What is Branding and How it is Important for Business

Cambridge Dictionary defines branding as “the act of giving a company a particular design or symbol in order to advertise its products and services.” Not so long ago, this was a pretty accurate description of branding – at least, what the general consensus was at the time.

Branding was (and still is) misunderstood by being reduced to its aesthetic component: visual identity. For many, whether specialists or not, branding is still just about the visual identity – name, logo, design, packaging, etc. Even more so, while the concept of branding and its understanding have evolved enormously over the years, the same old vision of branding is being preached, even by high-level marketers.

“Brands are essentially patterns of familiarity, meaning, fondness, and reassurance that exist in the minds of people.”— Tom Goodwin

Branding is important because not only is it what makes a memorable impression on consumers but it allows your customers and clients to know what to expect from your company. It is a way of distinguishing yourself from the competitors and clarifying what it is you offer that makes you the better choice. Your brand is built to be a true representation of who you are as a business, and how you wish to be perceived. 

There are many areas that are used to develop a brand including advertising, customer service, social responsibility, reputation, and visuals. All of these elements (and many more) work together to create one unique and (hopefully) attention-grabbing profile.

What is branding?

If the explanation of branding was simple, there would not be so much ambiguity and dissonance regarding the concept. Still, for the most part, a strong understanding of branding requires a decent grasp of business, marketing, and even (human) relational basics. Branding is such a vast concept that a correct definition that truly encompasses everything that it represents would not bring too much clarity to the subject just by itself. But, for the sake of lowering the propagation of obsolete, incorrect, and incomplete information about branding, we offer a more complete definition:

Branding is the perpetual process of identifying, creating, and managing the cumulative assets and actions that shape the perception of a brand in stakeholders’ minds.

If you compare this definition to the official Cambridge definition, you can clearly see that the latter (Cambridge) offers more surface-level information, giving a false sense of understanding to the reader. This might be one of the reasons why most people think that definition is correct and choose it as the foundation of their knowledge-building on the subject. In truth, basing your learning about branding on a definition that reduces it to only one element (visual identity) makes every other branding-related concept fall short when trying to connect the dots.

Our definition of branding, even if seemingly more ambiguous than the other, gives much more sense to the concept when diving deeper into its meaning. Here is a rough breakdown:

1. Perpetual process

Branding is a perpetual process because it never stops. People, markets, and businesses are constantly changing and the brand must evolve in order to keep pace.

2. Identify, create, manage

There is a structured process to branding, one where you must first identify who/what you want to be to your stakeholders, create your brand strategy to position yourself accordingly, and then constantly manage everything that influences your positioning.

3. Cumulative assets and actions

Your positioning must be translated into assets (e.g., visual identity, content, products, ads) and actions (e.g., services, customer support, human relations, experiences) that project it into your stakeholders’ minds, slowly building up that perception.

4. Perception of a brand

Also known as reputation. This is the association that an individual (customer or not) has in their mind regarding your brand. This perception is the result of the branding process (or lack thereof).

5. Stakeholders

Clients are not the only ones that build a perception of your brand in their minds. Stakeholders include possible clients, existing customers, employees, shareholders, and business partners. Each one builds up their own perception and interacts with the brand accordingly.

Why is branding important?

Branding is absolutely critical to a business because of the overall impact it makes on your company. Branding can change how people perceive your brand, it can drive new business, and increase brand value – but it can also do the opposite if done wrongly or not at all.

“A good definition of brand strategy is the considered intent for the positive role a company wants to play in the lives of the people it serves and the communities around it.” — Neil Parker

Let’s set something straight: Reputation builds up whether the business does something about it or not. The result can be a good or bad reputation. Understanding and using branding only means that you take the reins and try to control what that reputation looks like. This is why it is recommended to consider branding from the very beginning of your business.

Contrary to popular belief, branding is not an “expensive marketing tactic that only big brands use”. On the contrary – branding has a lot to do with common sense and is heavily influenced by the market you’re in and the level you want to play at. Branding involves a consistent mix of different competencies and activities, so its cost can wildly differ from case to case. High-level consultants and flawless implementation will, of course, be more expensive than anything below it. Likewise, branding an international, multi-product business will be much more challenging and resource-heavy than a local business, for example. There is no one-size-fits-all approach.

Branding increases business value

Branding is important when trying to generate future business, and a strongly established brand can increase a business’ value by giving the company more leverage in the industry. This makes it a more appealing investment opportunity because of its firmly established place in the marketplace.

The result of the branding process is the brand, which incorporates the reputation and value that comes with it. A strong reputation means a strong brand which, in turn, translates into value. That value can mean influence, price premium, or mindshare. The brand is a business asset that also holds monetary value in itself and must have a place of its own on a business’ balance sheet because it increases the overall worth of the company. Although this is a controversial topic and a difficult task for many companies, giving financial weight to the brand is as important as branding itself – this is called ‘brand valuation’.

Branding generates new customers

A good brand will have no trouble drumming up referral business. Strong branding generally means there is a positive impression of the company amongst consumers, and they are likely to do business with you because of the familiarity and assumed dependability of using a name they can trust. Once a brand has been well-established, word of mouth will be the company’s best and most effective advertising technique.

Just like with the reputation of a person, the reputation of a brand precedes it. Once a certain perception of the brand has been established in the market, an uncontrollable chain of propagation begins. Word of mouth will pass the perception on and further reinforce or tarnish the reputation of that brand. If the reputation is positive, potential new customers may come into contact with the brand, having an already-positive association in their mind that makes them more likely to make a purchase from this brand than from the competition.

Improves employee pride and satisfaction

When an employee works for a strongly branded company and truly stands behind the brand, they will be more satisfied with their job and have a higher degree of pride in the work that they do. Working for a brand that is reputable and held in high regard amongst the public makes working for that company more enjoyable and fulfilling.

As we have mentioned before, the stakeholders of a brand are not just clients, but also employees. We must be aware of the fact that human interaction is the basis of commerce, and employees are the first line of communication for any brand – the first ambassadors. Employees that have a good association with the brand will perpetuate that perception further down the line to the clients and partners they interact with. This can also translate into better leadership, more involvement, and better products and services.

Creates trust within the marketplace

A brand’s reputation ultimately boils down to the amount of trust that clients can have in it. The more you trust a brand, the better your perception of it, the stronger its reputation and, thus, the brand itself.

Branding searches for the right way to earn and maintain a certain level of trust between the company and its stakeholders. This is done by establishing a realistic and attainable promise that positions the brand in a certain way in the market and then delivering on that promise. Simply enough, if the promise is being delivered upon, trust builds up in stakeholders’ minds. In highly crowded markets, trust is especially important because it can make the difference between intent (considering to buy) and action (making the purchase).

Branding in practice

The topic of branding is definitely not a one-pager. It’s an ever-evolving subject spanning many areas of expertise: business management, marketing, advertising, design, psychology, and others. Branding also has different layers, each one with its own meaning and structure. It is not the same as marketing but there are many common grounds between the two, which is why we cannot acknowledge or deny that branding and marketing are somehow subordinate one to the other. They are interdependent and their primary goal is to serve the business