The ROI of brand building - Experiment Nation

The ROI of brand building

In our data-driven and data-informed world, we are increasingly being asked to prove that everything we do is delivering value and return. Rightfully, businesses want to invest where it makes sense — where they can see strong ROIs. While this has mostly benefited lower-funnel activities, upper-funnel funnel activities such as brand building have had a harder time proving their worth.

You focus on what you can measure

At its core, marketing is about persuading people to take an action by presenting them the right message at the right time in the right context. In theory this is straight-forward. In practice, it is challenging to figure out which of the countless combinations of messaging, timing, and location are worth investing in. While this has always been tricky, it has become exponentially more difficult in recent times due to the proliferation of the internet, smartphones and fragmented media. Take into account that no two people are truly alike and the number of permutations to consider becomes daunting. Oh and did I mention that customers often make choices irrationally and based on emotion? Yeah.

It should be clear by now that despite what the marketing funnel would have you believe, customers’ journeys are anything but linear. Customers can go back up the funnel, enter at any point in the funnel (including at purchase) and stay at a stage for an incredibly long time. In fact, there are three things to keep in mind when working with a marketing funnel:

  • It is merely a tool to help focus activities rather than a faithful representation of how every customer makes decisions.
  • It is challenging to put near-real-time offline metrics (e.g. word of mouth) into a marketing funnel.
  • It is very biased towards activities that drive lower funnel metrics within a relatively short timeframe.
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And because we often focus on activities that can clearly be measured and directly drive results, brand building usually gets deprioritized.

The long and complex equation of brand ROI

The deprioritization of brand building is a dangerous game. It is absolutely understandable that it is not the main focus of start-ups that are trying to survive. But I would argue that once you start seeing retention, and a firmer grip on product-market fit, it’s essential to start focusing on building your brand. A strong brand will fight off user defection, help a company survive public missteps, and support offline referrals. And make no mistake, a strong brand contributes to the bottom line too. It is often said that the difference between what customers are willing to pay and the actual cost of producing a product can be attributed to brand equity. Do you really think those Nikes really cost that much to produce?

Brand building is a team effort as well. Brand comes through in how a company speaks to its customers, how it hires employees, how its services work, how its customers feel about themselves, how the way the CEO speaks, in other words — through every interaction a customer has with a company. However, despite all its benefits, the ROI of brand building is a tough thing to measure.

“What is the ROI of brand building activities?” is a fair and valid question. One way to answer this is to to look at the revenue generated from direct traffic to a website and compare that to brand building costs. While serviceable, it’s not perfect, particularly in offline situations.

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Furthermore, you cannot build a brand overnight (not well at least). Convincing a large number of people to buy into what you want them to believe takes time. So during the early stages, any ROI metrics will always look bad. Even worse, the ROI of bad brand building and the early days of brand building will look very similar. What’s a brand marketer to do?

Focus on the metrics that match your brand’s maturity

It should go without saying that you should get executive support/air-cover as you build the foundation of your brand. Plan to invest a good amount of time here — trust me, it’s worth it.

Now that you have some breathing room, the early days of building a brand (or re-building a brand) should focus less on the contribution to lower funnel metrics and more on the improvement of higher-level metrics such as traffic, sentiment, social engagement, unpaid/earned media mentions, etc. With that said, keep an eye on the revenue attributed to direct and organic branded search traffic. In offline situations, ask how customers heard of your service, or send out post-purchase surveys. Anything that you cannot attribute cleanly, find a suitable proxy and use fudge-factors as needed. (No one said that this would be easy or clean.) In any case, the revenue should increase over time if things are going well.

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How long will it take before you start to see any meaningful changes? There’s no hard and fast rule on this but what I like to use is a time frame relative to that of a typical customer buy-cycle. For example, buying large ticket items like a car or a house has a longer buy-cycle as compared to that of chewing gum. Instinctively, we know that it would be unreasonable to expect materially increased car sales based on one week of brand building.

Once you’re out of the ramp-up stage, the revenue metrics should start to increase in importance. Rather than a secondary metric, they must start to play a leading role. Eventually, the upper-funnel metrics will be leading indicators of the revenue and the brand marketers will have some great ROI numbers to brag about too.



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