The Value Of Branding

One of the most valuable ways branding can help your business is by allowing you to charge more. A recent study by Mckinsey and Co. prove just how staggering the value of branding really is.

“During a First Insight executive retail dinner this fall, two partners from McKinsey and Company spoke to the value of a strong brand. McKinsey has identified a number of factors that are predictive of total shareholder return. They determined that fifty percent of value can be attributed to performance (strategy and execution). The remaining 50% is due to perception, which includes the brand “narrative.”

That’s a pretty shocking statistic. 50% of your company’s value has nothing to do with you. 50% has everything to do with how you are perceived in the minds of your customers.

This statistic naturally raises the question,”Do you spend 50% of your time controlling the perception people have of you? Or are you like most people where you spend the majority of your time dedicated to the other 50%: strategy and execution?”

But why exactly is branding so valuable? Why is the perception of your company worth as much as the company itself?

The answer is simple. Branding turns commodities into distinct products and services.

Commodities are by definition fungible goods and services. Branding takes the fungible and makes it unreplicatable.

Commodities compete on price and price alone. A gallon of gas from company A is no different from a gallon of gas from company B and therefore a rational buyer will buy the cheaper option every time.

When services and products are fungible, the only way to compete is on price, and that my friend is a very hard thing to do.

Trying to compete on price is how Walmart put so many small shops out of business. These smaller shops couldn’t compete with Walmart on price because these shops didn’t offer customers anything different from Walmart. These shops commoditized themselves by not developing strong brands and signed their own death warrant in the process.

With the Walmarts and Amazons and Starbucks of the world in full force, developing a well-defined and unique brand is more important than ever. You simply must develop a brand that makes you unique (a brand that makes you NOT a commodity) in order succeed.

And that’s where your opportunity lies. You may not be able to beat Walmart on price, but you can offer a better shopping experience or better customer service. You may not be able to match Amazon’s convenience but you can stock unique local products that Amazon can’t.

Starbucks is able to charge $5.00 for a cup of coffee exactly because they have a great brand. They offer a fantastic selection and an in-store experience that is comfortable and inviting. Before Starbucks, coffee WAS a commodity. They made it something more.

You may not sell coffee but you can create a brand that makes you unique. A brand that makes you irreplaceable. If you don’t, you’ll be a commodity and that’s the last thing you want to be.

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