Why Brand Strategy Is Important

Sarah RobbJanuary 18, 20228 min

So how do you explain why brand strategy is important? Through the lens that speaks to all business leaders: VALUE.

On average, brand accounts for more than a third of shareholder value, according to Interbrand and JP Morgan, so anything that improves your brand should have a significant impact on a business’ bottom line. Now this value can vary by industry, as Jonathan Knowles points out in his article, ‘When is it true that “brand is our most important asset”​?’ and trying to put a number on the value of a brand is incredibly difficult (as the discrepancies between brand valuation studies show). But most leaders are aware that brand is one of their most valuable intangible assets, that intangible assets account for 70% of the global economy, and hence brand contributes a substantial amount to their balance sheet.

But how does brand strategy directly impact the bottom line? Well brand strategy helps businesses grow in a multitude of direct and indirect ways. It’s not just a ‘nice to have’ element that brings consistency and clarity to branding and marketing. It’s real impact is on the main levers of business growth.

How Brand Strategy Helps Businesses Grow

Ultimately there are two ways a business can grow without creating new products or services. By lowering or raising prices, or increasing the perceived value of what they already have.

Branding, and the brand strategy that underpins this, is all about increasing the perceived value of a product or service.

Sometimes it’s about defining your brand in a way that changes or expands the perceptions of the audience you want to reach. Just like Nike did in 1988 when they realized they’d become too narrow and elitist; that they were limiting their growth by talking only to elite athletes. The brief that led to the infamous slogan, ‘Just Do It’, read:

“We need to grow this brand beyond its purist core…We have to stop talking just to ourselves. It’s time to widen the access point. We need to capture a more complete spectrum of the rewards for sports and fitness.”  ~ A New Brand World, 8 Principles for Achieving Brand Leadership in the 21st Century, Scott Bedbury

Often it’s about getting out of the weeds of product features and understanding how to ladder up to a bigger benefit and platform for your brand, to help you create more empathetic, premium associations in the minds of your target audience. Just like the Pampers team did in 1997 when they stopped talking just about dryness and focused instead on becoming ‘moms’ partner in every stage of their babies’ development.’ From being P&Gs poorest performer in terms of profitability and market share growth, they grew $1billion year over year with this more powerful brand strategy.

Defining this bigger benefit area is all about identifying WHY you exist. Jim Stengel, in his study of 50,000 brands over 10 years that led to his book, ‘Grow, How Ideals Power Growth and Profit At The World’s 50 Greatest Companies‘, showed that the brands that identified a strong WHY statement collectively outperformed the S&P 500 by almost 400% and grew 3 times faster than competition. That’s a statistic that gets all the C-suite to sit up and take notice.

How Brand Strategy Improves Market Share

Brand is an intangible asset – but what does this really mean?

Well, brands are built in people’s minds. They are a set of perceptions, feelings and associations we have about a company or product. And in order to establish a brand in people’s minds, companies need to build a dense ‘mental network’ of these associations in the minds of their prospective customers. As IPSOS showed in their research highlighted in ‘Brands Don’t Buy Brands, People Do’, the more dense and connected these associations are, the larger your market share.

So how does brand strategy connect to this?

Simple. First you’ve got to figure out what you want those associations to be! What do you want to stand for in people’s minds? So when you invest in building those associations – creating a brand identity, writing your ‘About’ page, running ads, briefing a customer service team, developing new products, presenting a keynote at your annual event – you ensure that they are all aligned. They all connect to your brand strategy so they build dense connected associations in your customers minds.

How Brand Strategy Improves Customer Loyalty, Acquisition Costs And Preference

I often use this graphic to highlight the impact and importance of brand strategy.

The Value Of Brand Strategy

Growing 3x faster than competition refers Jim Stengel’s study referenced above.
The 80% figures in my model comes from two sources. Firstly, a 2015 HBR study among 474 executives where 80% said that an organization with shared purpose will have greater customer loyalty.

Secondly, a pwc study that showed that 80% of consumers prefer to buy goods and services from companies that stand for a shared purpose that reflects their personal values and beliefs.

Both of these track back to answering that first question in a brand strategy – what most companies today call their purpose or mission – but is just the answer to WHY you exist.

The other metric I use here is around customer acquisition costs. A study by Rokt, highlighted in this HBR article, ‘4 Factors Separating the Top Marketers From the Rest of the Pack’, identified that a strong brand outperforms weaker ones by 3:1 in terms of customer acquisition costs. As they highlight,

“Choosing one product over another is ultimately powered by the consumer’s emotional relationship with the brand. We see companies with strong brands outperform weaker brands in the same industry by 3:1 in terms of customer acquisition costs (CAC). Many businesses miss the link between brand and performance entirely. They underinvest in brand because outcomes are not as easily measured. This is the challenge when the approach is laser-focused on short-term performance metrics versus long-term shifts in brand strength.”

Undertaking the research necessary to create a world-class brand strategy always involves understanding the emotional triggers, cues, and benefits your brand needs to tap into so you can define the consumer’s emotional relationship with the brand.

How Brand Strategy Improves Employee Satisfaction And Retention

It’s hard to underestimate how important it is to consider employees when developing a brand strategy, but so many people do. Partly this is because brand strategy projects are often funded by the marketing department and, depending upon the strength of the CMO’s relationship with the CHRO, it can be a battle to cross these silos and bring the whole leadership team together around the impact of brand strategy, and the implementation steps that are needed to make it a success.

What’s helpful, though, are the countless studies that have connected the importance of brand strategy – in particular, answering that question of ‘WHY we exist’ – to improve employee performance, satisfaction and retention.

In a pwc study, ‘Putting Purpose To Work’, among 1500+ employees and 500 business leaders in over 39 industries, 83% of employees said having a sense of purpose gives them meaning in their day-to-day work.

In an HBR EY sponsored study, ‘The Business Case For Purpose‘, 89% of executives surveyed said organizations with shared purpose will have greater employee satisfaction.

Michigan State University’s Dr. Valerie Good’s research, ‘Motivating Salespeople Toward Greater Productivity‘ (which earned her the 2019 Taylor Research Award) revealed that even salespeople (notoriously associated with being motivated by money!) with a sense of purpose beyond money put in more effort over time and are more adaptable than salespeople focused solely on internal targets and quotas.

In Greg McKeown’s study of more than 500 people’s experiences across 1000 teams, referenced in his book, ‘Essentialism, The Disciplined Pursuit of Less‘, he found “a consistent reality”:

“When there is a serious lack of clarity about what the team stands for and what their goals and roles are, people experience confusion, stress and frustration. When there is a high level of clarity, on the other hand, people thrive. The fact is, motivation and cooperation deteriorate when there is a lack of purpose.” 

His solution for businesses is for them to adopt “a meaningful and memorable essential intent”– another way of saying that you’ve got to identify a clear and actionable WHY for your business. Brand strategy 101.

Finally, when brand strategy is most valuable is when there is a long-term commitment to making decisions based on the four questions the business has answered in defining their strategy, because this can help to guide future growth.

WHY –  you exist
WHO –  you are
HOW – you do things, and how you look, feel and sound
WHAT –  you do

In a 2015 HBR study, 84% of executives agreed that their business transformation efforts will have greater success if integrated with purpose, and 84% agreed that an organization that has shared purpose will be more successful in transformation efforts.

A further study highlighted in HBR, ‘Put Purpose at the Core of Your Strategy’, It’s How Successful Companies Redefine Their Businesses’, that looked at high growth companies, (those with an average compound annual growth rate of 30% or more in the previous five years), identified that that these companies had moved purpose from the periphery of their strategy to its core, and had used it to generate sustained profitable growth, stay relevant in a rapidly changing world, and deepen ties with their stakeholders.

“What’s a key difference between low-growth and high-growth companies? The former spend most of their time fighting for market share on one playing field, which naturally restricts their growth potential. And because most aggressive battles take place in industries that are slowing down, gains in market share come at a high cost, often eroding profits and competitive advantage as offerings become commoditized. High-growth companies, by contrast, don’t feel limited to their current playing field. Instead, they think about whole ecosystems, where connected interests and relationships among multiple stakeholders create more opportunities. But these firms don’t approach ecosystems haphazardly. They let purpose be their guide.”

They conclude the article urging leaders to constantly assess how purpose can guide strategy, because “the advantages it can confer are legion”.

The impact that brand strategy can have on a business touches multiple levers of business growth. So just make sure you take your time to create a brand strategy in the right world-class way. Do it once, do it right and get the business impact you’re looking for.

Contributed to Branding Strategy Insider by: Sarah Robb, Founder, Brand Strategy Sarah

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