The value of brand has been a topic of much debate, philosophizing and general arguetainment for decades. When I think about brands today, there are some differences from yesteryear, but more similarities.
Statistically speaking, strong brands (still) outperform the competition
The latest insights from the BrandZ Strong Brands Portfolio provide compelling evidence that investing in brands yields superior returns. A few highlights:
Superior Performance
According to the 2023 BrandZ report, the Strong Brands Portfolio has consistently outperformed major stock market indices. Over a 10-year period, the portfolio’s cumulative return was 290%, significantly higher than the S&P 500’s 163% return over the same timeframe.
Resilience During Economic Downturns
Economic cycles invariably include periods of downturn, where market volatility can erode investor confidence and portfolio values. However, brands within the BrandZ portfolio have shown remarkable resilience during such times. For instance, during the market fluctuations induced by the COVID-19 pandemic, the BrandZ Strong Brands Portfolio demonstrated a lower drawdown and a quicker recovery compared to the broader market.
Premium Pricing Power
Strong brands command premium pricing, allowing them to maintain healthy margins even in competitive markets. This pricing power stems from the perceived added value that these brands offer to consumers. Whether through superior product quality, exceptional customer service, or innovative offerings, strong brands can justify higher prices without losing customer base, ultimately enhancing profitability.
Long-term Value Creation
The BrandZ data reveals that strong brands are not just about immediate financial performance but also about long-term value creation. Companies like Apple, Google, and Microsoft, which have been perennial leaders in the BrandZ rankings, continuously invest in brand-building activities that secure their market position and drive sustained growth. These investments in brand equity translate into long-term shareholder value, making them attractive propositions for investors with a long-term horizon.
The brand trifecta (is still) = emotion + differentiation + awareness
Creating and building a strong brand requires a solid strategic and creative foundation. And, solid strategic and creative execution. The same, really, as it ever was (yes, Talking Heads reference).
Emotion is essential
Strong brands typically trigger some sort of emotion in their target audience. A mixture of heart and head, with the heart typically tipping the decision making scale.
Daniel Kahneman, a Nobel Prize winner for his work in behavioral economics, made famous the concept of System 1 and System 2 in his best seller “Thinking, Fast and Slow”. System 1 is ‘always on’. It works rapidly and unconsciously, with minimal effort and without any sense of voluntary control, assessing our immediate environment and the world around us. As Kahneman says, whilst System 2 believes itself to be where the action is, it is System 1 that is the hero, responsible for generating the intuitive feelings, impressions, associations and impulses that form the basis of literally millions of unconscious judgements and decisions that we make each day.
Brands without emotion are typically weak, and lag the competition.
Standing out in a sea of sameness
Based on current neuroscience, researchers estimate that a moment is defined as a period of time as short as 3 seconds and that humans experience upwards of 20,000 moments a day.
“So what!” you say. “Why should I care?” you say.
Well, if you’re responsible for creating, building or optimizing brands, 3 seconds is the minimum amount of time required (and sometimes all the time you get) for your brand to make an impact.
- You need to stand for something meaningful and authentic. See Dove – Let’s #KeepBeautyReal.
- You need an identity and design language that is dynamic and ownable. See Target – you know it’s them before they even tell you.
- You need a way of talking that has personality, is clear and concise. See Method – they originally launched as the “People against dirty” and still are a great example of a powerful brand voice.
In today’s information overload world, it’s imperative that brands standout – strategically, visually and verbally – and that they make the moments they get with their customers count.
Awareness required
While foundational brand strategy and identity elements are required to pass go, awareness is the fuel that makes your brand go far and fast.
In consumer categories, brand awareness is a must. From shampoos to solar panels, purchase decisions are heavily influenced by awareness. Awareness is mandatory for consideration. In the insurance industry, consumers will typically engage the first 2-3 companies they can think of to get a quote. And to be in the top 2-3 companies, on average requires 70%+ unaided brand awareness – this is based on primary quantitative research of a large national insurance company client (which I of course can’t mention:).
And awareness is not only important in the consumer space, this same concept translates to the business world as well. In fact, it may be MORE important. Based on a Bain & Company survey, 80%–90% of respondents, depending on what they are buying, have a set of vendors in mind before they do any research. Just as important, 90% of them will ultimately choose a vendor from the day one list.
Moral of the story, brand awareness matters. And it’s required to drive business performance.
Newer (but not new-new) brand headwinds
So, while the essence and value of brands is really not very different today from years past, there are a few differences.
In the past:
- Less Information: Consumers had fewer choices and relied on brands for guidance. Brands acted as trusted curators, informing them about products and features.
- Higher Switching Costs: Switching brands often meant higher costs due to factors like limited product availability or difficulty finding compatible parts.
- Less Transparency: Information about companies and their practices wasn’t readily available. Brands held more power in shaping consumer perception.
Today:
- Nearly Unlimited Choice: Consumers are bombarded with choices and information. Brands need to cut through the noise and stand out for something.
- Lower Switching Costs: Online shopping and readily available reviews make it easier for consumers to switch brands.
- Increased Transparency: Social media and online reviews give consumers a voice and more power to hold brands accountable.
Punchline
So, what does this mean for the value of brands?
- Trust and Credibility: In a sea of information, brands with a strong reputation and a commitment to quality become even more valuable.
- Emotional Connection: Brands that build an emotional connection with consumers, through storytelling, values, or experiences, can create loyalty.
- Differentiation: Standing out from the crowd is crucial. Brands need to clearly communicate their unique value proposition and what sets them apart.
- Community Building: Creating a community around your brand fosters a sense of belonging and strengthens brand loyalty.
Find out more about Kiosk’s brand services here.