In 1886, an American bookkeeper was asked to create a logo by a pharmacist. The pharmacist was Dr. John Pemberton from Georgia and had recently founded a company in which the bookkeeper, Frank M. Robinson, was a partner. So when Robinson successfully created the logo, no design fees were paid and the world received one of its first truly global brand names—Coca Cola—for free.
Fast forward into 2016, it is unimaginable to think that someone will brand your business at no cost. Pepsi is famous for paying a million dollars for its logo redesign of 2008. In the same year, BP shelled out a whopping $211 million on its logo to "reinvent itself as an energy company [or brand] people can have faith in."
BP and Pepsi are not the only businesses to spend huge amounts on branding. A 2013 Gartner report reveals that, on average, companies spend 10.1 percent of their revenues on marketing and branding. Worldwide, it amounts to billions of dollars each year. Do businesses receive anything for this investment? David Aaker, says "they do".
A few years ago, David Aaker, hailed as the "Plato and Newton of branding," and Professor Bob Jacobson of the University of Washington conducted four studies to explore the relationship between brand building and financial returns. They found that the impact of building a brand on stock return was huge; 70 percent as much effect as earnings. It means that if good quarterly earnings increase stock return for a company $100,000, it brand building will increase it $70,000.
Why does brand building increase stock price?
Branding experts know that customer rationality is overrated and most buying decisions are emotional.
Most customers do not buy a Volvo because it is fast or a BMW because it is powerful. A Volvo buyer wants to feel safe and a BMW buyer is looking for to excitement. It applies to other brands as well. A Lexus buyer feels successful, a Zara shopper feels cool and an REI equipment owner feels adventurous. A brand with an emotional connect with its customers is likely sell more products and have more long-term clients.
How do companies develop brand strategies?
Successful companies hire expert brand marketing agencies for the job, with many branding contracts running into millions of dollars. But that is not a reason to be disappointed if you are an entrepreneur whose startup does not have millions of dollars in cash to pay brand marketers. Alternatives exist.
Alternatives to Paying Brand Marketing Agencies Millions of Dollars
To sum up, branding your business provides handsome returns on your investment. Unlike some other business strategies, it does not cost you much. You can start brand building for your startup right now by partnering with a brand building agency. You should also start reading books on the subject and educating yourself on the ins and outs of branding.