Does branding’s role need to be redefined?

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The criteria for doing business today have changed fundamentally from what they were only five years ago. Two key drivers led this change and impact how companies should view the role of branding.

First, after an era of consolidation, we live in a world of fewer, better and smarter companies controlling a greater portion of overall industry revenue. The operational mantra has been to consolidate, keep the healthy assets, shed the weak ones and implement value-based programs such as Six Sigma to drive costs out and efficiency in. This was all done in anticipation that it would lead to industry dominance. But it hasn't.

Instead, it has led to a world where there are fewer but stronger competitors, all delivering world-class products and services at "world-class" prices. Having done all the hard work of building highly efficient organizations, the still-standing industry leaders find themselves competing on a transactional level, fighting to keep pricing and margins from eroding further. In this world, branding represents one of the remaining strategic levers to create a meaningful incremental advantage.

The second significant driver that redefines how branding should be viewed is that the rules of business have changed, and so have the stakes. A key paradox is that CEOs are now, more than ever, expected to deliver the numbers. But delivering the numbers alone can now end up being your downfall or, worse yet, lead to the kind of front-page news no CEO ever signed on for.

Companies today are viewed and judged in a more multidimensional way than ever before. Consistent financial performance, coupled with sustainable business practices, unimpeachable business ethics, the ability to attract and keep world-class talent and the ability to be nimble and innovate to take advantage of changing market opportunities—all have equal footing on the scorecard against which a CEO is evaluated.

There has been much talk and frustration around the issue of ROI and branding in recent years. One of the reasons for the frustration has been that the definition of ROI has been 100% focused on how branding impacts a company's financial performance. In today's world this definition needs to be revisited. ROI needs to be looked at both in terms of how communications have contributed to business growth as well as reputational growth. Both are key to how companies are evaluated by their customers, employees and the investment community.

When a brand is articulately and effectively communicated, it has enormous strength that, when unleashed, takes on a life of its own. And that strength provides enduring return on investment, which transcends market cycles and elevates the value a company provides above and beyond world-class pricing.

Howard Sherman is managing director of Doremus. He can be reached at [email protected]

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