What’s the Return on Branding?
A number of financial institutions ask, “What’s the ROI on branding?” It’s often the bean counters who ask this question. They want to see a “demonstrable rate of return” before making any investment. Certainly it’s a rational and reasonable perspective. But it’s essentially the same thing as asking this question:
Just because you can’t generate an ironclad formula proving the ROI of something does not mean you shouldn’t be doing it anyway. For instance, how would you measure the return on other things like…
…brochures
…community involvement
…financial education programs
…youth programs
…sponsorships
…giving lollipops to kids in drive-thrus
…smiles
…remembering someone’s name
Trying to classify intangibles like “brand” on the balance sheet is tricky –- if it’s even possible at all. If you agree with most experts who say that brands are formed every time someone is exposed to- or interacts with your organization — through your website, call center, advertising, branches, debit cards, etc. – then the “ROI on branding” will essentially be the organization’s total, overall return.
If you really want to understand the ROI on branding, all you need to do is take a look at the difference in profits between branded- and more generic products. If price was the driver of people’s purchases, Nike couldn’t sell a pair of sneakers for $500; everyone would buy $25 Keds instead. We would all be driving a Kia or Hyundai instead of a BMW or Lexus. But price isn’t the key. Almost every buying decision is driven by people’s emotions.
A pair of Nikes sell for 20 times more than a pair of Keds, but they don’t cost 20 times more to manufacture and market. Nor do the Nike shoes deliver a 20-fold performance boost either. So why can Nike charge $500 for a pair of shoes, of which a big chunk is pure profit?
Branding — relevant, credible differentiation.
Key Takeaway: The less branded your organization, its products and services are, the more you will be forced to compete on price. The more branded something is, the more you can charge and the wider the profit margin.
This article © 2012 by The Financial Brand and may not be reproduced.
Related Articles From The Financial Brand:
- You Don’t Control Your Brand (Actually, You Never Did)
- The 2 Most Important Branding Questions You Could Ever Answer
- Is Facebook The Only Social Channel That Really Matters?
- Financial Marketers Must Focus On Downward Trend In Overdrafts
Great Post!!! And I love the tennis shoe comparison.
I wonder what the ROI is on the bean counters?
Seriously – I would be remiss if I didn’t mention the power of Net Promoter Score in determining the “value” if you will, of your brand.
There is a direct correlation between high NPS scores and high profits.
Zappos.com
Apple
Amazon.com
All NPS leaders in their categories and all very profitable. And certainly not the cheapest in their categories. With the exception of Apple, the other two do little if any “traditional” marketing. But rather lead their markets with their versions of lollipops at the drive-up window:
Free overnight shipping and return shipping – Zappos
The Genius Bar – Apple
Incredible online community that allows reader reviews, ratings, and selling of used books – Amazon
None of those things are cheap to execute – the kind of things a bean counter would totally point out – BUT the ROI? Repeat business. Crazy loyal fans.
That’s modern marketing, IMHO.
For more info on NPS go to http://www.satmetrix.com
Besides production/delivery costs, the single biggest difference in price between two similar items boils down to “brand.” The stronger the brand, the more you can charge = pure profit margin.
Your headline reminds me of a line from David Meerman Scott, who speaks to big corporations about social media and is frequently asked, “yeah, but what’s the ROI?.” His response is something like: “What’s the ROI on the army of gardeners mowing the lawn at your corporate headquarters?”
Some things have a value that simply can’t be measured by standard accounting methods.
@ Don Ball – that’s what I’m sayin’……..nice.
Good start of a discussion on Return on Branding. We recently developed a method to work with clients on their Return on Branding. Our main thing: we go further than the financial benefits of branding and – at the same time – make Brand Invenstment measurable up till P&L level.
Simplified we help measuring and deciding on strategy to turn Brand Power in to Market Power. And there are many markets, like the buyers market, but also the political market and the employer market.
I’m sorry that the presentation is in Dutch, see the presentation on my LinkedIn (www.linkedin.com/jorisvanzoelen).