What’s the ROI on Branding? It Depends on What you Mean by Return, Investment, and Branding

By Alan Brew

If there’s one question that leaves even the most experienced brand strategists floundering for a good answer, it’s that one about branding and the return on investment.

It usually comes out of left field, about half way through an early meeting with a prospective client. It starts constructively on the assumption that there’s a brand-related business issue to be addressed and how we as brand strategists might be able to solve it. It should be expected because it never goes away, but the question about ROI always feels like an abrupt non sequitur, as though branding could be considered an investment alternative, like a CD, an IRA, or a stock.

To be clear, branding is an investment. It’s an investment in the future of your business. And the hard returns can be incalculable. That’s why the ROI question deserves a much better response than “it depends.” The inconvenient fact is, though, “it depends” is the only possible answer: the effectiveness of branding and the subsequent calculation of ROI depends very much on several key variables.

The first variable, and the pivotal one, is what is meant by branding. Are we talking about the same thing?

Branding in its fullness comprises many related activities. A new name or a logo alone won’t get you very far. As with business strategy, brand strategy is a starting point – a foundation for action. It needs to be activated to produce results. Depending on the situation and objectives, it might include multi-channel marketing, sales training, employee engagement, corporate communications, PR, and investor relations. Some or all of these could be deployed to produce a desired, measurable outcome depending on the purpose of the exercise.

The second variable is investment against a plan. What you get out of branding depends on what you are prepared to put in. The most effective way of determining a realistic investment is to work with your brand advisors to establish the optimal budget against a clearly identified set of objectives. And this leads us to the third variable and the heart of the conversation – the objectives and investment horizon.

Branding is not a self-validating process, there must be clear objectives in place established against an identified business strategy and timescale.

Sometimes, the objectives are clear and straightforward. A company seeks out a branding agency at times of significant business change. It might involve a transformational transaction such as a merger or an acquisition, a spin-off, or an initial public offering (IPO). The objectives in each case are different but each involves the creation and articulation of a compelling new brand reality beyond the usual synergies and cost savings.

Then there is the less urgent but still strategically significant situation of a successful company that has evolved beyond its original core business and reached a tipping point of transition when the future begins to look very different than the past. It might have reached a growth plateau; the stock price might be in the doldrums because investors don’t have a sight line to growth or a business direction. The specific brand objectives in this case are often less clear at the outset and have to be determined in close collaboration with the leadership team and investors.

With these variables clearly established and understood and the appropriate plan put in place, the ROI going forward can be measured precisely in terms of performance against key indicators. BrandingBusiness developed the Brand Performance Platform™, an analytics-based research methodology specially built for B2B brands designed to measure, manage and monitor brand performance. It has four key steps:

1. Benchmarking

For any movement to be measured there has to be a point of departure. That point is identified by competitively benchmarking the current state of the corporate brand against key performance indicators so that subsequent movement can be measured against the following indicators:

  • Leadership (the reputation and market leadership of a brand)
  • Relationship (the value of a brand to a customer based on its ability to solve problems and the level of advocacy achieved)
  • Impact (the ability of a brand to establish differentiation throughout the customer experience based on interaction points with customers and the ability to deliver ROI).

2. Establishing the drivers of choice 

Employing the same data set, we establish a bank of attributes based on buyer behavior, rank them, and then plot the performance of the client brand against a set of competitive brands. This allows us to determine which brand attributes influence behavior and how various brands are performing against those attributes.

3. Identifying growth segments

The attributes are clustered into factors and distributed on a map to create a market landscape. A competitive set of brands are placed on the map according to their strength and performance against those factors. The customer universe is then segmented using Firmographics (a set of characteristics of organizations which are most likely to spend money on your product or services) to identify the most viable groups of customers with reach of your brand, and how best to reach them.

4. Positioning, execution, and monitoring

With this clear view of the customer and brand landscape mapped with precision, we can then scientifically position brands for optimal growth and monitor their movement against the established indicators to give CEOs, CMOs, and brand leaders a clear view of progress and effectiveness against strategy and marketing investment.

To summarize, the three variables that determine return on branding investment are:

  • A clear understanding of what is meant by branding and how it works
  • An identified level of investment against a clear brand strategy and activation plan
  • An agreed set of achievable business objectives within a time horizon

Learn more about the Brand Performance Platform here.