Commentary

The Cost Of NOT Branding

It's a simple formula: Recession requires more tactical spending. This year's budget  = + online spend + social activity + lead generation campaigns - brand investment.

 

When the dollars get tight, spend shifts to more tangible, less expensive marketing programs with the promise of shorter-term returns (or at least lower costs). Not that there's anything wrong with saving a few bucks wherever you can get the job done more efficiently. But when saving money becomes the goal instead of a guideline, something big always suffers -- and it's usually the brand.

While this is an important problem within the B2C community, it is absolutely URGENT within the B2B community. B2B marketers in large numbers have seen their marketing resources cut back dramatically for anything that isn't expected to generate significant near-term flows of qualified sales leads. Why? Because absent good metrics to connect brand or longer-term asset development to actual financial value, these items were seen as strategic luxuries that could be postponed.

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If I were a CFO looking for strategies to free up cash, I might have reached the same conclusion -- unless my marketing team could explain to me the cost of NOT investing in brand.

Here's an example. A B2B enterprise technology player (Company X) dropped all marketing programs except those that a) specifically promoted product advantages; or b) generated suitable numbers of qualified leads to offset the cost. After a few months, leads were on target, but the sales closing cycle was creeping up. What was originally a six- to nine-month cycle was becoming nine to 12 months. Further analysis and research among prospects and customers showed that, indeed, some of this delay was being caused by the general economic uncertainty and the need for buyers to rationalize their purchases internally with more people.

But fully 45 days of this extended cycle (estimated by sales managers) was happening because the ultimate decision-makers weren't sufficiently familiar with the strength of Company X's product/service offering. (They thought Company X made small consumer electronics, and wasn't a serious player in enterprise tech.) So the sales team had to make repeated visits and presentations just to work their way into the game to compete on feature/function/price/value.

In this case, the question of the cost of NOT branding could be measured by the increased cost of direct sales associated with NOT branding. Specifically, if Company X strategists measure the sales cost/dollar of contribution margin among accounts with strong brand consideration, versus those with little-to-no brand perceptions, they should expect to see at least a 50% difference (nine months of effort vs. six), half of which would be attributable to low levels of brand consideration. Multiply that by the percentage of prospects in the addressable market with low levels of brand perception, and you can quickly derive a rough approximation of the cost of NOT branding, expressed either in terms of additional sales headcount required to compensate for lack of branding, or in terms of sales opportunity cost to compensate for an underdeveloped brand.

Either way, it's an imminently measurable problem that would better illuminate the business case for investing in brand development.

There are many other ways to measure the cost of NOT branding, including relative margin realized and strategic segment penetration, among others. The right approach for you will depend upon your organization's key business goals.

Now, I'm NOT advocating branding as a solution in every circumstance. Nor am I a proponent of the idea that marketing should generally be spending more money, versus less.  But as a tireless advocate for marketing effectiveness and efficiency, I think we too often fail to examine the business case for NOT doing something as a means of pushing past cultural and political obstacles in our management teams. Remember, there are always two options: DO something or NOT DO something. Both are definitive choices requiring their own payback analysis.

5 comments about "The Cost Of NOT Branding".
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  1. Dean Fox from ScreenTwo LLC, January 19, 2010 at 2:25 p.m.

    Another excellent post, Pat.
    In more than 35 years of advertising and marketing, I've seen this lesson repeated again and again. When sales are down and the economy is poor, the first budget to be cut is always the marketing budget. There are a number of studies over the years proving that, in any market or segment, the companies that continue to work at their marketing will recover sales and revenue faster than those that do not stay the course. This is a time of opportunity - less competitive noise, bargain media pricing, more customers willing to consider alternatives that deliver in efficiency or competitive advantage. Time for sharpening strategic focus and great execution, not fear and ennui.

  2. Carolyn Allen from California Green Solutions, January 19, 2010 at 2:27 p.m.

    Great points about branding: People have confidence in the "top three companies" in a niche stick around and provide good service. Dropping out of that triad is costly. Branding is like warming up the oven before popping that bread in -- it makes a difference in both quality and length of time to completion. In today's social media world, it takes focused effort to keep your strengths in focus in a muddled world of opinions. Thanks for the thought provoking approach to advertising and marcom.

  3. C.t. Trivella from NAS Recruitment Communications, January 19, 2010 at 3:21 p.m.

    In a word, this post is Excellent!

    Pat hits the nail on head and does it with a wonderful explanation. Something worthy of bringing to a CFO.

  4. Fraser E from Opinions expressed herein are solely my own, January 20, 2010 at 5:52 p.m.

    I've been saying this a lot lately, but if you stop putting people into the top of the funnel, all the conversion-rate improvements you make towards the bottom of the funnel won't matter. You will still have fewer total conversions.

  5. Mark allen Roberts from Out of the Box Solutions, LLC, January 21, 2010 at 9:07 p.m.

    One of the greatest costs is when the market Brands you by default as I discuss in my book; Branding Backwards.
    Your business will have a brand, so why not intentionally brand yourself in the market? You can download a free copy of my book on my blog at www.nosmokeandmirrors.com .

    Mark Allen Roberts
    www.outbsolutions.com

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