Six ways a strong brand makes your company money

Many company owners go about their business without thinking much about brand. They either ignore it altogether, hand it off to marketing (or maybe a talented graphic designer), or make strategic decisions based on an incomplete understanding of what brand really means. If one of these describes you, you could be making a big financial faux pas: A strong brand can be a huge moneymaker.

Your company’s brand may not be a dedicated line item on your profit-and-loss statement, but your profit will absolutely increase based on the strength of your brand. It’s too bad so many leaders think brand is “squishy” or insubstantial, because it serves a very pragmatic economic purpose.

In fact, a recent study found that 87 percent of business value among the S&P 500 is intangible value, including brand equity. Another study valued S&P 500 companies’ intangible assets at 74 percent, with brand comprising 20 percent of that.

So, what exactly is brand? While I admit the concept can be tough to pin down, I define it as the interconnected web of what our business means and how we deliver that meaning, all made possible by our special position in our customer’s universe.

Brand should be a company’s North Star. Every decision you make should be filtered through it. Forging an ironclad brand lets you occupy the single best position in the hearts and minds of your customers. When you pinpoint this optimal position, you’ll be able to create value, maximize scale and lead with purpose.

That said, here are six ways a strong brand creates immediate value:

1. It creates a high “willingness-to-pay” factor, which translates directly to better margins. In a recent study, strong brands on average commanded a 13 percent price premium over weak brands. Look to your own purchasing behavior. When you love a brand, aren’t you willing to pay more for it than for an alternative brand? Renowned brands like Apple, Mercedes-Benz and Williams-Sonoma — r niche brands like Lululemon, Campagnolo and Vitamix — are examples.

2. It commands attention and makes it easy for customers to choose you. Consider the infinite stimuli competing for your customers’ attention. To break through and secure a place in their minds — and their wallets — you need to make it easy for them to notice you. The solution is not to shout the most loudly — most lack the marketing budget to shout loudly enough. The solution instead is bracing clarity. Be crystal clear about what your business is and why that matters to customers. This way the customer’s mind has to do less work to grasp your offering.

3. It enables you to hit that sweet spot between old and new that persuades people to buy.

Wharton School marketing professor Jonah Berger writes in his book “Invisible Influence” that people like a blend of similarity and difference. When it’s the right blend, he refers to it as “optimally distinct.” For a brand position to be compelling to customers, it should be similar enough to something a customer already knows so that the person will feel its “warm glow of familiarity,” as Berger has called it — yet it should be different enough that it stirs the customer’s curiosity and desire to be different themselves.

When selling something new, it helps to piggyback it on top of something else the customer already understands. This is why automobiles were positioned as “horseless carriages.” It’s also why Airbnb referenced the familiar B&B idea, with its associations of belonging and safety and psychological comfort, when trying to persuade people to embrace the dramatically new idea of sleeping in non-hotel beds they find on the Internet.

4. It sets the groundwork for customer loyalty. Your brand strategy enables you to focus on what matters to the target customer — on that which produces customer desire for your business. Once customers have found it easy to see you and buy you, and those customers value your big benefit, they will love your business. In this way, great brands deepen and lengthen your customer relationships, increasing customer lifetime value. Brands set the conditions for loyal customers who come back again and again because you singularly bring significant value.

Starbucks brings a big benefit — good coffee, uplifting third-place space, human connection, consistency across locations. This fills a deep need and delivers meaningful value, which spurs loyalty. It makes somebody a customer not just once, but countless times.

5. It “digs a moat” around your business. A great brand is good defense. It protects what you have, helping you to survive and defend, as well as thrive and grow. If you have built a powerful brand, your competitors cannot credibly copy it, and this un-copy-ability protects your business’s long-term value. Pretty much everything else can be copied, given enough time. Patents expire; features obsolesce. But it is hard to copy an emotional territory that your brand occupies in the mind of your customer.

A strong brand is the only truly sustainable competitive advantage. Consider that Brooks Brothers has been around since 1818, DuPont since 1802, and Jim Beam since 1795 — and our country goes back to only 1776!

6. Finally, it guides strategic decision-making. When your brand is well-defined, you can look to it to filter where and how you can innovate, or what categories you can expand into, with confidence in your ability to grow. In this way, it prevents you from making costly mistakes.

If I am the CEO of Brooks Running and I’m considering areas for innovation, I look to my brand, represented by the tagline of “Run Happy.” My brand is about the joy of running — not the joy of skateboarding, not the joy of sports in general, not even about running for the sake of things other than joy. This lens puts into sharp relief where I can or cannot grow, making my decisions easier and more accurate.

Keep in mind that all of these money-making benefits hold true ONLY if your brand is strong.

A weak, anemic brand simply doesn’t command the same value. Make sure yours is customer motivating, distinctive and ownable, simple and singular, and that it leverages your unique competencies. The strength of your brand is just too important to leave to chance.

Lindsay Pedersen is the author of “Forging an IronClad Brand: A Leader’s Guide.”She is a brand strategist, board advisor, coach, speaker and teacher known for her scientific, growth-oriented approach to brand building. She developed the Ironclad Method for value-creating brands while working with billion-dollar businesses like Starbucks, Clorox, Zulily, T-Mobile, and IMDb, as well as many burgeoning start-ups. Lindsay lives in Seattle with her husband and two children.

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