Branding in Business Markets

by Tim Smith, PhD, 10 August 2005

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Repeatedly, executive teams in business markets are frustrated by the issue of branding. While a marketing executive pushes for a greater branding budget or a sales executive complains that no one knows about the value proposition, the rest of the executive team sees little value in branding. To solve this impasse, executives turn to historical budgets, industry benchmarks, and case studies. Unfortunately, these indicators often have little relevance to the challenge at hand and consequently fail to provide the necessary guidance.

Just consider how often you’ve heard one of the following sentiments.

• Branding is for consumer products, we serve a business market.
• Branding isn’t important to us because we sell a complex offering.
• We don’t need branding, we have a sales force.
• We don’t see any return on investment associated with our branding budget.

If you’ve been caught in a conversation where one of these lines came up, then you know how entrenched these beliefs can be. But calling these sentiments “biases” and discarding them as “uninformed” won’t help executives overcome the impasse. On the other hand, giving the marketing department a blank check to spend on branding rarely produces a profitable business.

Somewhere between anti-branding sentiments and the marketer’s inclination lies a best practice for industrial markets.

Defining Brand
To address this impasse, we first need to get executives to agree on what a brand is. Fortunately, the definition is short:

A brand is a unique identifier of a value proposition.

Notice what is in, and what is not in, this definition. A brand identifies something, but to whom and why? A brand denotes a value proposition, which can be a product or service, but it does not necessarily describe the nature of that value proposition. Nowhere in the definition of a brand are the words “sales”, “revenue”, or “profits”. In fact, a brand, in and of itself, does not imply any action. It is just an identifier of a value proposition.

If a brand is just an identifier of a value proposition, then what is its value? The value of an identifier derives from its use. How companies use a brand, and more importantly how prospects and customers use it, determines the value of a brand. When people know of its existence, are able to distinguish it from all others, understand the value proposition represented by it, and are in a position to take action based on their knowledge, then a brand has value.

A Unique Identifier
The fact that a brand is an identifier implies that every business will have at least one brand, if not many. Even companies that spend nothing on branding can have a brand simply by naming their product or service, or associating their value proposition with their company name. Brands are the nouns that embody the value proposition.

Brands must be unique in order to provide value. This implies that brands are differentiable. Having a differentiable brand is much less taxing than having a differentiable value offering. Even commodities can be branded. People must be able to distinguish one brand from the others. If for no other reason, brands need to be unique in order for customers to state which of the competing offers they wish to purchase.

Of a Value Proposition
A brand embodies a value proposition. This is both the beautiful and the challenging part of a brand. All of the features, benefits, and value points of that offering are denoted by the brand, including the tangible and intangible. By successfully embodying the tangible aspects of an offering, a brand becomes a super-descriptor or a shorthand identity for the collection of all of the physical aspects of a single entity. By embodying the intangible aspects of an offering, a brand expands beyond being a useful shorthand and develops a meaning greater than the sum of its parts.

The intangible parts of a brand are the greater sources of the ephemeral “brand value”. When people trust a brand to fulfill a set of expectations, either due to direct experience with that brand or through the brand’s reputation in the market, the brand itself becomes a point of value for the offering. We experience this dimension of branding when we reflect on words like Dell, McKinsey, Morningstar, GE, or Newark InOne. Nurturing a brand to develop an intangible meaning like those above is the goal many executives hold.

That Others Understand and Value
Even if a business creates a brand that uniquely defines their value proposition and represents all of the tangible and intangible sources of value, the brand will fail to have value until others know about the brand and are in a position to take an action based upon that knowledge.

Developing useful brand awareness in business markets is a careful investment decision. Not everyone in the world needs to know of a business’s brand. Just those that the company wants to take an action based upon that knowledge. For low-cost offering, the potential to take action may be shared by many and the desired action may be to make a purchase. In these cases, broad brand awareness has an appeal. But most business markets are tightly confined. In these markets, and for businesses that provide high-value offerings, such as capital improvements, enterprise technology, or strategic professional services, the target audience narrows and the desired actions are less direct. In these markets, the value of branding may derive from facilitating the sales process, charging a competitive but differentiated price, or leveraging power over suppliers or employees.

Builds Brand Value
A brand is a directional tool. It tells people where to go to solve a certain set of challenges. It denotes value due to the trust that people develop about that brand in its ability to fulfill a set of expectations. Every business serving a business market has a brand, if it’s only the name that customers write their checks payable to. As such, every business should nurture their brand. But, the definition that they give the brand, the method and amount of nurturing, the audience in which it is nurtured, and the expected results will vary. Perhaps this is what executive teams should really be worrying about.

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Author
Tim Smith, PhD, Directorial Editor of The Wiglaf Journal and Adjunct Professor of Marketing at DePaul University.

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