Why Brand Equity Helps You Grow
  • 2018/07/23
  • Ryan Chan

 

Companies that identify themselves as sales-driven organizations are hamstrung by their own self-fulfilling prophecy: making short-term sales the number one priority while seeing brand-building as an unessential “nice-to-have.”

These organizations are tired, easily displaced by competitors, attract mediocre talent and are quick to go bust in times of recession – consequences that result from defining brand as window dressing rather than an effective business strategy.

There are three reasons why organizations will increase their bottom lines when they take the plunge and invest in both the cosmetic and foundational aspects of their brand.


One: Investing in your brand accelerates your efforts everywhere else.

Brands are built over time and amplify any action an organization takes across every department (sales, marketing, operations, human resources). A brand that actually lives and breathes a resonant brand purpose attracts the best talent, brings out the best in them and retains them for the long-haul.

Margaret Wheeler, the SVP of People Potential at Lululemon, credits the company’s growth to Lululemon’s ability to infuse its brand principles of balance, mindfulness and fulfillment into its work culture.1

We teach employees how to create a vision for their life… in their personal life and their career. We feel if you love your life, it’s a benefit for you, and it’s a benefit for Lululemon.

Margaret Wheeler
SVP of People Potential at Lululemon

The economic impact is substantial. BDO Canada finds that employee and customer satisfaction are positively correlated, which ultimately has a positive effect on financial performance . Furthermore, Tesla found that highly engaged employees improve profitability by 15%, productivity by 30%, and safety issues by 62%.2

In this way, the impact of brand purpose goes beyond the realm of sales; it affects multiple dimensions of the business by inducing cost savings, increasing employee engagement, transforming customers into advocates and insulating the brand in times of crisis. The result is a profit margin that widens over time, which may not always be credited to strong brand equity.

Investing in brand is like investing in a company’s acceleration rate, and when it is applied in the right direction, it pays back exponentially with time.


Two: Creating a unique and resonant brand purpose insulates you from the competition

In the English language, “unique” cannot be grammatically modified with words like “very” or “extremely.” Unique is unique – it is one of a kind. “Very unique” is not more unique than “unique.”

Being unique is key to building a defensible brand. It begins with ensuring that your brand purpose is fundamentally different than the competition.

Take the success of Airbnb, for example. Rather than positioning itself as a brand that comforts travelers in foreign places with the familiar (i.e. think corporate hotels like Marriot or Holiday Inn), Airbnb’s purpose is to help travelers belong anywhere. In fact, Airbnb invites travelers to “Live Like a Local.”

While Holiday Inn, Hilton, Grand Hyatt and Mandarin Oriental thrive off of offering travelers familiar Western garnishes and a consistent aesthetic, Airbnb turns the paradigm on its head and targets travelers who craved authentic experiences – something none of the incumbents were able to offer. Airbnb’s unique positioning made it the only relevant choice for those looking for the most honest view of a foreign place.

Remember it is human nature to conform to existing precedents – but the most successful companies always introduce a world view that is initially hard to grasp. Your ability to inspire others to partake in your brand’s unique offering is the key to double digit growth. So, build from the inside-out. Ask yourself why your brand’s purpose is inspiring and one-of-a-kind. The more uncertain you feel about your brand’s newfound purpose, the more likely it is you’ve created something strategically defensible.

As Sun Tzu said in The Art of War, “Attack the enemy where they are not.”


Three: Brand equity reduces your organization’s dependency on any single individual.

If you ask most people whether they’ve heard of Warren Buffet, they’ll probably say yes. Ask them about his company Berkshire-Hathaway, and many will scratch their heads.

Associating a brand too closely with the mythos of a single individual is a strategy that’s quick to expire. Yet, many brands find themselves in this situation as the organization grows dependent on building the equity of its founder rather than the collective.

KFC famously struggled after the death of Colonel Sanders in 1980. His prominence as the face and genius behind KFC’s recipes made him the most important part of KFC’s brand equity. When KFC, abandoned the Colonel in its marketing, sales in the United States began to go downhill. Like Apple, KFC became more synonymous with its founder rather than its brand to the point where customers were unsure if the essence would actually remain the same.

Brands that have been able to achieve long-term success make the brand name more powerful than the name of the founder (sometimes the brand is named after the founder, but careful brand stewardship will give the brand an identity of its own).

Microsoft is a company that managed to step out of the shadow of Bill Gates. By having the founder step aside during his lifetime, the perceptions of genius behind the brand were gradually attributed to the work of a collective. Steve Ballmer, the CEO of Microsoft that succeeded Bill Gates, famously resisted the idea of developing Xbox (now one of Microsoft’s most successful products), while Gates encouraged its production from the sidelines. This position of the founder stepping aside to gently guide the direction of the company may have a short-term impact on the stock price (Microsoft’s share fell by almost 50% under Ballmer), but it is a small trade off to increase the odds of long-term success. Today Microsoft’s share price has tripled under its 3rd CEO Satya Nadella, and the brand’s dependence on the image of Bill Gates is less fundamental to consumer trust.

The true genius of brand-building is empowering your organization and customers to have the tools to operate independently of any single visionary. Companies that depend on the results of a handful of individuals are companies that risk paying the price when nature or scandal plays its hand.

The best strategy for succession is to gradually shift the brand-building efforts away from the image of the founder toward the collective power of the organization. This allows brand equity to be built with the guidance of a trusted visionary from a backseat, so that when that visionary departs, consumers will associate excellence with the system they’ve left behind.

Great brands, like great teachers, succeed when the next generation outshine their master.


How you can change your organization

With these 3 arguments in your back pocket, ask yourself whether your organization has properly defined its brand purpose and whether that purpose has been activated within the structure of its business. Remember that defining a relevant and consistent brand purpose creates a culture that refines itself over time and has the foundational strength to outlast its creator.

Without a resonant vision, or higher-order purpose, customers feel disconnected, employees grow less productive, offerings become undifferentiated and succession turns into a Sword of Damocles looming over a company’s head.

Over time, organizations find themselves spending more money to reacting to their failure to invest in brand ahead of time. Like many things, prevention is often the most effective cure.


1. Jonathan Stoller. “How Lululemon gets high returns.” Globe and Mail.
November 15, 2012.
2. Scott Koegler. “The empowered employee: How 6 companies are arming their teams with data.” IBM AI for the Enterprise. March 24, 2017.