The Branding Paradox

Bill Nissim

Par•a•dox
Pronunciation: 'par-&-"däks
Function: noun
1: a tenet contrary to received opinion
2: a statement that is seemingly contradictory or opposed to common sense and yet is perhaps true

At the heart of branding resides a distinct paradox. This article meticulously unveils this paradox and examines its true intricacies. It begins by asking what and why this paradox occurs. Next, it translates branding from the realm of the theoretical into metrics that are financially based. This approach illuminates the critical need for brand management, and in turn, quantifies the process into tangible results. A new metric arises from this process – Return on Customer Investment (ROCI).

In previous articles, my constant droning that top management “doesn’t get branding” has reached an apex (in my mind) and this article attempts to frame the discussion in terms that business leaders are most comfortable with. If “financial metrics” are more palatable to organizational leaders, then let’s translate branding into quantifiable terms (ROCI).

What is this paradox?
As noted in the above Merriam-Webster definition, a paradox is an idea, thought, or accepted notion that may be contrary to the truth. In today’s business environment, marketing plays a subservient role in crucial imperatives that drive strategic trajectories of organizations. The notion of branding, primarily viewed as a subset of marketing, receives even less notoriety.

The business paradox, more specifically, is the link between branding and an organization’s market value, but at the same time, is received amongst corporate America as unrelated. The brand paradox is further compounded by erroneous conceptions of what marketing is and the real impact it plays in business valuation. A quick test – why would you consider buying Nike’s shoes or invest in their stock? Because their P/E ratio is 20.3 or your overwhelming desire to associate with this brand identity?

Why does it occur?
In my estimation, the prime reason for this widely accepted opinion is the absolute dependence on financial imperatives. When considering a stock purchase or a business relationship with another public company, most leaders immediately turn to the annual report, skim the statements, and calculate key ratios. In their minds-eye, the numbers (historic) dictate the health and proposed future trajectory of a given concern. Unfortunately, there isn’t a line item in an organization’s 10K statement for neither brand contributions nor valuation. We all agree that Coca Cola and Nike’s most valuable asset is their brand mark, yet try to find a financial valuation on the income statement or balance sheet. Touché!

Translation in financial terms:
During graduate school, my professor introduced us to a new concept called Integrated Brand Communications (IBC). Until such time, Intergraded Marketing Communications was the latest rave amongst organizations as a means to unify their corporate brand messages. IBC, on the other hand, quantifies media expenditures and through a spreadsheet format, allows the leader to evaluate the return on investment. In addition, a direct link (for the first time) can be established between media expenditures and growth in revenues. This causal relationship between media placement and ROI is rarely utilized due to thin resources and breakneck speeds most organizations traverse. Another significant paradox is this – organizations use financial results as the key metric of performance, yet forego this critical analysis and squander precious resources in the process. In my opinion, the application of IBC provides management accountability and tangible metrics to assess their strategic branding and marketing initiatives!

An abbreviated ROCI spreadsheet below provides the framework by which a financial assessment can be undertaken. The essence of this exercise is to establish the available market potential, the current income flow without communications, and the ensuing outflow by pursuing an investment in brand communications. If this methodology was followed in pursuant years, a true ROCI could be established and evaluated in quantifiable terms. .

Return on Customer Investment

Category Requirement Assumptions Domestic Europe Asia

Base Income Flow Assumptions $ $ $

Scenario A: No Communications Investment $ $ $

Scenario B: Communications Investment $ $ $

ROI Calculation $ $ $

Incremental ROCI $ $ $

How can one effect change?
The application of IBC shifts marketing philosophy from that of measuring awareness to one of targeting opportunity. For the first time, it forces marketing to analyze the overall category potential (market leaders per segment) and determine through a targeted effort what a focused IBC program can yield. This process also allows the monitoring of current media spend to assess the ROI from year-to- year. Finally, leaders can now apply accountability to marketing budgets and evaluate the effectiveness of different programs. In a world driven by financial metrics, isn’t it time to measure your marketing staff and subsequent programs?

Final thoughts
If management hired one individual to implement IBC throughout the organization, the return on investment and increase in business opportunities would dwarf the monetary expenditure in less than one year. Even if your organization had one staff member responsible for the marketing function, the accountability realized in the short term would be dramatic. The application of IBC not only helps to identify what and why of your current marketing programs, it quickly enables leaders to shift investments from under-performing programs to those with more attractive returns!

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The Branding Paradox

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