A Direct Marketing Agency - Helping Brands Acquire and Retain Customers

Assigning value to a new branding initiative can be difficult at best. It's not like doing an ROI against a promotional activity where you can quite easily see how the investment impacts and drives sales within the span of that particular promotion. Investment in branding needs to be viewed from a long-term perspective and analyzed accordingly.

We recently developed an ROI analysis for a small regional bank that amortizes the brand investment over five and ten years. After the first year, and expecting incremental gains in business (conservatively between 5% and 10% annually), the ROI looked terrible and was in fact a negative number. At first blush, this would indicate that a branding initiative was a poor investment. But once the cost was amortized over five and ten years (assuming the branding would stay focused and consistent over the years), the investment was well worth it, bringing in almost $1,000,000 in incremental income to the bottom line. This resulted in a 70% increase in income after 10 years, once average yearly growth was factored into the equation.

Also of importance is to establish a benchmark in customer attitudes, beliefs and loyalties to track against the ROI and from year to year. This then ties the investment to the customer's brand perceptions and monitors whether or not there is a direct correlation with perception/intent and actual customer purchase behavior (e.g. positive brand image = growth in sales), and then how it trends over time.

I think more companies would see how important investing in corporate branding can be to their bottom line if we marketers helped better define and monitor long-term investment spending against the brand.