Jan 10, 2012 By: frogdog

When Not to Invest in Branding

Five times when spending on branding just doesn't make sense.

Branding isn’t an overnight achievement. It’s a long-term investment that—let’s be honest—doesn’t immediately result in sales. (What do we mean by branding? Read our series of articles on branding for critical background here.)

For many companies, branding is critical for success. In these cases, companies must ensure that their marketing mixes include essential branding elements and must plan to invest considerable funds in the discipline of branding. And they must expect to do so for a sustained period—fast results aren’t possible without investing far more money than most companies can afford over a short time.

But, truth be told, there are some cases in which it isn’t a good idea to spend on branding efforts. As a follow up to our popular branding series, we’re giving five scenarios in which branding investments just may not make sense.

1. Customers? What Customers?

FrogDog once had a client in the biotech space. Prerevenue, it was working hard to test and tweak a pharmaceutical product with multiple possible applications. If the product proved its concept and made it through all regulatory tests, the company would likely be quickly acquired by a larger pharmaceutical corporation.

In this case, branding wasn’t a good idea.

Let’s assess why: Large pharmaceutical corporations are branding machines. They generally take proven products like the one our client was developing and develop brands for them as part of bringing them to market. Any brand that FrogDog’s client invested in developing would be shuttled the moment the company was acquired—and the goal was to be acquired as soon as the product passed all tests. The client would not increase its value to the acquiring company by spending time and money on branding.

Also, this biotech company was not selling anything to anyone at that time and it likely never would. It was hoping to leave the branding and marketing work to the pharmaceutical company that bought it. And, as the company was prerevenue, every precious dollar needed to be spent extremely carefully, and the vast majority needed to go toward the company’s strategic goal: proving the product so that the investors could sell the business.

There are numerous parallels outside the biotech-pharma space, of course. Certainly many “inventions” are developed by people hoping to build enough traction to get acquired by larger corporations, which are better equipped in capital and experience to market the products or services more widely. If your company exists to develop a product or service that it hopes to sell as quickly as possible to a company that doesn’t find value in the brand you develop, it may not make sense to invest in a serious branding program.

2. Companies with Few Client Prospects

If you’re a business that sells to other businesses, and your possible client base is a handful of corporations, spending on branding may not make sense.

Examples? Well, let’s look at the energy industry. Some companies build very specific equipment that only a few companies would ever purchase. If you manufacture valves that can only be used in a specific fashion, and only a few dozen oil and gas companies will ever use them, and you are one of only a handful of companies that make these valves, spending funds on a concerted, long-term branding campaign may not make sense.

Of course, you still need to spend on marketing efforts, in these cases. You still need to differentiate yourself from the few other competitors in your space through messaging clarity and targeted, focused marketing tactics. And your sales team will be critical to building relationships and selling large orders into the few possible clients your company has. In this instance, marketing needs to ensure it gives sales staff the tools it needs to be successful. But branding? Not as important.

3. Straitened Start-ups

You just started your company. You’ve got limited funds, whether from investors, or loans, or personal savings. To fund continued operations, you need to sell your products or services. Yesterday, in fact, would be good.

We run into this a lot at FrogDog. Start-up companies call us all the time to help with branding. In many cases, they’re on the right track. But in some cases, we have to redirect them: When you’re in this spot—especially if you’re a business selling to other businesses—spending on branding may not make sense. (Note: We said branding, not marketing in general.)

Let’s talk about why: Branding is a costly, long-term investment, as we said above. If every dollar you spend right now needs to bring you closer to a sale right now, you need to spend on other marketing tactics, not on branding. You can spend on branding later, when you have a little more revenue cushion.

Now, if your business is selling to consumers, branding efforts may be required to sell anything whatsoever. (Not in all cases, but often it is.) Your potential client base is large and diverse, and you likely need a number of people to buy from you to give you needed capital.

But if you’re a business selling to other businesses, you may have more runway before you need to make a serious branding effort. Why? Each sale likely has a higher dollar value—meaning you don’t need as many sales for a real revenue boost—and you can often focus in on a handful of clients to target directly for a short “start-up” period.

4. Parent Companies

Some companies are dedicated parent companies, which exist to market distinct products—often completely independently.

Think about Procter & Gamble, for example. Procter & Gamble, also known as P&G, doesn’t spend a whole lot of time or money branding P&G. (Do you know what the P&G brand looks like? Yeah, didn’t think so.) Instead, P&G focuses on branding efforts for its dozens of brands in the beauty and grooming and household care markets. You may not know what P&G’s brand is all about, but we’ll sure bet you know about Old Spice, Head & Shoulders, Tide, and Pepto-Bismol.

There are companies that sell into the business space that likewise focus on branding their products and services. Intuit is one example. Yes, the company sells Quicken and TurboTax to consumers, but it has a much larger line of business in its popular QuickBooks product lines.

In these cases, companies have multiple product lines that need to be branded distinctly to sell effectively to distinct audiences. Strategically, these companies need to focus their branding efforts on their offerings, not on the offerings’ parent corporation. If this is your situation, spending considerable time and effort on a branding campaign for your company may not make much sense.

5. Commodity Producers and Wholesalers

We feel like writing “enough said” under this header, and leaving it at that. Really, if you’re producing a commodity item for sale into the market, branding makes no sense. And if you’re wholesaling products to larger retailers or producers, either the company who created the product or the company who will retail the product will do the marketing. Breathe a sigh of relief, my friends—the branding work is off your shoulders.

The Common Denominator?

In these cases—and if others pop to mind, e-mail us and let us know—it makes more sense to invest precious marketing dollars in other areas. What’s the common denominator? In all cases, except perhaps in #3, the company’s brand has little value to or influence on the buyer, whether corporate or individual. If the brand won’t make you money over the long term, you generally shouldn’t spend on it.

And if you’re not sure whether a serious branding effort is right for you, give us a call. We can help.

Posted: Jan 10, 2012
Updated: Oct 11, 2019
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