Managing Partner of Global Fixed Advisors – A lower mid-market investment bank focused on heavy consumer e-commerce products
Throw a rock outside your office window and you could hit an ecommerce consultant who embraces the transformative power of building a sustainable brand. And in a bigger picture, long-term planning, traditional wisdom suggests that: they are right†
It is true that recognizable brands can charge premiums, while less established companies cannot. Additionally, in my experience, brand equity allows founders to negotiate a higher purchase price, which translates into a higher value from a merger or acquisition.
The downside of brand building
While it may seem like a good idea, many founders are tempted to postpone or forgo brand building altogether. This may be due to the high time investment or financial costs.
I’ve talked to hundreds, if not thousands, of entrepreneurs throughout my career. Many have said that they have simply put branding on the back burner to prioritize more urgent initiatives. Customer service, digital marketing and all the different functions of running an online business take a lot of time and energy. And not all companies can afford to outsource these functions to an employee or a third-party service.
However, failing to pursue brand building can be detrimental to a company’s health. Research indicates that branding increases both awareness and brand equity, drives sales volume, and increases a company’s overall value.
Despite the perceived “disadvantages”, I believe that building a brand is too important to put off any longer. Simply put, I’ve found the investment is insignificant compared to what businesses can gain.
The benefits of brand building
In addition to the benefits mentioned above, there are plenty of other reasons why entrepreneurs should consider developing a robust branding strategy. I categorize them as follows.
1. The Immediate: Store shelves are lined with dozens of variations of essentially the same product; some are better, some are worse, but they all fulfill the same need. It’s common knowledge that competing on price isn’t sustainable, so to stand out, it’s best to set your business apart from others in the space.
In the e-commerce landscape, this comes down to making a strong impression and communicating quality in an efficient manner. This is essential when buyers can compare different offers at the click of a button. Differentiating from competitors is incredibly powerful and when used correctly, brand building can boost conversions, which translate into extra sales.
2. The Persistent: As the life cycle of brands becomes shorter and shorter, it is critical to create a lasting impact on the market. Strong branding can help gain and secure a competitive advantage.
Brand building can have a lasting impact on sales speed, growth and your overall business valuation. So the benefits are twofold: first, increases in sales make the business more profitable, and second, you can earn more from a trade if you decide to close. Ultimately, the result is that you will have a more sustainable business that retains its value, whether you are at the helm or decide to pursue other endeavors.
3. The Intangible: Finally, there is the indescribable feeling of shopping with a brand that consumers trust. Giving customers a sense of comfort and security encourages them to keep coming back. Recurring sales increase sales and an improved perception of your product translates into a better perception of the brand itself.
Then there’s the awesome responsibility of leading a community – to represent something greater than just the sum of its moving parts. After all, a brand is much more than a company. It is an experience and sense of belonging that you share with the customer.
While difficult to quantify (at least at first), focusing on the intangible components of branding can generate loyalty in ways that improve the business in the short and long term.
Investing in brand building
The concept of brand building is not new, but it has never been more important than it is now in 2022. Why? Based on my company’s discussions with the market, many institutional investors are looking for established brands with a strong track record of sustained growth.
It is no longer enough to pursue unrelated initiatives in isolation in the hope that one of them will help you set yourself apart from the competition. Success requires a deliberate and deliberate approach that spans all business functions to operate as one cohesive brand strategy.
I believe brand building can help you achieve meaningful differentiation for your business. Not only does this drive additional growth in the short term, but it can also improve the overall value of the company. So if you decide to make an M&A transaction, you have already started laying the groundwork for a successful transaction.
My best advice for business leaders is to start developing an effective positioning statement. A positioning statement is essentially an overview of your product and/or service and what sets it apart from that of your competitors. This will inform all other aspects of your branding, so it’s important to get it right.
Think about how you want your company to be seen in the market and make sure you can build an authentic story around that perception. It’s critical that your coverage is consistent across the board and that your branding reflects what you do from day to day.
Establish trust early and future brand-building initiatives will have a greater impact on the value of your business.
A long-term strategy worth pursuing
While it is an ongoing effort, developing a sustainable brand is well worth the investment of time and capital. The benefit to your business can be significantly greater in the long run.
Brand building is an incredibly powerful tool — and one that companies can’t afford to overlook.