The Six Financial Benefits To Brand Identity
For at least the past decade, the topic of “branding” has dominated marketing discussions to the point that the concept has numerous definitions and explanations. This proliferation has not necessarily increased the credibility of branding as a marketing function, but instead seems to have created confusion regarding the actual value that branding provides–if the value can even be measured. The majority of business people would likely agree that branding is important, and developing a “brand identity” for their organization should be part of their long-range planning. However, organizations operating in today’s economy are under tremendous pressure from stakeholders to focus on current financial results.
Because of this, the challenge has been to measure branding’s financial benefits to an organization from both short- and long-term perspectives. How does branding contribute to the financial health of an organization? And, if it does not contribute, does branding hold any value at all or is it just a good topic for the latest marketing guru book?
This article will provide you with insight into six financial benefits that a strong brand identity contributes to an organization. This article will also explain how brand differentiation and brand relevance can be valuable tools for increasing an organization’s operating margin.
What is brand identity anyway?
Before addressing its financial benefits, we offer this brief definition of brand identity. An organization’s brand identity represents how the company wants to be perceived in the market, what the company stands for, and most importantly, implies a promise to the company’s customers.
The value of a strong brand
Based on the research presented in his book, Building Strong Brands, Dr. David Aaker cites a number of financial and non-financial benefits to building a strong brand. AVS sifted through these benefits and discovered that six of them have direct impact on an organization’s financial performance. Each of these benefits can be measured and they are interdependent, meaning that if the first benefit can be achieved, it will assist the organization in achieving the remaining five.
Our research also showed that achieving the six benefits is a linear process. Achieving Benefit 1 will assist the organization in reaching Benefit 2, and so forth. In addition (and probably the most powerful benefit of all), when an organization has achieved all six financial benefits, it loops back to the first benefit and repeats the process like a continuum. This is a powerful process, because as an organization repeats its journey through the continuum, the brand gets stronger and stronger. Each pass through the continuum produces more financial benefit to the organization. AVS calls this process the Brand Continuum.
Here are the six financial benefits to a strong brand identity:
Benefit 1: A strong brand identity commands a price-premium. Why is someone willing to pay thousands of dollars more for a Lexus than for a Toyota? They are virtually the same product with the exception of some additional options and accessories. “You can also buy exotic cars from Jaguar, Volvo, and Range Rover. And every one of them is made by Ford–and you shouldn’t be surprised to discover that they even share parts.”
The value proposition is wrapped around the brand. The Lexus, Jaguar, Volvo, and Range Rover brands are worth more in the minds of consumers regardless of whether the product actually functions better.
Benefit 2: A price premium creates the perception of quality. This follows the age-old axiom of “you get what you pay for.” If a Lexus costs more than a comparable product, it must be because the Lexus provides better quality. Right? Not necessarily. There are plenty of lower-cost, high-quality vehicles available, yet people still pay more for what they perceive to be a better or higher-quality brand. So the axiom lives on.
Benefit 3: Perceived quality has been shown to positively affect customer usage. Consumers tend to select brands they perceive to be quality brands. This also connects to repeat buying or brand loyalty. Consumers tend to continue buying brands that reward them with a good experience versus repeating the evaluation process time after time.
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