The ROI of Branding
Does branding Bring a high return on investment (ROI) for BUSINESSes?
Branding is a critical part of building any business, whether you’re a small startup or a worldwide corporation. The goal of branding is to create a distinct identity for your business that sets it apart from its competitors and creates a sense of loyalty among your customers. However, branding can also be costly, and it can be challenging to determine the return on investment (ROI) for building a strong brand identity.
In this blog post, we will explore the impact of branding on business ROI and delve into the factors that contribute to its financial benefits. From attracting more customers at a lower cost per acquisition to enticing them to pay a premium and increasing their frequency of purchase, we will uncover how a strong brand generates substantial returns for businesses.
What is branding?
Branding encompasses the entire identity of a business, including its name, logo, design, messaging, and tone. It's the way a business presents itself to the world, and it's essential for establishing trust and building relationships with customers. A strong brand can help increase customer loyalty, attract new customers, and differentiate a business from its competitors.
A brand’s identity is a collection of elements that represent and distinguish the brand in the minds of consumers. It’s the way a company portrays itself and communicates its values, personality, and messages to its target audience. Brand identity also includes the visual identity of a brand. But remember, a brand’s identity goes beyond just the visual aspects of a brand and includes the brand's voice, messaging, positioning, and overall perception.
Brand identity goes beyond just the visual aspects and includes the brand's voice, messaging, positioning, and overall perception. Visual brand identity specifically refers to the visual elements that represent a brand.
Visual brand identity, on the other hand, specifically refers to the visual elements that represent a brand. These visual elements are designed to create a consistent and cohesive visual experience for customers. The visual brand identity helps consumers recognize and differentiate the brand in the marketplace. It includes various tangible elements, such as:
Logo: The logo is a distinctive graphic symbol, emblem, or mark that represents the brand visually. It serves as a visual representation of the brand and is typically the most recognizable element of a brand's visual identity. The logo often incorporates elements such as typography, colors, symbols, or icons that reflect the brand's personality and values.
Color palette: A carefully chosen color palette helps establish the brand's visual identity and evoke specific emotions or associations. Colors play a crucial role in brand recognition and can convey meanings and messages to consumers.
Typography: The selection of specific fonts and typography styles helps create a consistent visual language for the brand. Typography choices can evoke different emotions or convey specific brand attributes.
Imagery and graphics: The use of specific imagery, illustrations, or graphics can contribute to a brand's visual identity. Consistent visual elements across various marketing materials, advertisements, and online presence help reinforce the brand's image and enhance recognition.
Design elements: Additional design elements such as patterns, textures, shapes, or visual motifs may be employed to further enhance the brand's visual identity and create a distinct visual style.
It's important to note that while the visual brand identity is a significant aspect of overall brand identity, brand identity encompasses more than just the visual elements. It also includes the brand's tone of voice, messaging, values, customer experience, and the perception and associations formed in the minds of consumers through various touchpoints. A strong and cohesive brand identity ensures that all elements work together harmoniously to convey a consistent and compelling brand experience to the target audience.
Focusing on design as a strategic asset allows brands to stand out, create unique offerings, and establish long-term relationships with their target audience. Above is a brand identity we did for She Speaks.
Research on the ROI of Branding
The Design Council conducted research on how design impacts a company’s financially. The report includes lots of evidence that show how investing in design can provide a significant return on investment for businesses. The report is based on a 10-year study (1994-2004) analyzing 63 portfolios of companies traded on the Financial Times Stock Exchange (FTSE). I know this research is a little old, but I found it fascinating because of the results. You can see a screenshot from the report below.
Here’s a screenshot of the research report. You can read the whole report here.
The findings of this study showed companies that prioritize design exceeded the FTSE 100 index by 200%. This tells us that businesses that place a significant emphasis on design will outperform those that don’t focus on design.
The research report presented another interesting finding: "design alert" businesses show a £225 increase in turnover for every £100 they invest in design. This statistic underscores the significant impact of design investments on financial performance, highlighting the tangible returns that businesses can achieve by prioritizing and leveraging the power of design.
For every £100 a design alert business spends on design increases turnover by £225.
But what exactly characterizes a "design alert" business? As defined by the Design Council in the report, these are companies that fully recognize the value of design and make substantial investments in it. These businesses perceive design as an indispensable component of their whole business strategy, utilizing it to distinguish themselves from competitors, enhance their products and services, and cultivate enduring customer loyalty.
The report published by the Design Council shows us the importance of design in business. Brands must distinguish themselves to build meaningful connections with their customers. Focusing on design as a strategic asset enables your businesses to stand out, create unique offerings, and establish long-term relationships with your target audience.
In today's competitive world, establishing a strong brand is vital because it serves as a critical pillar for your marketing and overall business plan. Here’s an example of a brand we designed called, Ball of the Month Club.
How to measure the ROI of branding?
Here's an explanation of how a strong brand attracts more customers at a lower cost per acquisition, encourages them to pay a premium, and increases their frequency of purchase:
Increased customer attraction: A strong brand attracts more customers. A well-established brand with a good reputation and clear value proposition stands out in the marketplace. Customers are more likely to notice, consider, and choose that brand over competitors. This increased customer attraction results in higher customer acquisition rates and a larger customer base.
Lower cost per acquisition: When a brand has a strong reputation and some recognition, it becomes easier and more cost-effective to acquire new customers. Positive brand perception often leads to higher levels of trust and credibility, reducing the need for extensive marketing efforts or aggressive sales promotions to convince customers to choose the brand. As a result, the cost per acquisition can be lower compared to less-established brands.
Willingness to pay a premium: A strong brand can command a premium price for its products or services. Customers perceive strong brands as offering higher quality, reliability, and desirability, which can justify a higher price point. When customers have confidence in a brand and associate it with positive attributes, they are often willing to pay a little more for the added value they expect to receive. This premium pricing strategy can contribute to higher profit margins and increased revenue.
Increased customer loyalty and repeat purchases: Branding plays a crucial role in building customer loyalty and fostering long-term relationships. A strong brand that consistently delivers on its promises and provides positive experiences cultivates customer trust and satisfaction. Loyal customers are more likely to make repeat purchases and become advocates for the brand, driving word-of-mouth referrals and organic growth. This repeat business increases customer lifetime value and maximizes revenue potential.
Higher purchase frequency: A strong brand can also encourage customers to increase their frequency of purchases. When customers have a positive emotional connection or affinity with a brand, they may be more inclined to choose that brand more often, even in the face of competitive alternatives. This increased purchase frequency further amplifies revenue and strengthens the brand's financial performance.
These factors collectively contribute to a positive ROI of branding. By attracting more customers, lowering the cost per acquisition, commanding premium pricing, and increasing customer loyalty and purchase frequency, a strong brand identity can generate your business higher revenue, profitability, and overall success.
The truth is, a strong brand attracts more customers at a lower cost, who are willing to pay more and maintain their loyalty through repeated purchases.
From establishing a distinct identity to fostering customer loyalty and gaining a competitive edge, a robust brand strategy becomes the driving force behind forging meaningful connections with customers and carving out a prominent position in the market. Branding is critical for building a successful business because it:
Establishes your identity: Your brand is how customers will remember you, and it's what sets you apart from your competitors. A strong brand can help you establish a unique identity and build trust with customers.
Creates loyalty: Customers are more likely to be loyal to a brand that they trust and identify with. A strong brand can help you build a loyal customer base that will keep coming back for more.
Differentiates your business: In a crowded marketplace, it can be challenging to stand out. A strong brand can help you differentiate your business and create a competitive advantage.
In today's competitive world, establishing a strong brand is vital because it serves as a critical pillar for your marketing and overall business plan. A brand goes beyond just a name or a logo; it encompasses the essence of what sets a business apart from its competitors and resonates with its target audience.
Need help building a strong brand? Download our free brand planner workbook for a detailed guide to building an impactful logo and brand identity.
Does your branding need some help? We would love to help you design and build your brand identity. Get in touch with us today by clicking the button below.
