It was once true, only large businesses had to care about branding. Small businesses informally managed their brands through personal relationships. There was no need for a small business to formally extend or scale its brand beyond the reach of interpersonal communication. A customer visited or called a business and was greeted by a real person. The internet changed all that. Small businesses may never meet their customers. Now, businesses large and small have to manage and scale their branding equally. In this article, you'll learn why it's important and what it entails.
The business value of branding
No business spends money just for the sake of spending money. Charitable donations notwithstanding, any business that invests in something expects a return on its investment. Whether that return arrives in the form of revenue or cost savings doesn't really matter. A business's investment in branding is no exception.
Branding is a big part of why advertising exists. Advertising has two main goals. Most obviously, it intends to create product awareness and increase sales. Second and of arguably greater importance, advertising intends to create brand awareness and loyalty.
Effective brands differentiate themselves from ineffective ones. A product or service can be a commodity, but if a given business's brand is sufficiently differentiated, then the product is differentiated in the customer's eye. The business will attract more customers and earn more revenue.
...The best design performers increase their revenues and shareholder returns at nearly twice the rate of their industry counterparts. – McKinsey & Company
Coca-Cola sells a lot more cans than RC Cola does. RC Cola might taste great, but a lot of people have never tried it. When a person drinks a can of Coke, they connect with its rich brand history. When making the decision to buy Coca-Cola, they often do so without even considering a competing product. That's powerful stuff.
Coke connects to customers at an emotional and nostalgic level. It's created lockin among consumers, even though there are no physical barriers that prevent any consumer from trying a competing product. Barriers are self-imposed. Coca-Cola is an iconic brand.
The internet and the need for brand scale
Remember the Yellow Pages? Your children will not. It was once the authoritative directory of business contact information, delivered to your doorstep in the form of a thick book. The internet is the world's phonebook now. Specifically, search engine results are, but the internet has done more than change how the phone book is delivered.
After receiving a phone book in the mail a person could look up a business and do one of two things. A person could call the business or drive to the business's location. Both activities involved an element of friction. In that friction, competitive exploration was limited. With the internet, when a search engine returns contact for a business or multiple businesses, the consumer can interact with a business's brand instantaneously by clicking the link to their website.
Brands compete for sales and awareness
Most every business has a website. For many businesses, the first experience a consumer has with its brand is through its website. There's no person-to-person communication whatsoever. When a business's branding is undefined or unclear, its website can't convert visitors into customers. It might convert the occasional person shopping for the absolute lowest price, but it will do nothing to build customer loyalty.
Large businesses have always benefited from already-defined branding before building their websites. They built their websites to fit. Small businesses often build their websites before considering branding. When true, they're not meaningfully competing with large businesses, even though constraints of geography are all but eliminated.
Many small businesses have non-mission, mission statements like, "Our mission is to provide excellent customer service." That's not a mission. It's a practice (a method of doing something), and it's one every consumer expects. As brand positioning, the statement does nothing to differentiate the business in the mind of the customer. This problem often extends to a business's brand identity. Similarly undefined, the business's visual and tonal elements don't extend beyond the website and may themselves be inconsistent across the website. The effect dilutes consumer confidence in the business and entices would-be customers to seek more competent competitors.
Brand positioning is the place a business occupies in a consumer's mind. It's what sets one business apart from its competitors. In order for a business to differentiate itself from its competitors, it needs to first understand them. Brand positioning requires analysis.
Any business that defines its brand position through resemblance to a competitor – whether intentionally or incidentally – will suffer from being second-best or worse; it will remain unknown and generic. It will never match the greatness of the existing brand. It's unlikely to attract customers from the established brand unless it's materially cheaper. There's no incentive for the customer to switch, and the customer will always think they're giving something up by using the alternative.
There isn't a 1:1 relationship between how a customer perceives your business's products and services and the quality of the products and services that your business provides. It's the former, the perception, that drives sales.
Brand identity is how a brand looks, sounds, and behaves. It's the outward-facing persona of a business. It's what makes a business identifiable and recognizable in the marketplace.
The easiest way to understand brand identity is to use a person as a metaphor. One person knows and recognizes hundreds of people. People are able to identify each other through a multitude of traits: height, build, style of clothing, hair color, eye color, skin color, voice, accent, and mannerisms. Among more than 7 billion people in the world, one individual can pick another from a crowd – even in an unfamiliar setting – and say, "I recognize that person." That's brand identity.
When people use the word branding, they're usually referring to how a brand looks. Appearance is only part of branding, but it's the most visual part. A brand's appearance includes multiple features:
- Color palette
- Typography (font choices)
- Image style
- Shapes and forms
Visual brand elements are visible in lots of places:
- Business cards and letterhead
- Product packaging
- Ads (billboards, commercials, print)
- Retail locations
How a brand sounds is an important part of its identity. For example, banking, insurance and, medical brands tend to be conservative. Gaming companies are more edgy and fun. Companies that sell outdoor gear are adventurous.
Just like a person, every brand delivers its message in a certain way, with a specific voice and tone. That voice and tone make the brand relatable to its audience.
Much as behavior differentiates people, it also differentiates brands. How a brand acts demonstrates clear alignment to its brand position.
Patagonia has a clear and inspiring mission statement upon which they expand as their reason for being.
Our Mission. We're in business to save the planet.
Our Reason for Being. At Patagonia, we appreciate that all life on earth is under threat of extinction. We aim to use the resources we have—our business, our investments, our voice and our imaginations—to do something about it.
Patagonia uses some powerful words. Alone, they wouldn't mean much. However, Patagonia backs their words with commitment and action. They actively champion environmental causes, and their behavior connects them with consumers who share the same values.
In 2018, outdoor equipment company REI decided to close its doors on Black Friday, the busiest shopping day of the year. REI is repeating its choice this year.
It seems crazy that any retailer would close on Black Friday. Why would they do that?! It starts to make sense when you look at REI's mission statement. REI wants people to spend time outdoors, in nature. That's the exact opposite of shopping online.
At Recreational Equipment, Inc. (REI) we believe a life outdoors is a life well-lived...We believe that it’s in the wild, untamed and natural places that we find our best selves, so our purpose is to awaken a lifelong love of the outdoors, for all.
Patagonia and REI do more than sell outdoor clothing and equipment. They each behave in ways that express their mission and values. That behavior connects them with their customers and creates loyalty. Importantly, it also connects the two companies with their employees. Their customers and employees value nature and outdoor experiences. Patagonia, REI, their respective customers, and their employees come together around shared values.
A cynic might argue, "Patagonia does all that environmental stuff to make money." Yes, Patagonia is in business to earn a profit. It's also true that the company employs real people with real values; that employees are attracted to Patagonia for its values and activism. As such, Patagonia's employee culture is built around its values and how it practices them. The same can be said for REI. Market behavior and employee culture reinforce each other.
Want to learn more?
Now that you know more about branding, go explore some of the brands you admire on your own. Visit their websites and look at more than the products and services they sell. Look at how they sell them: the visual language they use and their word choices. Read their mission statements and values. Then, visit the websites of brands you think are less effective. When you're done, you'll have increased your perspective for when you inspect your own brand and those of your competitors. You should do that too.