelligently craft a singular, competitively differentiated positioning for both the broad market and for specific targets if needed. Define all the rational and emotional attributes. Develop the brand narrative, customer personas, and customer life cycle. Define the personality attributes of the company, its tone, its manner, how it sounds, feels, walks and talks. The result will be a positioning that lasts.
5. Remove Personal Bias
Accept that the branding process is not about you. Acknowledge that the objectivity of an outsider (not the opinion of an emotionally vested stakeholder, someone’s wife or a committee) is what’s required to lead and execute the process. Believe in the wisdom and impartiality of an experienced unbiased brand strategist. Remember that the ultimate expression of all the foundational strategy is a creative process, and as such, subjective and open to interpretation. Temper your personal aesthetic opinions with the knowledge that in a good branding process, all creative decisions are grounded in logical strategic thinking. If there isn’t solid strategic rationale for creative decisions, then get a new brand strategist.
6. Be Only One Thing
A brand can’t be all things to all people. If you give a consumer too much to remember, they remember nothing. Be single minded, concise and then commit to it. Be consistent over time. Stand for one thing, one memorable thing. Invariably, simple is always better. Less is always more. These adages hold real truth.
7. Understand The Internal Implications
Know from the start, a branding effort will affect the entire company. Brand and culture are inextricably connected, the first defining the later. In fact, employees are the first and most critical constituency in building and maintaining a brand. Involve your employees in the process, let them own it, become it. These are the people that will fulfill the brand promise. They need to live and breathe the brand’s values, its personality and what it stands for. Employees are the brand’s front line advocates, the voice for the brand. It's their identity too.
8. Know You’re Making Long-Term Decisions
Building brand equity is a frequency over time equation. To own a position and have it imprinted on the minds of consumers, it must be delivered across all touch points, consistently over time. The operative word being consistently. Be willing to put a stake in the ground and stick with it. Owning mind space takes time.
9. It’s All Or Nothing, Don’t Go Cheap
A branding effort can’t effectively be done piecemeal. It is a synergistic, linear process where each step informs the next. Commit to honoring the process holistically. Lay a solid foundation. And commit to spending what it takes to do it right. It represents the foundation for future success, improved performance and higher valuations. In this game, you truly get what you pay for and underfunding the effort is asking for trouble. It is a long-term investment that pays increasingly greater dividends over time. Don’t cheap out.
10. Start Early
This one is easy. The earlier you go through the process, the greater your equity value will increase. Re-branding is way harder and more expensive. Think teaching vs reteaching. To maximize market perceptions and increase transaction multiples when time to sell, do the solid brand and positioning work early.
Play by these rules, commit to doing it right, invest properly and the rewards will come. Want to talk branding, need help with yours? We’d love to connect.