Branding Basics 1hour
In this module, you will learn the basics of branding, its importance and what it includes.
Understand the basic terms in branding.
Let’s start with simple definitions of what you need to know so you can at least get a basic idea of what we are going to talk about.
In this short chapter, I want you to understand what is a brand, a brand name, and branding, and what the difference is between branding and marketing.
Many people confuse marketing with branding and do not fully understand what the second really means. As a result, they perceive branding as a vague and irrelevant concept that they should not be concerned with.
To understand branding, it is important to distinguish between a brand and a brand name. Think of Mercedes. I guess that you know not just its logo but you also automatically associate Mercedes with luxury cars, famous for their reliability and design. In this case, the brand name is just that – a name and logo of Mercedes.
But the image that springs to your mind and how you ‘feel’ about Mercedes cars is a brand.
In other words, a brand is a promise made by the company that owns the brand. Mercedes through its branding strategy plants in our subconscious the feeling that Mercedes is the most reliable and one of the most luxurious cars in the world. Watching their advert you can even feel the prestige of their cars.
Branding then is the perception of the company and its products. Even if you have never had a Mercedes car and you don’t plan to buy one in the near future, you know that Mercedes cars stand for luxury and reliability.
In other words, branding is the process of image and reputation creation.
The same way most people associate 4×4 all-terrain cars as ‘jeeps’. Actually, Jeep is a car manufacturer, but their brand name went beyond that and created a segment of cars called jeeps.
Whenever you see a Jeep you know that it’s an indestructible 4×4 car of your dreams that can take you anywhere.
Another example is the iPhone. iPhone is not a company, it’s a product and a brand name. iPhone is a brand itself apart from the Apple. It’s worth billions on its own as a brand. Apple used the success of the iPhone to create a whole bunch of products with the “i” at the beginning to associate them with the quality and innovation that customers found and perceived with iPhones.
Also, you probably have some sort of an image when you think about other companies like Starbucks and Coca-Cola. How we ‘feel’ about different brands is just a perception, a carefully planned and executed branding strategy that creates this perception. As you can see, branding is much more than just creating a company logo. It is concerned with differentiating a product and brand from its competitors, building a reputation and the successful promotion of them both. Success is achieved when consumers associate your brand with the values that you wanted to stand for. Mercedes equals reliability and luxury cars, whereas Ryanair is an icon of cheap flights. Creating such an image is the result of a lot of careful planning and deliberation. It requires an understanding of the market, but, also, defining a company’s values and its commitment to them.
Huge companies like Apple spent decades creating its brand and without a doubt, we can say that s Apple is a brand and a marketing house; hey can sell anything.
If we look at Red Bull, it doesn’t even focus on energetic drink manufacturing. The whole process is led by a separate company. It just includes the Red Bull logo. Red Bull is a marketing company that uses its brand, which is associated with extreme sports, to sell drinks and other accessories. By buying Red Bull we don’t buy an energy drink, rather we buy the hope of doing an extreme sport one day and to feel like all those sportsmen from the Red Bull videos.
Apple doesn’t sell iPhones or MacBooks, rather sells dreams and aspirations to be the best by having a very high quality and superbly designed smartphone or laptop. Their logo reflects this quality.
Apple is the most expensive business in the world. They became the best in what they do, because they focussed on one thing at a time- at least so far.
Apple’s biggest asset is its brand which also consists of at least 25% of the iPhone or MacBook price.
It shows us that brands are more important than the products themselves. Let’s consider at the iPhone. Each version of an iPhone has a lifecycle of around 11-14 months. Then another, newer version of an iPhone replaces it. iPhone is a brand, iPhone 5 is a product. iPhone will live forever, if managed well.
Abrand might be simply a symbol, element, tagline, logo or even a word or a sentence, however in the more explanatory way it is a set of values and a promise of delivering a unique experience to the customer. Brands are created to distinguish one business from another and in the 21st Century, it is used to create the value of the product.
A brand is the face of a company that attracts new customers, but also maintains the relationship with them. Imagine a girl that you meet in a pub. Obviously you started to talk to her because you felt she was attractive. Now, to keep your interest she needs to positively respond to your interest, showing her quality and values. Otherwise your conversation might end in a few minutes.
Taking into account the definition of branding provided in previous sections, branding and marketing are not the same – they cannot be used interchangeably.
Branding is being confused with marketing by many people who do not fully understand what branding really is. As a result, they perceive branding as a vague and not relevant concept that they should not be concerned with. So let’s look at what branding really is and why you should care about it.
branding and marketing are not and never will be the same. Both have the same goal which is to grow and expand even more your company. That said branding is fundamental to your company overall process of image building and as such it should also be the inspiration for marketing activities like TV adverts, billboard campaigns, newspaper ads – those just contribute to the strategy and help to build a strong brand. It’s not a secret that people more willingly will choose a product well known for his brand than another one less known, even if the second would be better. So in other words, good branding and brand awareness generates more revenue for your company and makes marketing campaigns more flexible, as they can focus on products strengths instead of wasting time on building exposure.
Let’s summon here the example of Heinz ketchup and their branding narrative. As you will watch Heinz TV commercials you will notice one thing – all of them shows a big, solid glass bottle with the same white and green plaque on front. This one always looks good but they are not only producing and selling those. In most cases you will come across a Heinz ketchup in a convenient, plastic bottle (with the plaque of course) that in the terms of image looks worse. Nonetheless you can without any hesitation purchase it because you know Heinz is a trustworthy company that makes good ketchup. The same is with the less promoted but still popular other Heinz products that probably you would just ignore, but you see Heinz’s logo there, so automatically think – it must be good and you still buy it without them even advertise it!
That said successful branding makes use of marketing, but it is also required that other elements of your company are to be present and working clockwise like customer care, quality control, business strategy, website, logo, uniforms etc. This creates a long chain of attractive looking mechanisms that the customer can experience 24/7. Even in a case they have an issue with your service or product, they feel obligated to contact your company and report it, because they know yo can fix it and solve their problem. Also they will not complain on the forms about the issue before they report it to you and that in today’s reality is very compelling
This part is about demystification of branding. More precisely, I will discuss 5 myths about branding which are often mistakenly repeated by many entrepreneurs.
Understanding why phrases like “branding is only for large companies” or “branding must be expensive” are not correct may help you with the development of your own brand. Hopefully, this text will provide you with a coherent explanation of what branding really is, and then you will be able to use this knowledge to plan strategies for your company.
1. Branding must be expensive
Some entrepreneurs tend to ignore the importance of branding as they think that its development is associated with costs they are unable to afford. This is not true and- in reality, in order to successfully promote your brand, you don’t have to necessarily run an ad on the BBC for months. Instead, you may choose alternative forms of advertising which bring fair results for a decent price. The Facebook platform can be given a key example. On this social media website, you can create a custom ad, target it to the proper audience and set the budget you like, which can be as low as £1. The effects of the campaign depend mainly on your ability to define your customers and to make an interesting and a high-quality ad.
Besides Facebook, advertising on many other social media platforms works on the same principle – you create an ad, choose the budget that suits you and just wait for the effects. These platforms include Instagram, Twitter or Pinterest – all of them with millions of users who might become your potential customers.
2. Your brand has to be known worldwide
Coca-Cola, Apple, Windows or McDonalds… they are all strong brands and they are all known around the world. Does it mean that your product must be recognizable in numerous countries in order to become a brand? The answer is definitely not! A single cafe which offers a live jazz concert twice a week may become a very strong brand in the consciousness of the local community. People from the other end of the country don’t have to be aware of the existence of this cafe – its target may include just people who live within a radius of 25 miles, especially if the jazz concerts are performed by artists who live in this area.
Similarly, a brand can be built by bakeries, restaurants, local cinemas or by small family businesses. Uniqueness, naturalness, and quality of the products/services which often come together with such businesses are all trumps at creating the brand.
If you lead a small business, it is very important to target the right people, for instance, through ads on social media. A useful tip would be to display the ad only to these users who live near your operating area instead of displaying it to everyone from the country (on Facebook it is very easy to specify such data).
3.Branding involves only products and services
Among the many myths about branding, a popular one is that branding is often automatically associated with business, even though the term is wider than that. Cities, countries, festivals or soccer teams, they may all also possess a brand. Promoting e.g. a certain destination through a long-term consistent strategy can positively influence the tourism value of a given region. That’s why local or national governments tend to invest in branding.
Regarding this topic, a relevant case-study may be a story of the Polish city of Wałbrzych. About two years ago, two members of a research group announced that a train full of gold was hidden somewhere below the city. Many people started visiting Wałbrzych just because they were interested in this train. And although it seemed like it does not exist at all, the region’s authorities and the community itself invested a lot to keep the myth alive. A city’s brand became strong enough to attract much more tourists than usual. If you are creative, you can brand almost everything.
4.Branding is only for large companies
This myth was partially busted when we described why a brand did not have to be known worldwide. Similarly, like the company’s operating range is not an essential feature, its size is also not a crucial factor. Yes, of course, you can brand an MNE with thousands of workers but, identically, you can create a successful brand if you are self-employed or if you have just a few workers. Think about the restaurants, cafes or bakeries that have been mentioned. If you run a local business, your main aim would be to become the “number one” within a given region. You don’t have to set yourself unreasonably difficult goals like being the best bakery in the country within the first three months of trading. To brand on such a scale, it would cost you an exorbitant price whereas, at the beginning, increasing local awareness about your organization is just perfect and not that expensive. Branding indeed can be used by every player on the market.
5. Brand and Logo are not synonyms
Although a logo is very important for your business, ‘brand’ is a wider term than that. Logo and brand are not synonymous notions – the first one is a graphic representation of a company whereas the second one includes the whole “image” of the organization, for instance, its slogan, values, colors, features, even its way of communicating with customers. In other words, a logo can be treated as a brick and the brand as a wall. If your logo is too complicated or of low quality, then the wall may wobble. On the other hand, one brick is too little to secure an organization from the competition, loss of customer loyalty, etc. Both aspects must be taken into account when developing a business.
To sum up, there are many myths about branding and we have managed to explain some of them. First of all, branding can be used by everyone – small, medium-sized and large companies, as well as by the organizations which operate locally, nationally or worldwide. It can, but doesn’t necessarily have to cost you a lot to develop a successful brand; new mediums such as Facebook or Twitter allow the creation of well-targeted ads for relatively small prices compared to e.g. TV or radio ads. The most important thing is to stay consistent with your chosen strategy.
Learn why a brand may become the biggest intangible asset of your company.
You are lost if you think that brands have no value.
It is intangible – yes, but what would you prefer to buy: Coca-Cola or a regular soda?
Branding may require long arduous work and cost a lot of money, but you must not view it as an expense. Instead, view it as an investment which can add significant value to your company.
For companies like Apple or McDonald’s, the brand is worth much more than its property and machinery. It is rational for those companies to spend money on cultivating their brand rather than on opening another McDonald’s restaurant or another Apple Store. If you need to be convinced by numbers, Google’s brand is estimated to be worth $109.5billion and Apple’s $145.9 – according to Brand Finance ranking from 2017. Milward Brown, a market research company estimates that brands account for more than 30% of the stock market value of companies in the S&P 500 index – the leading indicator of the US equity market. In other words, Milward Brown claims that 70% of the company’s value comes from its physical assets such as factories or shops and 30% comes from its brand that it intangible and present only in our minds.
Although this may seem like an arbitrary number and the actual value of the brand might change over time, one thing is clear – brands are valuable and companies are willing to spend money to cultivate their brands or even buy new brands. In 2014 Imperial Tobacco – a large cigarette maker spent over $7 billion to buy a collection of brands like Kool, Winston, Salem, and blu eCigs.
What makes some brands valuable?
Most industry insiders would agree that branding inspires consumers’ loyalty. Faced with a choice between similarly priced and almost identical products, customers are more likely to choose the brand they know (would you buy an unnamed TV screen or would you decide for Sony if both were the same price?). This brand loyalty allows companies to charge a premium price for their products. For instance, McDonalds’ profit margins are much larger than its competitors.
The art of choice
As consumers are increasingly ‘bombarded’ with information and advertisements, branding becomes even more important, because it makes it easier for shoppers to make the choice. According to Pediatrics (2006), youngsters are exposed to about 40000 TV ads per year. This is undeniably a giant number but, besides ads displayed between the TV programs, we are constantly forced to watch ads on our mobile phones, Internet, newspapers and so on. As consumers dig through hundreds of products and firms, they are more likely to focus on the brands they know.
The most successful brands are able to influence the consumers to the point where the company name is used as a verb. (‘Did you google that thing’; ‘I am going to skype my friend’; ‘I am going to hoover the floor’). Brands that achieve that are extremely valuable, because it is very difficult for others to compete with their products. How can Microsoft’s ‘Bing’ beat Google when the very action of searching for something on the internet is called ‘Googling’? Also, sometimes a brand can be so strong that its name is associated with all the products of a given category. For instance, in Poland many people tend to call every diaper “Pampers” and sporty shoes “Adidas”, even if the products themselves were produced by a completely different company. Also, in the UK, some consumers call every 4×4 off-road car a “Jeep”.
Another sometimes overlooked aspect of a brand’s value is its internal value. A strong brand might be more attractive for employees as strong brands find it easier to recruit talented and motivated career-seekers. Ask yourself – would you rather work for Google or for an unnamed IT company?
In short, a strong brand can bring very tangible benefits for a company and it should not be looked at as an expense, rather as an investment and an opportunity.
When you think about the most successful businesses across different industries one thing they have in common is a strong brand. Whether it is M&M’s, Coca-Cola, or Apple. Yet, many small businesses neglect the importance of branding and miss out on the benefits of a carefully planned branding strategy. So let’s look at a couple of reasons why you should spend some time building a strong brand.
1. Brand creates recognition
People prefer to do business with companies they are familiar with so a memorable logo and consistent branding can help people remember your organisation and recognise your products instantly. Other important factors such as professional appearance also build credibility and trust.
Businesses with a branding strategy have more chance to acquire new customers. It’s simple, they look more professional and it looks as if tthe businessowners really care about it and invest money in its development. People are more likely to remember nice looking businesses, which starts with a modern website and ends with smart office interior design where you provide your company services.
If you are a self-employed painter and decorator, you can simply start by creating yourself a simple website using any one of the dozens of online platforms available, printing business cards that do not cost a lot, and putting your logo with a tagline on your private car. It pays off! People will start recognizing your business.
2. It increases the value of your products
Branding can indeed increase the value of your products. Think about Apple – people tend to buy iPhones, not only because they like those devices, but also because they value the brand. If customers trust your brand, they might be willing to pay more for your products just like they pay more to get an iPhone rather than a similar phone from a different company.
3. A strong brand can help inspire your employees
All your employees should work to achieve the same goal. Whether it is the quality of the products, excellent customer service or innovative ideas, a strong brand can help your employees to understand what you aim for and set common goals.
4. Brand help to get referrals
Branding is able to generate referrals – notice that the word of mouth is the most effective advertising. After all, you are more likely to listen to your friend’s recommendation than a TV advert. Well-implemented branding enables your company to get referrals and therefore, generate new customers. When people remember and like your brand, they are more likely to tell others about your products.
5. Brand can create an experience
The brand is the ‘face’ of your company. Think about how you want to present your business to customers. People will associate your brand with the friendliness of the staff, the quality of the products, and the experience they had doing business with you.In short:
Branding is about ideas and values. Values that you and your staff can hold on to and commit to. Your brand should permeate your business. When the branding strategy is clear and you can deliver on the promise of the brand, you will see tremendous results building brand loyalty among your customer base and generating more referrals.
In this chapter you will learn how to actually calculate the value of your brand.
In some of the previous chapters, I referred to the value of the brand, giving numerous reasons why it’s money well spent. We even provided an estimated value of brands like Coca-Cola ($80 billion) and Google ($160 billion). What we didn’t discuss is how brand value can be calculated. The reason we did not do it is because it is a very complex issue and we did not want to bore you with all the equations and details.
Because brands are ‘intangible’, calculating their value is difficult. How can you put a price tag on customers’ loyalty and product awareness?
Many would claim that they don’t pay for the badge and chose products solely on their merits. Yet, evidence shows we all pay for the brand even if we don’t know it. The car industry is an excellent example here. Some manufactures (with considerable success) intentionally put different badges on almost identical cars and charge different prices. The Volkswagen Up (with cosmetic changes) is also sold as Seat Mii and Skoda CitiGo, each at a different price, of course.
Okay, so we all pay for the badge, but how is the brand value calculated? Again, because it is a very complex issue we will cover just the basics. Because each brand is made up of so many different components (customer awareness, loyalty, positive or negative perceptions etc.) there is no single way of measuring brand value. One of the most common ways of measuring brand value is calculating the difference between the market value of the company and its tangible assets (i.e. factories, machinery etc.). When a company is being sold this difference between price paid and the value of its assets is called ‘goodwill’.
Goodwill includes all intangible assets like the skilled workforce, internal procedures that increase efficiency, patents and the brand. By separating different components of the goodwill it is possible to calculate the value of the brand. However, this is easier said than done and for many years the different components have been valued together. More recently, professional brand valuing companies have come up with complex equations that separate different elements, taking into account a whole range of factors like strategic brand management, marketing budget allocation, marketing ROI, portfolio management, brand extensions, M&A, balance sheet recognition, licensing, transfer pricing and investor relations.
As you can see calculating brand value is a difficult undertaking done mostly by specialised companies. Despite this complexity the fact that brands are valuable assets is not being questioned.
You will learn what a difficult looking “Brand Equity” means.
Brand equity – yet another term that might sound like it comes from the world of large corporations and has nothing to do with small and medium businesses. Don’t let the name put you off from the concept. As it is easy to grasp and will help you understand branding a bit better.
So what is brand equity? In essence, it refers to the value of the premium that a company is able to charge for a branded product compared to its generic equivalent. The concept ties up with customer loyalty and the value of the brand that we have already described on our blog. Things like quality of the product, perception of the brand or past experience can all influence brand equity.
Interestingly, brand equity can be both positive or negative. A positive brand equity means that the customer is prepared to pay more to get a branded product. If brand equity is negative, then the opposite is true. The customer will only buy a product if it is cheaper than other products.
Think of a company you had a bad experience with. If you are ever going to need a similar product in the future, you will not be very keen on doing business with them. You might be prepared to pay a little extra to get an equivalent product from their competitors.
Brand equity is relevant not only for large companies like Apple, but also for local businesses. You might be running a local barber shop, or a grocery store. If your brand equity is positive, people will be happy to pay a premium for your products.
Positive brand equity can also help your marketing efforts. People will not only pay extra to buy your products, they will happily recommend you to their friends and family. This in turn helps you promote your business and strengthens your brand awareness.
If you are planning to expand your product line, positive brand equity is extremely important. By associating your brand with the new product, you are increasing the chances of the new product being successful. Think of the iconic ‘i’ in the case of Apple products. By strongly associating each new product with the success of the iPhone and the brand as a whole, the company is able to immediately put their products in an advantageous position.
The same can be true for any other business. If you are running a successful car garage and your customers value your brand, you have a good chance of succeeding when expanding your offering to include motorbikes.
In this short chapter, you will learn what is the correlation between brand and added value to your product or service.
Value added is the amount extra that a company charges in additon to simply the production costs. Let’s say that producing a can of soda costs around $0.15, but if we put a logo of Coca-Cola, it can costs even $0.5 and we will still buy, because, afterall It’s a Coke! Those remaining £0.35 (0.5-.015 of production costs) are value added.
Value added can be generated by good branding. If a company has a strong, recognizable (even local) brand, then it can charge more for its products.
If you own a beauty salon, you can work on your brand for a couple of years, creating local awareness, business and brand recognition, creating your reputation, presenting your business in a professional way on the internet. I am pretty sure it will drive more customers to your business and you will be able to increase your prices assuming that the level of the service will be maintained over time.
The importance of internal branding is often being neglected. But you better don’t do it.
You might have already spotted the term ‘internal branding’. This new and mysteriously sounding term is increasingly popular in business circles as more and more companies realise the potential of internal branding. Its high time we defined the term.
We defined branding as building the image of the company and planting it in the mind of consumers. Following this definition internal branding is about doing this INSIDE the company. You don’t have to run advertising campaigns to inform employees about the products your company is selling – they are the people selling those products. However, they might not know why they are doing it, or why they should care and that is where internal branding comes in.
It is essentially about building a very specific culture inside your company so that. A culture that will reflect the vision, values and mission of your brand. Your company should be true to its brand both internally and externally. Internal branding activities focus on a range of aspects inside the company from improving internal communication, providing additional training for employees and changing management practices. It should focus on each and every employee to help them understand their role in the business – get them ‘on board’ and increase their loyalty.
Ideally internal branding aims to make your employees genuinely support your brand and stand behind your company’s values. So don’t get confused internal branding is not just a fancy name for internal communication, it is not about giving away T-shirts with company logo on it either. It is about changing the way your company works internally and making your employees believe in your business idea.
This might sound trivial, but the research suggests that fewer than 50% of employees believe in their company’s brand idea. Companies realised that and that is why they are investing so much resources in internal branding. In 2009 Starbucks closed all of its stores for two hours to provide additional training for its staff a – move that aimed at motivating their employees to deliver the best customer experience.
Internal branding is equally important as external branding. Starbucks has some 135,000 employees if half of their employees did not believe in what they are doing they would not provide top quality service making half of Starbucks customers unhappy.
You might have read our post about internal branding and wondered whether it concerns you. So here is the answer: If you employ at least 1 person, then yes it does!
Internal branding is important for every business, not just large corporations with hundreds of employees. Quite the opposite, small business should put even more effort to improve their internal branding and here is why:
Large corporations have huge marketing budgets and are well-known throughout the world. They can afford to pay Hollywood stars to market their products and make people believe that they are the best. They might get some bad publicity if their employees fail to deliver due to poor internal branding, but they usually have the resources to recover from it.
Small business owners on the other hand, rely on a different form of marketing – word of mouth. If your customers like you and what you are doing and they spread the word – they recommend your products to their friends and colleagues. If they don’t like you they also spread the word and tell their friends to avoid doing business with you.
If you employ only a couple of people their role in the success of your business is huge and so are the losses if they fail to deliver. If your employees don’t believe in your business and don’t like what they are doing, they will not be able to deliver to their full potential. They will not provide the best customer satisfaction and they will not work efficiently. Your customers will not be satisfied and they will tell their friends about it – the word will spread.
By improving your internal branding you can change that. If you make your staff support your business idea, their genuine commitment will help you succeed. You are going to get more satisfied customers who will then spread the word among their friends. Your employees will add to that as well- they will be happy to talk with real passion about you and your business. This is the best kind of publicity you could get.
In short- internal branding is important to both big and small businesses. As a small business owner you should really think about your employees and do your best to get them ‘on board’. The benefits will be enormous!