Branding is investment or expense: A Start-ups Chicken & Egg situation

Authored by Shashwat Das, Founder, Almond Branding

Across the world, whenever an organisation faces slightest of turbulent weather, the first to face the axe is the branding expense. This cut is deeper if the organisation in question is a start-up.

World-over organisations constantly face a “chicken or egg” situation every day. Without customers they wouldn’t have any budget for branding and without branding, they wouldn’t have any customers. So should organisations, especially start-ups, treat their branding expenses as an investment or should they treat it as an expense? 

Let us find out.

For any organisation, branding is a key activity that helps in achieving one or more of the following objectives.  

Creating Awareness:

Branding supports an entrepreneur in ensuring that their creation is known to the world.  

Generating Trials

With awareness comes trial. Branding helps in generating those much needed first customers for the start-up.

Creating Differentiation

Branding helps in making the creation stand-out of the crowd and get noticed by potential customers.

Appealing to the right customer

Branding helps in appealing to the right customers thus helping in generating better returns for the resources expended.

Long-lasting impact

Smart branding leaves a lasting impression on the potential customer’s mind which is very critical in the long run.

However, when done haphazardly, the same branding activity becomes a cost. Following are the ways in which organisations can invest their branding resources and generate amazing returns. 

Optimising media and its cost

One of the biggest branding expense is the media cost. If left unattended, media cost can burn a large hole in an organisation’s budget. For instance, take the on-going Covid19 pandemic. Due to lockdown and other restriction, customers were forced to stay at home for a larger part of the year. This led to a drastic decline in the out-of-home (OOH) media consumption opportunities. Brands which continued to spend huge on OOH incurred huge costs without any proportionate returns. On the contrary, brands that went digital generated far better returns as the customers were also online. Hence, the key is to look at better avenues rather than cutting the input.  

Delaying  or cancelling a strategic brand input

Brands often postpone or cancel a critical input fearing non-performance or delayed return in difficult situations. These inputs could be in the form of a packaging improvement or a positioning change. Whatever be the case, a difficult economic scenario is an ideal time to score brownie points over your competitors and take that crucial lead. For instance, in the 1920s when the US was in the midst of the Great Depression, Kellogg’s introduced its new brand, “Rice Krispies”, and increased its advertisement budget drastically over its competitor “Post”. This not only increased Kellogg’s profits by over 30%, but helped it to become a category leader, a position it has retained till date. Had Kellogg’s delayed the launch or not increased the advertisement budget; things may have been different today. Hence, the key is to grab the opportunity and give it your best.

Stifling innovation

Branding expense has a component that goes towards gathering consumer insights and product innovations. In 2009, when the world was in the midst of a recession, e-books were launched by Amazon Kindle. Kindle quickly overtook the sale of printed books because it offered customers a better and economic alternative to enjoy their books. Today, Kindle dominates the market and has forced a lot of off-line book retailers to either shut shop or go the e-way. Hence, the key was to gather insights and innovate your product offering.

Start-ups are usually under immense pressure to juggle their top-line and bottom-line, particularly during their initial days. However, they should keep looking for opportunities that often come disguised as recession, slowdowns or even pandemics. So if you are an entrepreneur, then you should use your branding muscle strategically to wrestle control in your hands. Such situations are too infrequent and far precious to be lost just because you decided to cut your branding expense.

DISCLAIMER: The views expressed are solely of the author and does not necessarily subscribe to it.


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