Five financial benefits of a strong brand

by Nigel Hollis | October 28, 2019

In a previous post, I tried to define the word brand. In this one I want to propose five financial benefits of a strong brand. Most people, I believe, would start with selling more, but given what I wrote in the last post I must start with commanding a higher price point.

1) Higher price

Often ignored or, worse, used as a lever to drive short-term sales volume, I believe that charging a higher price compared to competitors is the true benefit of a strong brand. The profit leverage of being able to increase price and not see a significant decline in volume is huge. When the iPhone can command a $430 premium over the similarly spec'd and rated OnePlus, that differential can fund more research and development, more marketing and more ecosystem.

2) New customers

A brand must gain new customers in order to grow. Additional sales to existing customers rarely result in incremental sales when analyzed over time. There are exceptions, of course, particularly when the brand extends to new needs and occasions but they tend to be few and far between.

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3) Lower incentives

If people are predisposed to buy your brand – they are instinctively and deliberatively inclined to buy it – then our evidence suggests that not only will people search less and choose more quickly, they will need less incentivisation. For instance, when I compared how much car brands in the U.S. paid in incentives I found that the top third ranked on perceptions of meaningful difference paid out 45 percent less than the lowest third.

4) Better retention

You cannot grow your brand’s penetration if new customers are offset by the loss of existing ones. In our Mastering Momentum report, we refer to experience as the foundation on which a strong brand is built. Greater customer satisfaction (and greater willingness to forgive) is not just the result of the actual experience but how people’s interpretation of that experience is enhanced by the brand’s communications.

5) Better staff attraction and retention

It is well-documented that people are more attracted to work at well-regarded companies but in the same way that communications can influence the satisfaction of customers, so to it can increase satisfaction among staff. And, just as greater customer satisfaction is reflected in more positive word of mouth, greater staff satisfaction is likely reflected in better customer service and productivity.

So, what do you think? Am I missing anything important? Please share your thoughts.

3 comments

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  1. Nigel, November 11, 2019

    Thanks guys, nice builds. 

    On rereading this post it does occur to me that point number 2 needs fleshing out. Big brands have no choice but to find ways to improve sales to existing customers. And some industries can always cross-sell as well as up-sell.

  2. Peter Teachman, October 28, 2019

    Hi Nigel, somewhat tied to #2, but another could be referrals/WOM.  Think of it as a free sales force, one more powerful than most marketing or sales initiatives given the trust consumers put in friend's WOM.

  3. Phil Herr, October 28, 2019
    One more, companies with strong brands can raise capital at lower costs. 

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