How To Calculate Your Optimal Brand Investment

Posted by Mark Gibson on Aug 19, 2016 1:19:00 PM

Most of us struggle to measure the impact of our brand efforts, and therefore have a difficult time justifying a budget increase.  In this post, we'll discover why strong brands make more money, and how to determine the right amount to spend to create a strong brand.

Powerful Brands Make More Money

Millward Brown's BrandZ study can help you begin to build the case for your branding efforts with your executives.  Over many years, they have been surveying millions of consumers about brand strength using three dimensions:  difference, salience, and meaningfulness (more on those later!)  What they've found is that the higher consumers rank a company on those attributes, the stronger a brand is and the better the company performs financially. 

In fact, the 100 brands that rank the highest in brand power have seen their stocks outperform their competitors by nearly 100% over the past decade (see below.)

 

What Makes A Brand "Powerful?" 

So how do you make your brand the most powerful?

First, your brand needs to deliver on those three critical words:  difference; salience; and meaningfulness.  In order for your brand to be perceived as different, you must be viewed as setting category trends or at least different in some meaningful and relevant way. Even if the brand is only marginally different, it can command a price premium over competitors. A salient brand is one that comes to mind quickly and easily -- think unaided awareness -- and is therefore selected more often.  A meaningful brand not only meets the functional needs people have, but creates a positive emotional attachment with its customers. Brands that rate highly in these categories have an advantage over other companies, attract more new customers, have higher retention of existing customers, are able to command a price premium, and are more profitable.  That's what translates into a doubling of share price compared to competitors.

How Much Money Does It Take?

Now, let's assume you've done that.  How much money will it take to get the word out?  This is what I call the math of branding, and once you learn the tune, your CEO and CFO will be singing along!

There is an optimal amount of marketing spend for any company.  The following diagram from Tenet Partners, another firm that measures brand power, helps you and your executive team visualize it.  Until you invest a certain dollar amount, most of the money (in red) is wasted.  When you reach the breakthrough point, you are advertising enough so that people see and remember your brand.  At that point, your incremental revenue more than pays for the dollars spent on marketing, until you reach the point of negative returns.    

Source:  CoreBrand; Tenet Partners.

So, how do you calculate the right amount for your brand?

First, identify the target customer groups you are trying to appeal to.  Consumers and small businesses are the easiest to calculate.  Look at the deposit share and branch share you have in each of your media markets, and determine with your management team what share you want to have within five years.

Next, work with your media partner to determine your "share of voice," or how much you are spending compared to all your competitors in each media market.  If you're like most banks, you have about the same or less market share than branch share.  If you want to keep that share, your "share of voice" needs to equal that percentage.  If you want to grow share, your share of voice needs to be at least as high as the market share you aspire to, and preferably 3 to 5 percent higher.  That is equivalent to the "breakthrough point" on the chart.

For other customer segments like wealth or commercial, you have to be more creative to determine the right level of spend.  Advertising is usually not the best way to reach these prospects because it's not targeted enough, while content marketing, events, and digital and direct mail are often more effective.  The principle is the same.  You need to estimate what your competitors are doing, and what you need to do to gain the "share of voice" that is equivalent to the market share you desire.

If you're looking for some help making the most of your marketing budget, let us know. We'd love to help in any way we can. 

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