Why brand is your best recession-proof investment
May 5, 2022 By BEAM
I once worked in a company where employee tenure was very high. After a few years there, I noticed that most people did not have the resources they needed or the time off to meet much of their personal needs for health, family, and friends. (I am clearly old enough to where this was the way business treated people – a behavior that is rarely replicated these days.) As I got to know the owner of the firm, he once admitted that the reason he had so much tenure was not because he gave so much but he looked for people who expected so little. (I left the company shortly thereafter.) Sometimes, I think brand managers expect too little and therefore get too little.
I have and have had the privilege of working on brand for over 20 years. I say privilege because I have experienced advertising, marketing, operations, and manufacturing roles as well. Brand is more influential and probably more important to companies than other disciplines. It is the only part of the business ecosystem that truly finds, addresses, and connects the company to a human problem.
Learn More: Guiding Principles for Creating a Human Brand
To make that connection, brand managers must understand the nuance of a decision-making process that exists in a shifting cultural zeitgeist. It is the opera stage of the business world because it requires the entire array of “business stage craft.”
The Brand Challenge
Like an opera, building a brand takes long-term planning. The time needed to fully establish the brand equities requires coordination over multiple years. Unlike marketing that can dial up and down, or sales teams that can expand and contract, brand needs consistent investment over time. That investment needs to grow with the growth of the organization. So the challenge is to change stakeholders’ views of brand from a short-term expense to a long-term necessity.
I used to think that the way to show a difference was to convince people of the value of the differences. While this may be a noble effort, it often failed as way to gain funding and support. The few times I did get the support, I realized that I had to communicate it in terms that made it look the same as all other investments. After I got the money and delivered the results, making a business case was easier. Brand managers who want to get more need to build a business case. It needs to look like the one a manager who wants a call center, a new plant, more ad spend, or to hire more people would make.
In a previous blog, we demonstrated how to justify a brand investment in a brand center for a year. While this is a helpful tool, it leaves brand managers susceptible to the vagaries of short-term budgeting.
Learn More: Calculating the ROI on a Brand Center
For those looking to make the case for sustained brand investment, we have developed another calculator that equates a brand center to traditional finance metrics. In it we make a few assumptions:
- Revenue is growing for the brand year over year
- Margin improvements tied to the brand center occur each year at 3% per year
- Investment in the brand center will increase 30% per year for 5 years
- All other costs and margins remain proportional over the life of the investment
In this case, we see the following results:
- Saves $18M in operating expense
- A 4x ROI
- An internal return rate of 66%
- Raises the investment in the brand center from $400K to $1.4M
For those of us involved in brand management and governance, we must change our perspective. We need to remind ourselves of the primacy and importance of brand. We must then change our expectations on what we expect to get in funding. Not meager budgets: budgets that allow us to have meaningful impact.
We need to be willing to tie our investments to performance. We need to do it now so that if the headwinds of a recession start to blow, it is the temporal and superficial things that face budget cuts. We know brand makes all the difference and we need to make the business case now to avoid the age old axion: in a recession, brand is the first thing cut and the last thing to get restored.
If you would like to discuss more about making the case for investing in brand, please reach out to us here.