Why branding matters more than ever and some of the fundamentals every tech CEO should know
Living and working Silicon Valley it’s hard not to be impressed and dazzled with all the amazing technology that we see everyday. Whether it’s AR / VR, Drones, Cloud Computing, On demand services or whatever the pace of technological innovation in the valley is breathtaking.
However, one thing that never fails to surprise me is the lack of emphasis on branding. Often when you talk to CEO’s and/or investors marketing is really confined to growing the business by acquiring more users or customers (commonly known as “growth hacking). Even things like a company's website or mobile applications are often owned by product teams since these invariably drive revenues and power the company’s core services. Branding, sadly, is confined to the company’s logo, stationery and letterhead and often not a factor until much later in the company’s life cycle - oftentimes at great risk to its future.
When you think Vikings, what do you think? What does that make you feel? If you’ve watched the History Channel show or read about them in school you’ll think raiders, longships, explorers, fearsome warriors and you might even feel a mixture of fear, excitement, bloodlust, admiration or revulsion. For most people you think Vikings you think long ships and horned helmets. That’s their Brand.
Ironically, the word ‘brand’ actually comes from the Norse word “brandr” which literally means “to burn.” The term seems to have been used around 950 A.D and meant to carry a torch. In the 1500’s branding was actually associated with marking cattle to signify ownership. Farms and ranches would each have their own marks or “brands” to be able to tell who owned which cattle. In the middle ages, criminals were often “branded” for crimes they had committed such as theft, murder or incest. The marketing connotation of branding actually didn’t really start to take hold until the 19th century and was pioneered by companies like Coke and Pepsi. Initial branding was highly functional and meant to indicate a product’s literal benefits. For example, in the 1940’s Pepsi’s slogan was “Twice as much for a nickel” which was meant to imply they sold you twice as much product for the same price as Coke.
Why Branding Matters
Think about the last time you went to the supermarket and bought something mundane like toothpaste, pasta or a soft drink. Chances are if you’re like most consumers you bought the identical product from the same manufacturer. Think about the last TV show you watched, if you liked Vikings, Game of Thrones or House of Cards chances are you’ll watch the next episode and save your poor brain from the choice of having to find something new. That’s partially the power of brand (and partially sheer human laziness).
Strong brands have a couple of major benefits that have significant financial impact for companies regardless their of size:
Pricing Power. Remember that trip to the supermarket? Next time you go, check out the price difference between your favorite brand and a no name product provided by the supermarket itself. See a difference? Strong brands can usually command anywhere from 20-30% more pricing power from users. Even during times of financial crisis consumers still spend more for a brand they know then one they don’t.
Loyalty. Strong brands have more loyalty than weaker ones. This is particularly important when sudden shocks (economic depression, PR crisis) hit a company. Think of branding as an insurance policy. When VW had the emissions scandal last year their stock and sales took a hit but the company survived. Likewise, although United recently mauled one of its passengers and subsequently botched their handling of the incident, they still have one of the strongest brands in the industry and have learned (the hard way) from their mistake.
Decreased Advertising / new product costs. Strong brands, particularly market leaders, also don’t need to spend as much as others in their markets (though they usually do). Because customers already know their brand and have certain emotional and functional associations with them, when they do communicate it’s easier for them to cut through the noise. In addition, when they launch new products or extend existing products into new markets they have a much easier time getting their messages heard and understood as can seen in this 2013 survey by Nielsen.
Inspired Employees. In the age where everyone talks about talent hiring and retaining the best people is key to success. Strong brands and companies with powerful Visions and stories inspire the best people to want to create those stories and encourage others to stay the course when times are tough. Inspired employees have also been shown to be statistically more productive.
For tech companies a strong brand can mean less churn, greater life time value and reduced customer acquisitions costs. Not to mention happier investors.
So how do you define your brand?
The challenge is that any tech company (or any company) that’s successful will, by default, attract competitors. If these fast followers establish an equal or better product and do a good job branding themselves they risk displacing the incumbent. Compounding this problem is the fact that as an industry many parts of tech change so quickly. In the case of software, for example, you don’t really have to deal with the logistics of physical distribution, breakage or returns in the way you do for physical products. Product cycles are measured in months not years.
So what can you to do build a strong brand? Brand building takes time but here are the most obvious items to define when brand building:
Define your Vision & Mission. Most companies I speak to actually confuse the two. Your Vision is your big, hairy audacious goal (BHAG) and is always long term and idealistic. It’s designed to get your employees, customers and partners excited about what you and, more importantly, “why” you do what you do. Simon Sinek has a great YouTube video on why “the why” matters. Your Mission is always shorter term (say 2-3) years and is focused on “how” you’re going to drive your Vision. For more information on the difference see this post in Harvard Business Review.
Make sure you have and communicate your Unique Selling points (USP’s). Clearly define not just the core features of your product has but the ones that make it unique. What is it that really sets you apart from competitors and why should consumers care?
Understand what your current customers and potential customers see in your company. How do they define you? What would they say are your strengths and weakness and why do they use (or not use) your product vs. someone else’s? Importantly, how do they describe you and talk about you to others.
Agree on which words and phrases would you like to associate with your brand. You might not be there yet but in an ideal world what would you want people to say about your product /service? Are you high end, reliable, cutting-edge, customer service oriented, innovative? These are your core values and they should transcend everything you do. In addition, every employee in your company (big or small) should know them.
Most of the above information is usually captured in what I call a Brand Book. Think of your Brand Book as the blueprint for your company. A typical Brand Book covers the above as well as your target audience, visual identity (your logo / company colors) and also provides examples for how to talk about (and not talk about) and graphically represent (and not represent) your brand. It also includes a brand pyramid (I’ll have a separate post around that) which helps clarify the difference between your brand or product's functional benefits (what it does) compared to its emotional ones (how it should make customers feel) and your brand essence (the “why” around why customers should care about your Vision & Mission). Here’s an example of Apple’s brand Pyramid (though it’s dated by now).
In today’s market, it’s estimated that consumers are exposed to over 5,000 ads every single day. For every 5 hours per day of TV Americans watch, nearly 25% is made up of ads. So in a world full of ads, companies need to cut through the noise. The smartest way to do that: Build a strong, memorable brand and relentlessly nurture it over time. Fail to do that and no matter how good your product is you could become history, just like the Vikings.
Stay tuned: In my next post I’ll talk a bit about just “how” you do that.