The Purpose of a Brand & Branding…

We all have our favorite brands. My favorite brands range from expected “Über” brands like Apple, to smaller European niche brands (like Bionade).

Sometimes folks who aren’t as familiar with marketing or brand building ask me about the purpose of a brand…what’s all the fuss with the brand stuff anyway?

Brands drive shareholder value

25% of all market capitalization is derived from brands.  Astonishingly, brands within some sectors comprise 70% of a company’s market capitalization. As shareholder value shifts from tangible assets to intangible assets (like brands) in a 21st century world of ideas, information, etc., this trend is likely not going to wane any time soon. So, the purpose of building a strong brand (from the company’s perspective) is to increase shareholder value over time.

What about consumers (people)? What purpose does a brand serve for them?

Consumers have an unending maze of products & categories out there to choose from…people yearn for signpost brands they trust, so they have 1 less choice to make in life.  Some would argue that brands even transcend normal commerce in today’s confused world…driving social, psychological & political meaning.  Behavioral psychologists would even say that brands help people signal distinct sets of beliefs and values.

What about Harley-Davidson, Apple & all those other brand “Lovemarks?”

While I tend to think that we go too far by expecting these things from brands (they don’t have magic powers after all, do they?)…there are brands that make me stop and think for a second.   Harley-Davidson & Apple understand how to deeply connect with people.  They have been able to tap into their own authentic heritage and articulate a point of view that resonates deeply with the values of a certain community.  In some ways, these brands are more about the people who are mesmerized by them than the product itself (as my friend Matt Carcieri would say).

But, there simply aren’t many brands out there like Apple & Harley Davidson…yet.

Spending all my company’s $$ on brand building?

Despite all the market cap/shareholder value arguments, invariably folks still seem to wonder why companies spend so much money on brands. The cynical view holds that companies are diverting precious $$ that could be spent on R&D and training for employees, etc. Why would companies put so much emphasis on building a “thin” image around an intangible brand?

I understand this point of view. Today, however, with exploding categories & information overload, expert branding is needed across a lot of industries.  The trend shows no signs of slowing down as we go deeper into the 21st century.  So, if companies want to stay competitive over the next few decades…they’ll need brush up on their branding skills.

Getting the purpose right…

A lot of people behind brands want to make a difference in the world.  If a brand team really does want to inspire people (especially their own employees) then they should consider their purpose. What are they trying to achieve beyond driving shareholder value? The ironic thing about this question is that once it’s answered, invariably brands –> business units –> companies perform better.