The ROI On Brand Versus The Value Of Brand

I had an email exchange recently with a friend who raised some excellent questions and views on the topic of branding that I thought I’d share here (with permission, but anonymously):

Our clients often ask how to measure the ROI of branding efforts. Maybe the question needs to be redefined. Instead of “what is the ROI of brand,” maybe it should be “what is the overall value of the brand?” Instead of asking, “How does brand create revenue?” the question might be, “How does brand contribute to my balance sheet?”

We intuitively know there’s value in branding, but the bean counters want some dollar-for-dollar ratio on their investment — and I don’t think it works like that.

Two firms of the same size could both spend $500,000 on branding but have radically different results. It hinges a lot on how they deliver the brand, the messages in their materials, the media they choose, the markets they serve, etc. But mostly, I’d say it hinges on how well they execute and deliver — especially in first-hand interactions.

Many firms have the misconception that when they complete a branding project that the work is done. “Whew, glad that’s done. Now let’s watch the money roll in.”

We show them a picture of a newborn baby and explain that it’s only the beginning. We tell them it’s like they have an infant that they will have to nurture with time, energy and money if they want to see it grow up to be a mature, responsible brand that makes positive contributions.”

My take: My friend is on the right track by reframing the brand ROI question.

A brand is a lot like the servers in your data center. They’re infrastructure — they’re something you build applications upon. In and of themselves, they produce no return on their investment — you have to do something with them to generate a return.

It’s the same with brand. Brand can create awareness, expectations, and even intention…but it doesn’t close the sale. Something (or things) else does that — or, at the least, contributes to that. Which means you cannot calculate the ROI of brand. With carefully designed and executed tests, perhaps you could measure the contribution to sales that branding investments make, but few (if any) firms seem willing to take that route.

Over the past 20 years, CIOs have gotten a lot smarter about how to craft and justify their IT infrastructure investments. It took a lot of work on the part of the more successful CIOs to demonstrate how IT infrastructure enables and supports current and future business capabilities.

CMOs need to take a similar approach, and treat their investments in brand as infrastructure, and demonstrate how those investments enable the sales and marketing capabilities their firms develop. The free ride (i.e., spuriously linking brand investments to changes in sales) isn’t going to last forever.

For some great insights into the topic of brand and branding, see Jim Novo’s Marketing Productivity blog.

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