How Branding Increases Profitability

This is something you may not have thought much about; how branding increases profitability. The reality is your brand identity can help you increase your profitability, and you should be thinking about it. If you sell products and services locally, studies confirm that your ability to develop a strong brand will directly affect your long term profitability. Clearly, money invested in advertising, packaging, public relations, sales promotions, word-of-mouth marketing programs, etc., all contribute to developing a strong brand, but nothing is more important today than developing your brand online.

Why? The Internet has changed how consumers shop and interact. As a result branding is more important than ever. People don’t have relationships with products; they have relationships with people and brands. Developing your online presence helps convey a uniform quality, credibility and experience. It helps you develop your brand. A brand defines who you are, what you do, and differentiates you from the competition. Your brand is your identity; it helps you develop relationships that lead to customer loyalty and brand recognition. No branding, no differentiation. No differentiation, no relationships. No relationships, no customer loyalty. No customer loyalty, no long-term profits.

How Branding Increases Profitability

One of the most fundamental principles of business is this – customer loyalty translates into more sales. This can be explained by the Pareto Principle. In summary, the Pareto Principle states that 80% of effects come from 20% of causes. (Read More) As this relates to sales, 80% of your sales will come from 20% of your customers. That 20% are loyal customers. As your number of loyal customers increase, so do your profits.

Similarly if you spend 20% of your time building your online presence, it will influence 80% of your potential customers. This is important when you consider that 97% of all consumers use the Internet is some form to shop locallThe more customers you positively influence the more sales you make and the more loyalty you develop. More sales mean more profitability.

  • Building loyalty with 5% more customers would lead to an increased average profit per customer of between 25% and 100% (the loyalty effect)

Consumers Pay More Purchasing From People They Trust

Surveys continue to indicate that consumer not only prefer to purchase products and services from people and businesses they trust, they will pay more for that product or service if it is purchased from someone or a brand they trust.

A recent study by Neilson concluded that consumers now believe branded websites can be trusted more than any other form of advertising other than the personal recommendations from friends and family. Seventy percent (70%) of global consumers now say the completely trust branded websites.

How Branding Increases Profitability - Neilsen Ad Trust and Response

 

Your Brand Needs to Communicate with Potential Customers

Your customer’s relationship with your company begins and ends with your brand. What keeps your business profitable is, of course, sales, but the ideal customer comes to buy from your business or use your service specifically because they want to support your brand, not just because they want a product. That’s why it is important to clearly identify who your ideal customers are because you need to know exactly who, why and how your brand is going to communicate with these customers and potential customers.

Advertising is about communicating what you have to offer through sales, coupons, radio and TV ads, and posters. An advertisement is soliciting a meeting between your ideal customer and your company, and the difference between a customer who knows your brand and one who doesn’t is like the difference between asking a stranger on the street to go to coffee with you, and asking a friend.

A study by Robert D. Buzzell, Professor of Marketing at Harvard Business School, in general concluded that consistent advertising over time increased profitability by 30% or more. Today, advertising online through your branded website and business listings can have the same effect.

 

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