Calculating the ROI of Branding

By Ida Cheinman posted 09-12-2019 08:00


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How to Use Brand KPIs to Strengthen Your Business Performance

Today, data drives all marketing decisions. Companies spend much time setting and tracking marketing KPIs and mining collected information for insight to guide their decision-making process.

What they often neglect to measure is the performance of the very foundation of all marketing: the brand. Leadership and the marketing department may intuitively recognize that the brand is doing something positive for the company, but very few can pinpoint exactly what that “something” is.

Even companies that understand the critical role of a strategically defined and well executed brand and are diligent about setting and tracking business KPIs, seldom give much thought to measuring and managing their brand’s equity and even fewer actually put resources against assessing their brand’s commercial value.

As a result, most of the effort typically concentrates on marketing metrics, not metrics related to branding.

The problem with this approach is that marketing metrics are focused on immediate gains and don’t take into account the exponential impact a strong brand has over time. This leads to overallocation of resources toward short-term marketing tactics and underinvestment in increasing brand equity.

Read the full article to find out what you need to know about Calculating the ROI of Branding. Below are some highlights.

The Importance of a Strong Brand

The impact of a strong brand on the bottom line is well documented. A 14-year study by McKinsey & Company revealed that top-ranked brands outperformed the world market as measured by return to shareholders by 74%.

According to a study by Millward Brown, strong brands on average achieved triple the sales volume of weaker brands and a 13% price premium.

A brand is “strong” when it scores high across three dimensions:

  1. The Brand Is Relevant and Resonant: It meets its stakeholders’ needs and builds an emotional connection.
  2. The Brand Is Differentiated: It’s unique, leads the way and sets itself apart from competitors.
  3. The Brand Is Memorable: It has top-of-mind awareness.

Measure What Matters

The need to measure the return on investment in branding is often prompted by the rebrand, which requires considerable time and financial resources. And so it’s only logical for companies to consider the ROI of that investment.

Brand Behavior

Brand behavior signals the strength of internal alignment. When brand behavior metrics are high, they indicate high levels of employee engagement and brand ambassadorship.

The specific KPIs you select for this category depend largely on your goals for cultivating the desired culture and increasing employee engagement.

These are a few examples of brand behavior KPIs that could be measured and improved in order to achieve your goals:

  • Employees’ ability to accurately articulate the company’s brand
  • Consistent evidence of values-based, on-brand behaviors
  • Employees’ active participation in content creation and social sharing
  • New hire referrals
  • Customer satisfaction/complaints
Measuring these KPIs can involve a range of techniques – from interviews and surveys to analytics to simple tracking.

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Brand Perception

Measuring brand perception is typically more complex than measuring brand behavior.

Brand perception metrics calculate customer awareness and sentiments toward your company’s brand. They indicate the effectiveness of your customer engagement and require more sophisticated assessment methods and tools. Brand perception KPIs fall into two categories – awareness and consideration.

  1. Awareness KPIs: Recognition, recall, traffic, community size, reach and impressions.
  2. Consideration KPIs: differentiation, relevance, esteem, perceived quality, purchase intent.

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Brand Performance

The real bottom line on branding ROI is uncovered in the final KPI category: brand performance.

Brand performance KPIs tell the story of how customer behavior is influenced by brand perception. These KPIs look at both one-time purchase behavior and ongoing behaviors that equate to brand loyalty: repeat purchase and brand ambassadorship (referrals).

There are three types of brand performance KPIs: purchase, loyalty and financial.

  1. Purchase KPIs: leads, sales, close ratio, preference, price premium.
  2. Loyalty KPIs: customer satisfaction, repeat purchase, referrals, retention, customer lifetime value.
  3. Financial KPIs: market share, revenue, profitability, cost per acquisition, brand valuation.

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Getting Started

The process of calculating your brand’s ROI can get complicated and overwhelming. Where do you begin and how do you navigate the process while avoiding overwhelm?

  • Prioritize: Limit your KPIs to three to six initially. Determine which metrics are most important to your brand’s performance – those that enable you to make a business decision. Keep in mind that metrics only have value if they’re actionable.
  • Benchmark: Assess the current strength of your brand against each of your chosen metrics and use this as a baseline from which to track and measure improvement. 
  • Reassess: Analyze your KPIs over time using the exact same metrics and methodology you used for your initial assessment, in order to ensure statistical integrity and actionable insights. Use your baseline to see where your brand is making gains or experiencing losses.
  • Course Correct: Wherever your brand is underperforming, take measures to correct the situation. Equally, maximize your efforts in areas that are building momentum.
Brand measurement is an ongoing endeavor, and there are no real shortcuts.

However, being intentional and consistent about measuring one of your most critical business assets will pay back tenfold when it comes to gaining a sustained competitive advantage.

Read the full article to find out what you need to know about Calculating the ROI of Branding.

Ida Cheinman is Principal and Creative Director of Substance151 – a brand strategy, design and digital firm that helps companies develop and execute brands that result in a stronger bottom line. Sign up to receive articles from Substance151 blog directly to your inbox.