Building Strong B2B Brand Equity Can Increase Your Profits

Posted by David Terry on February 16, 2018

Inbound Organization

You often hear business owners talk about how quickly they're growing their business - it's a common measure of success, a badge of credibility, as though business growth is the single most important goal of a business. 

There is no doubt that business growth is an important goal, but we need to be clear that there are different kinds of business growth, such as a growth in sales, growth in total revenues, growth in headcount, or growth in market share.

However, these much touted types of growth, are not necessarily the best way to show business success, and they are probably not ideal KPIs for your business, as these goals are all relatively easy to achieve. All you have to do is lower your price and sell more stuff, just by discounting your pricing and increasing your sales volume - you will be able to hit those goals - and obviously this isn't ideal.

In the long term, lowering price to increase sales or grow market share is not sustainable.

Most of these growth strategies unfortunately lead to a lowering of overall profitability, and possibly losing money and moving the business into the red. This is definitely an undesirable way to run your business, and one that will ultimately stifle growth.

So what growth goal should you go after? Which growth goal is the most desirable? And which is the one goal you should relentlessly chase?

The type of business growth we should all be focused on is a growth in profits.

Profit growth is achieved by a strategic focus on charging a premium price for your products and services, and not, as one would think, by cutting your business expenses.

Hang on a minute, did you say increase your prices? Won't we lose new business that is price sensitive? Why would I want to do that?

With Strong Brand Differentiation You Can Charge A Premium Price

One of the best ways you can charge more, is to increase your pricing by positioning yourself as the premium provider of a service or supplier of a product - to do this you will need to build a really strong brand, and strong brands command premium prices.

It's usually the case that in each industry sector, there is a leading company, a brand that commands the highest price - they're the most expensive, they're highly regarded, and they are perceived to be the best in their field ... and as a result, they're often the most profitable.

A Strong Brand Builds Strong Profits

A strong brand can command not only a higher price, but you will be better positioned to grow your profits.

It's not just about increasing your pricing willy nilly, across the board. This is a thoughtful long term brand building process, to position your company as the best, or one of the best in it's field.

B2B Branding Doesn't Get The Attention It Deserves

In my experience, branding is an area that most B2B marketers don't fully understand, as branding projects often do not get the right funding and investment, or the C-suite importance it deserves. Branding is not often regarded as part of the core corporate strategy to influence pricing ... and profits, and in my opinion it should be.

Typically, when marketers refer to brand development and a branding program, they're looking at the logo, brand assets, and various visual design attributes. Maybe they have a grasp on the value proposition of the brand, along with some brand differentiation concepts vs. the competition, but mostly they do not understand the big picture view of branding and its impact on pricing.

Inbound Branding For An Inbound Organization

In my world of Inbound, we're now seeing some marketers associate their brand more closely with their desire to be an "Inbound Organization" so they are totally focused on helping and serving the customer, they're driven by their buying personas, the buyers journey, and they deliver a positive brand experience which leads to a positive customer experience (CX).

Interestingly, viewing branding in the context of an "Inbound Brand", definitely has the potential to create a model for better pricing and profits if the customer is treated better and they are prepared to pay more.

All of these brand strategies are really important and can contribute to creating a positive customer preference for your brand, as a result they may be willing to pay more.

But, most importantly, by developing a strong brand strategy that builds your awareness as a clearly differentiated company, you can then command a higher price, which contributes directly to a growth in your profits.

The Evidence Is In - Strong Branding Commands Premium Pricing

There's a lot of research that backs this up, including that from the International research firm Millward Brown, who looked at a variety of brands of differing sizes and indexed their price position against their category. What they found, not surprisingly, is that "it is abundantly clear that brands with higher equity have a price premium over lower equity brands." And higher prices lead to higher profits, and higher profits are why companies are in business.

Profits trump everything and the biggest influencer of creating a price premium is the brand. 

To put this in perspective, a McKinsey study showed that a 5% increase in price can result in as much as a 50% improvement in profits - very few other business strategies can have such an impact and tangible effect on the bottom line. 

More than anything else, we can conclude that profits are a direct result of protecting pricing integrity through powerful brand differentiation. 

A Reality Check For Your Brand

When we talk about brand leadership and premium pricing, we're not just talking about Apple, Google or Microsoft, or other mega global brands.

It can also work for your business. Developing a strong brand presence is achievable by any company, of any size, in your local market, nationally and in your specific industry sector.

For example, you can charge premium pricing by leveraging your new service offering around thought leadership, or by delivering a superior customer experience. Branding strategies like these can pay dividends for your profitability - just as well as any global brand can.

When done properly, brand building efforts and developing an Inbound customer-focused brand presence may not always increase revenues in the short term, they do however, produce the important result of allowing the brand to charge higher prices over the long term.

Make Improvements To Your Brand And Confidently Improve Your Profit Margins

Nothing can improve a company's bottom line better than protecting and enhancing its ability to command a higher price. This means that profits are the key metric for a firms success. Profit is driven mostly by price, price is mostly driven by strong brand awareness.

This makes brand building an essential strategy central for the success of every company.

 

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David Terry

Written by David Terry

David Terry is CEO / Founder of THE BRIT AGENCY.