Like strategy, the words brand and branding are frequently misused in the business world. This is unfortunate because brands – together with the process of branding – are incredibly important to a business’s success.
How important? Well, the fact is this. A high-value portfolio of brands is one of your most valuable assets. Which is one reason why – as part of international accounting standards – a brand portfolio and its inherent brand equity can now be listed on a company’s balance sheet.
How much is a brand worth?
Depending on the type of business you’re in, your brand could be worth as much as 30% of the overall value of your business. Take the examples in this graphic of brand values from Brand Finance, one of the world’s leading brand valuation firms.
As illustrated in the graphic, Nike’s enterprise value as at January 2017 was US $88 billion. Its brand value? US $31.8 billion. And Apple’s enterprise value at January 2017 was US $797 billion, with a brand value of US $107 billion.
Granted, these are valuations of large firms. But, even if you are a small one person business, your brand has a monetary value. How much value? That depends on how good your brand is, and how well you are monetising it.
The bottom line? Brands = potential success and money.
So how does one go about creating and building brand value? Answering that question is what this lesson is all about. So, over the next ten or so minutes I’m going to share with you:
- The “Big Three” brand-building activities
- A concise definition of a brand. What it is and isn’t?
- The three main types of brands
- How to create an awesome brand
- How to build brand value
Ultimately, this lesson will hit home the potential value that brands are to your business. Furthermore, it will stop you from being led astray by those who think they know branding – but in reality, don’t have a clue what they’re talking about.
The Big Three of Brand-Building
On Wikipedia there is a fascinating entry defining and explaining the concept of the Big Three, which is “a term used colloquially to refer to the three most prominent entities in any given grouping or subject.” They can be prominent in a number of ways such as being the three most important, the three biggest, or the three most well-known in a group. Some examples include:
Big Three US Colleges: Harvard, Yale, Princeton
Big Three US television networks: ABC, NBC, CBS
Big Three science fiction franchises: Star Wars, Star Trek, Doctor Who
Big Three Japanese car companies: Toyota, Honda, Nissan
Big Three Greek philosophers: Socrates, Aristotle, Plato
When it comes to brand building there is also a “Big Three”. And it’s essentially the “Big Three” strategic activities for growing a business. Let me explain.
In your day-to-day business you perform a variety of business activities, which could be anything from finance, to supply chain management, to sorting out a personnel crisis. Many of these activities are operational in nature, and a few are strategic.
Now, out of all the activities you perform in your business, there are just three activities that are most responsible for growth. They are strategic activities that business owners should spend most of their time focusing on. Here they are:
Yes siree, of all the activities that need to be performed in your business, only 3 activities are primarily responsible for creating profitable customers. And they are:
- Creating awesome brands
- Generating high-value brand awareness
- Successfully monetizing your brands
Truly, that’s it.
The brand building process starts when you create awesome brands. Then, you generate high-value brand awareness. And then you monetize the brands.
Here’s another way of looking at the Big Three. Before you can monetize a brand, you need to generate high-value brand awareness. And before you can generate brand awareness you need to have a brand. So it’s all about following a sequence.
How important are these activities? Stop performing them tomorrow and let’s see how long your business lasts!!!
Let’s get into the sequence of The Big Three in more detail by looking at the definition of a brand.
What is a brand?
How about we first look at what a brand and branding are NOT?
A brand is NOT just about a logo
A brand is NOT about graphic design and pretty pictures
Creating a brand does NOT start with a designer, creative director or art director
Branding is NOT just advertising or promotion
So a brand is? The traditional definition of a brand as it pertains to business is that of a mark, and the definition originates from the mark or brand that cowboys and farmers either burn or paint on their livestock in order to identify ownership. So farmer George’s cows, for instance, may be branded with a big “G” on their sides.
For a modern-day definition, Brand Finance defines a brand as the “Trademark and associated IP including the word mark and trademark iconography”.
In Brand Finance’s definition, we get some clarity around the fact that a brand is Intellectual Property (IP) or an intangible asset owned by a company. To add to the definition, a brand includes brand names, icons, secret recipes, unique processes, methods and even hard-to-replicate skills. So, there are different types of brands and brand assets. But ultimately, think of a brand as an asset.
And the main purpose of a brand? Firstly, a brand establishes ownership. But, the main purpose of a brand is to communicate a perception of value or to highlight why one brand should be chosen over another. Sure, a brand tells the public “who we are”, but it also needs to tell the public “why we are”, “why we matter” and “how we will benefit you.”
The ability of a brand to convey value, and not just ownership, is what makes it so potentially powerful – and a key intangible asset. So here’s my definition of a brand:
Some key points:
- A brand is an intangible asset. And potentially, it is worth a ton of money to you.
- A brand conveys positive and negative perceptions in multiple ways, including human behavior. These perceptions build or reduce brand value.
The three main types of brand
The three main types of brand are:
- Organisation/business brand
- Product/services brand
- Personal brand
There are several other types of brand that make up the portfolio and these include process brands and ingredient brands. However we will deal with the main three in this lesson.
The business brand is what most people associate with branding. Corporates listed on the stock market trade under their business/corporate name, and most people running a business have a specific business name that is distinctly separate to its product brands.
Although a business brand is distinct from its product brands, it is however associated with product categories or industries. For example, Saatchi & Saatchi = advertising, Adidas = sporting apparel, and Samsung = electronics.
Business brands also have perceptions attached to their names, so we buy what the business represents. For example, Toyota represents reliability, Apple represents innovation and McDonald’s represents fast food made fast.
The product/service brand is the second type of brand. And, it’s self-explanatory:
Apple iPhone, Toyota Corolla, McDonald’s Big Mac, Volkswagen Beetle. Nestle KitKat. Nike Shoes
Businesses typically have a portfolio of product brands, each with specific brand identities that target particular target markets. And, over time, as a business grows, it will refine, improve or stop certain product brands, and introduce new brands onto the market.
The third main type of brand is the personal brand, which is the brand of an individual. The personal brand can also be used to define a team brand, but for the sake of simplicity I’ll just focus on the person.
A personal brand is one that creates and generates perceptions of value about an individual. And these perceptions are generated by key factors including:
- Personal skillset and talents
- Physical features such as height and weight
- Dress code
Strategically, a personal brand is used in two ways.
Firstly, it is used when an organisation showcases the talents of individuals that work for it. Showcasing personal brands helps to add value to the organisation, and it also humanizes the business brand.
The other way a personal brand is used is when an individual uses their personal brand to build a business or career.
In effect what you are doing when strategically creating a personal brand is productizing an individual. That is, you are turning the person into a product. Such as Brand Obama, Brand Ronaldo, Brand Gates.
The simple fact is this. Every person on this planet has a personal brand. And so you are Brand You.
Furthermore, you can create and develop your personal brand strategically or haphazardly. Bottom line though is that when it comes to improving personal success, creating and building a strong personal brand will be a key component of your personal development strategy.
What makes an awesome brand?
So how do you go about creating and monetizing awesome brands? Well, you need to develop and execute an effective brand strategy.
Outlined here is my Strategic Branding Formula, which provides a blueprint for creating and building awesome brands. The formula has seven steps, with each step playing a key role in the brand-building process. Let me take you through the formula.
1. Form a highly skilled dream/strategy team
In the next minute or so you are going to learn the Ultimate Success Secret. Why is it important to learn?
Well, this secret has helped military leaders win wars, political candidates win elections and small businesses become global giants. It is frequently used by championship-winning sports coaches, successful investors and world-class athletes. And, this secret plays a key role in business growth, brand building and performance improvement. The fact is, this secret is the hallmark of all great leaders.
Oprah Winfrey applied this secret to become a media magnate and one of the world’s most powerful women. Warren Buffett uses it in his profession as the world’s most successful investor. Tennis great Serena Williams implements this secret in her career. And coach Graham Henry used this secret to help New Zealand win the Rugby World Cup in 2011. So it’s powerful stuff.
The secret is so important because it strengthens the strategies you create and multiplies your chances of success by huge margins.
What is the Ultimate Success Secret? Drum roll please. The Ultimate Success Secret is….
Establish and use a highly skilled strategy or leadership team
Yes, the ultimate success secret is to establish a highly skilled strategy or leadership team, which is also referred to as a leadership group or master mind. It doesn’t matter which term you use, but it is important to understand the team’s definition and purpose.
A strategy team defined? It is best defined as a team of highly skilled individuals who come together to perform two core tasks, which are:
- To analyse, create and plan an organisation’s strategy.
- To lead and direct the execution of the organisation’s strategy.
Ultimately the strategy team works hard in pursuit of a common goal. Like winning a war, growing a business or winning an election.
My concept of the strategy team is an extension of Napoleon Hill’s principle of the master mind. In his best-selling book, Think and Grow Rich, Hill defined the master mind as, “the coordination of knowledge and effort, in the spirit of harmony, between two or more people, for the attainment of a definite purpose.” Hill then added that, “no individual may have great power without availing himself of the ‘master mind’.”
A strategy team is much more than a collection of minds and skills. It represents your organization’s values and culture, which is a key driver of business success. Accordingly then you need to build a team of individuals who not only have the skills you need, but who also share your values. Just as importantly, the team needs strong, capable leadership, which will enable a strong team culture to develop.
2. Identify attractive markets and trends
The late Gary Halbert, the maverick American marketer and educator, often used his hamburger stand lesson to illustrate the importance of market demand. In a nutshell, in his marketing classes Halbert would ask students what would be the most important thing they’d need to have a successful hamburger business.
Answers would come in thick and fast…great hamburgers, good location, excellent value proposition etc. But, by far the most important thing needed for the hamburger business to be successful? According to Halbert, the most important thing you need is…a starving crowd.
Yes indeed, to build a brand, you need a starving crowd who will gladly buy your product. We refer to a starving crowd as an attractive market.
And, that market needs to be sustainable over time.
How to figure out the size and attractiveness of a market? Go out into the market and look for yourself.
Actually, thanks to Google the process of market research is far easier than what it used to be. A few hours on a computer can generate all sorts of data about a market including trends, competitors, market size and much more. Then, armed with that information you can use a tool like The Competitive Landscape to gauge market potential and opportunities.
The Competitive Landscape visual is a great tool because it allows you to measure your potential opportunity against the broader market trend. Enter a new market too early with your new widget, and your market will be very small and nichey. Accordingly there will be a high risk of market failure due mainly to market skepticism. The small market may be enough to survive, but then again, it may not.
Then, on the other hand, try to enter later on without a meaningful way to differentiate yourself, and you’ll just get lost in the market noise.
3. Create a strong strategic position and product/brand concept
As suggested by the Competitive Landscape visual, there is a good time and a bad time to enter a market. And, the best opportunities exist where you create product innovations within markets that have proven demand. In other words, you improve upon what is already out there in the marketplace. This is all about competitive positioning.
Introduced to the business world in the 1970s by marketing and advertising experts Jack Trout and Al Ries, positioning is one of the most important business growth principles you’ll ever learn.
Essentially, a position is the way in you’ve differentiated your business and products from those of your competitors. And, from a competitive standpoint you must be positioned or perceived to be unique in some way. For example, you could be the biggest, the smallest the largest and so on. Just as importantly your unique position must offer clearly defined value and benefits to a large enough – yet clearly identifiable – target audience.
To grasp an understanding of the importance of positioning, the next time you’re in a supermarket take a good look at what’s in the cereal aisle. There’s Froot Loops, Weetbix, Porridge, All Bran, Corn Flakes, Muesli, Bircher, Cocoa Pops, Ricies and NutriGrain, just to name a few. Now, for many consumers the vast range of cereal choices can be both overwhelming and confusing.
Yet the reality is, the cereal aisle is representative of most product and service categories that exist today. In other words, when it comes to buying stuff we are spoilt for choice in most areas of our lives. The way to break through that clutter? Have a clearly identified position.
To have a great brand you need a unique competitive position. That is, your need to have identified a gap in the market that is either uncontested, or is not being met by existing competitors.
Once you’ve identified the position and the opportunity, start to formulate a product and brand concept. This is your initial idea or vision of what the product and brand looks like. You can create a prototype if you wish, but you don’t want to go too far down the product or brand development path at this stage.
As part of this step you should use your strategy team members to assist you with the concept process. They can help you flesh out the concept, and also be your devil’s advocate in order to bring a sense of reality and practicality to your idea.
Once you’ve completed this step you will have:
- A clearly defined monopoly or leadership position
- A product and brand concept that is ready to develop
4. Develop revenue stream model and growth strategy
So let’s say you’ve developed a business and brand concept. Your next step is figuring out your growth strategy and how you plan to monetize your brand.
The Growth Strategies Model shown below goes through the stages of growth and outlines the key aspects of each stage:
As illustrated, your first stage or strategy is Brand Differentiation, which is where you take your unique brand and grow organically. The second stage is the Brand Multiplication stage, and this is where you multiply your brand via various options that could include licensing, franchising and channel expansion.
And the third phase is where you diversify your brand into other investment classes such as property and other businesses.
Now, in terms of actually monetizing the brand, especially in the brand differentiation phase, you need to consider five key factors.
The first is transaction size and gross margin. In simple terms, this is the size of the sale and the money made from the sale.
The second is transaction frequency, which is the number of sales made to a customer over time. Front-end revenue is the first sales made to a customer, while back-end revenue is additional sales made to a customer. The matrix below highlights the differences between the various types of revenue:
- Brand awareness reach
- Response rate and cost per response
- Conversion rate and cost per conversion
Brand awareness reach is the investment in marketing and advertising and its effectiveness in reaching the target audience.
Response rate is the percentage figure of people who respond to a campaign, while the cost per response is the cost incurred in generating each response.
And conversion rate is the percentage of prospects who convert to customers, while cost per conversion is the cost incurred in getting a customer.
Here’s where strategy is so important. A good strategy will allow you to achieve the following:
- Increase sales transaction size
- Increase sales transaction frequency
- Improve brand awareness reach and effectiveness
- Improve response rate and cost per conversion
- Improve conversion rate and cost per conversion
Ultimately, your revenue stream and growth strategy provides ideas and direction on how you will do these five things. If your strategy doesn’t address these five, then your concept may not be worth pursuing. In other words, there is little point in creating a great product and brand when you don’t know how to monetize it.
If you have a clearly laid out revenue stream and growth strategy that addresses the five factors outlined above, you are ready to go to step five.
5. Develop awesome products and services
One of the greatest product success stories from the 20th century was that of the Volkswagen Beetle. In fact, thanks to the car itself, as well as some brilliant advertising the VW has cult-like status worldwide.
But in the USA it didn’t start out that way. Actually, VW sold a grand total of just 390 Beetles in the US in 1951. But in the late 1950s VW began an aggressive campaign to sell more Beetles in the US. And fuelled by the power of this campaign, VW sales in the US went through the roof, with over 177,000 sold in 1961 alone, compared with 50,000 cars sold in 1957.
Interestingly, the Beetle US advertising campaign was ranked by Advertising Age magazine (the leading publication for the ad industry) as the #1 advertising campaign of the 20th century. Hell’s bells, let’s put this ranking into context. Of every prominent advertising campaign ever produced during the 20th century (we’re talking 1,000s of campaigns over that 100 year period ), the VW campaign was voted #1.
So why was the Beetle campaign so successful? First we have to look at the US car market of that era, which was dominated by gas-guzzling tanks. Indeed, during the 1950s-60s bigger was considered better, as these two ads illustrate:
So, here you have US carmakers building and promoting their large, powerful vehicles…and then Volkswagen comes along with its small, uninspiring Beetle. And then they launched the Beetle with this:
What contrast! It’s a classic case of what I call “attacking the empty space.” In other words, entering and filling a gap in the market.
Volkswagen positioned the Beetle away from the big cars of the day. Now here’s the reality of the situation. Great as the campaign was, it would not have succeeded if there was no empty competitive space to start with. At the time there were few small vehicles, so VW had a huge product advantage which just needed to be exploited.
Bill Bernbach, the creative director of the ad agency that created the campaign, describes the importance of the product advantage this way:
“Advertising doesn’t create a product advantage, it can only convey it….No matter how skillful you are, you can’t create a product advantage that doesn’t exist.” -Bill Bernbach
What you have read highlights one of the most important marketing principles you will ever learn, which is that to be successful in business you must first have a product advantage. Moreover, this advantage must be sustainable and it must be easily conveyed into a benefit that consumers will value.
VW had a product advantage and this advantage was brilliantly conveyed.
Once you have all the above elements in place, you can begin the process of developing your brand assets, such as names and taglines.
When it comes to brand design, it is important to understand that your design is not the brand. It is the representation of the brand. It is a part of the brand. But it is not the brand.
Think of brand design as the paintwork and other visual and auditory features on a car…like hubcaps, decals and even how the car sounds when it starts up.
When a car is branded as being beautiful and awesome…but the car itself is a lemon or doesn’t match the brand promises, then the brand is not authentic.Put another way, the perception doesn’t match reality.
When a business’s brand design does not match the underlying reality, it can get away with it short-term. But, it will not be successful long-term. Ultimately then, your design must align with the underlying reality of your product features and benefits.
Purple Cow is a branding term created by author and marketing guru, Seth Godin. So what’s a purple cow? Imagine yourself driving past a herd of brown cows and right in the middle of the herd is a cow that’s well…coloured bright purple. Now that cow would certainly stand out wouldn’t it? That is the essence of purple cow branding.
A purple cow brand is distinctive. It is memorable.
Being distinctive simply means standing out in a crowded marketplace. Yes, it’s about creating a unique look or image. Even better is when you create a distinctive look that incorporates what I call proprietary brand elements. Such elements can include:
• Distinctive names (Mad Butcher)
• Distinctive colours (Cadbury purple)
• Distinctive icons (Coca-cola bottle)
However, being a purple cow – when all the others in the paddock are brown or black – just isn’t good enough. Your brand must have underlying value that can be delivered.
You must convey value that can be delivered. In other words, you make or convey customer-valued promises that you can back up.
Finally, and in some ways most importantly, your brand portfolio must have high barriers to imitation. Put another way, you need to develop your portfolio in such a way that competitors find it very difficult to copy you. In my view the best way to develop and raise the barrier to imitation is by creating multiple brand assets that contain proprietary brand elements.
Whenever you develop brand assets, the idea of making imitation difficult must always be in the front of your mind. After all, when you develop hard-to-copy brand assets, they can help strengthen customer relationships and loyalty, and also strengthen your influence and relationships with suppliers and strategic partners.
7. Build and execute a powerful sales and marketing system
In strategy and coaching sessions the team learns and practices the plays in their playbook until these become second nature. Then the team goes onto the field to execute the plays.
All top sports teams and athletes have playbooks, from the New Zealand All Blacks rugby team through to Roger Federer. It is an important part of their preparation and performance.
In business you also need a playbook. And the specific playbook you need is a sales and marketing playbook.
This playbook contains all the attacking and defensive plays you will use in order to generate brand awareness, acquire leads and responses, and get customers.
The marketing playbook is actually a step-by-step marketing system that has these major components:
1.Brand awareness and response system
2.Sales funnel/database nurture system
3.Sales conversion system
4.Customer re-sell system
To highlight how comprehensive your sales and marketing system will be, it will contain many of the following assets:
- Social media presence
- Direct mail letters
- Brand collateral
- Pay per click/Google adwords advertisements
- Banner advertisements
- Tv/radio print advertisements
- Referral marketing programmes
- Sales funnel management system
- Talented field sales reps
- Talented inside phones reps/CSRs
- Product samples
- Sales promotion events
- Interior design
- Advertising billboards
- Website opt-in/squeeze pages
- email marketing software/system
- email marketing messages/sequences
- email newsletter
- Snail mail newsletter
- Customer events
- Sales scripts
- Sales presentations
- Media releases
- Branded uniforms
- Rules/policies around employee behaviour
- Sales and customer service skills training programmes
As you can see, the list is comprehensive. And, these assets are all part of a coordinated and strategically focused system.
Your priority in business must be to develop the respective components in the marketing playbook, and then execute the system in the marketplace.
How to build brand value?
At the outset, when a brand is created, it has little or no value. Yes, you may have invested time and money establishing the brand, but the underlying value is not worth much. So how is the value built? Through the activity of branding. Put another way, Branding is the activity of generating brand awareness.
Before people can make a judgment or form an opinion about your brand, they firstly need to know that you exist. So branding is about getting your name out into the marketplace.
Brand awareness can be generated internally or externally. Internally driven brand awareness includes your marketing and advertising, promotion, sales people communications, PR, pay-per-click advertising and any other form of communication that puts your brands in front of your target audience’s eye and ears.
Internally driven brand awareness also includes the behavior of your people, which helps explain that branding has very little to do with vision or mission statements. Instead, it is what your people do and how they behave on a day-to-day basis that either adds to or subtracts from, the overall brand value of your business. Internally driven marketing communication is something you have a high-level of control over.
The second type of brand awareness you actually don’t have as much control over. What is it? It is externally driven communication and includes word of mouth, social media chatter, viral marketing and externally driven PR.
Externally driven communication can be either positive or negative. On the positive side, word of mouth played a major role in the success of the 1977 movie, Saturday Night Fever, and helped John Travolta become a global superstar. The movie’s budget was US$3.5 million. In terms of return, total box office revenue was US$237.1 million, or more than 70x budget. Conversely, negative press towards United Airlines’ handling of its 2017 passenger over-booking blunder caused its share price to fall.
So whether it’s internally or externally driven, branding either adds to, or subtracts from, the underlying value of the brand asset. The key is making sure you are adding to the value. How? You need to develop and execute an integrated sales and marketing communications system.
If your brand-building efforts are successful it will allow you to perform the 3rd part of the brand-building process. And that is? monetizing the brand. In other words, brand monetization is the activity of converting brand awareness into a financial benefit in the form of paying customers.
The Brand Strategy Checklist
To help you build your brand strategy, use this checklist to guide you through the steps in the brand-building process. Give yourself a tick for each item you complete. And where there are crosses, do your work-ons as needed.
The three most important activities for growing a business
To conclude, you need to take a strategic approach to brand asset creation and branding. And as explained at the start of this lesson, when you simplify it, business-building all boils down to performing three key activities:
- Creating awesome brands
- Generating high-value brand awareness,
- Monetizing the brands
So, you really want to build your business? Then think seriously and strategically about creating and building high-value brands.