Christopher R. Smith, BrandSmith’s CEO and founder, 4th March 2022
Why branding is strategic
Throughout my years as a professor in numerous MBA programmes, I have seen my students’ puzzled faces wondering why there is a class about brands in an MBA. The crux of the matter is that brands generate profits, and any strategic decision is more related to the brand-consumer relationship than to the product-consumer relationship.
(Excerpt from the chapter ‘Why are brands important?’, included in Christopher R. Smith’s book “Identidad Diferencial” (Differential Identity), Crecento, 2009, distributed by Expansión newspaper as part of the TopTen Business Experts collection.)
Brand management can and must be strategic. The brand is one of the organization’s key assets and, in some cases, may be worth more than the companies the company’s tangible assets. The brand is, in short, the signifier of a company, product or service and any changes in the entity it represents affect it, and vice versa. That is why decisions about the brand must come from the board of directors.
Net gains generated by the brand, or brand equity – the part of the profits of a company attributable to the brand– is one of the reasons why they are so important. However, Scott Davis in his book “The Brand, Maximum Value for Your Business,” lists seven benefits, besides those of recurring purchases and margins:
Credibility: A strong brand enables the introduction of new products or services.
Profits: There is a direct relationship between a recognized brand and the stock market listing.
Differentiation: A well-managed brand will have a specific, unique and clear meaning, which contributes to creating customer loyalty and, thus, recommendations from clients.
Tolerance: The higher the level of loyalty, the more understanding consumers will be if there ever is a mistake.
Talent: The brand generates indirect value to attract not only consumers but also the best employees.
Shorthand: Brands serve as a quick guide for consumers. Most purchasing decisions are based on brand reputation, in the repeated purchases of those that have been pleasing to us in the past.
Lastly, and I have purposely left this benefit to the end, Davis states: “a strong brand requires a clear internal approach and execution.” So, it is. A powerful brand is so both inside and outside the organization as it guides strategic decisions.
A clear and consistent brand helps the innovation department in making emotional statements on their new developments, both in form and substance, beyond essential functional issues. All these leads us to a key concept: Brands are important, but not by themselves. A brand is not an end, but a means to express and achieve ends.
The Nike brand, for example, is worthless on its own; maybe only the $ 35 Knight paid to Davidson in 1971 for its design. The brand is not worth for what it is, but for what it represents. What really matters is the meaning, not the signifier. The brand is only a trigger that provokes in the consumer’s head a chain reaction of memories, attributes, sensations, opinions and attitudes that are stored in association to the mentioned name. In short, perceptions which accumulate and evolve causing that although the signifier (the brand) stays unchanged, its meaning (the mental representation) varies depending on how they evolve (positive, neutral or negative). Because, we have to assume, a brand is not what the manager says it is, but what a consumer thinks it means for him.
It is interesting that, on several occasions, we lose sight of the fact that the user can only associate a brand based on what the issuer says (the organization represented by the brand) and what they experience with the product or service. It is imperative then that the brand is properly managed by the company, but … what does that mean?
From my point of view, we must focus on the deep knowledge of what motivates and moves the organization, its personality, its proposal and its purpose, that is, its identity, not on the iconic representation of it. That is strategic branding.
