Building Valuable Brands
In a capitalist economy, the dominant form of organizational activity is in corporations. The potential impact of a corporation's activities is driven in large part by its value.
Corporate value is comprised of tangible and Intangible Assets. An estimated 90% of the S&P 500’s value is held in intangible assets), and in consumer-facing categories, brands comprise about 50% of that value.
Fundamentally, brands are shared ideas about organizations and what they offer. Brand "strength" is the degree to which the shared ideas about a company’s offering disproportionately influences financial return, primarily in the form of increased market share and price elasticity.
- Making customers more likely to buy something via the perception of tangible points of difference or intangible points of distinction that generate stronger mental presence.
- Perceptions of quality, reliability, and durability that justify price premiums.
Advertising is just one, highly limited lever for building brand strength:
"People in our industry love macho words like 'driving', 'forcing', and 'active'. They make us feel in control. But they don't reflect reality. Looking at how real people think, feel, and act, we find marketing is usually a weak influence, nudging us just slightly towards one brand or another" — How Not to Plan
"Only 28% of your brand equity is built by paid media. 71% is built by direct and indirect experiences... Brand experience is any way that someone interacts with a brand. Real, live interactions that involve real people, inviting them to actively engage" — Be Distinctive Everywhere, the Experience Edition
Where Advertising does make in impact, it does so via establishing mental presence by targeting the entire category over a long period of time with an outsized spend in highly attended media with creative, narrative, emotional, and platform-specific messaging that establishes a differentiated brand, supported by some rational activation messaging.
It is precisely these properties of strong brands (perceptions, mental presence, emotions, unquantifiable experiences, storytelling, breaking expectations) that make corporations systematically struggle with understanding brands and how to build them.
As ideas, brands aren’t constrained by the laws of the material world. They are in a constant state of flux, requiring constant stewardship:
"Our 'beliefs' about brands are nowhere near as stable and consistent as we think. As Ehrenberg-Bass Institute for Marketing Science's work with re-contact surveys has shown, individual opinions about brands are much more volatile than top-line tracking data suggests... People answer research questions in a 'probabilistic' way. They may lean slightly in favour of one brand or another, but they don't have fixed beliefs" — How Not to Plan
Ideas are maintained my human beings, in all of their irrational and unpredictable glory. Human behavior is business’s most constant blind spot.
“You believe you know what goes on in your mind, which often consists of one conscious thought leading in an orderly way to another. But that is not the only way the mind works, or indeed is that the typical way. Most impressions, and thoughts arise in your conscious experience without your knowing how they get there… The mental work that produces impressions, intuitions, and many decisions goes on in silence in our mind.”— Daniel Kahneman
At their best, brands represent visions for imagined futures—what a company and its offering could be to people, and the world it could create.
"Imagination - the mental process of speculating beyond probability and what is possible to see what does not exist… it is part of the organism’s pragmatic attempt to get maximum grip on its changing environment.” — Martin Weigel