Posted by: Michael Masterson
July 13, 2010
Issue #965

The Myth of Branding: Why Entrepreneurs Should Focus on the USP

Dear Business-Builder,

I recently got an interesting e-mail from Brian Ochsner, an ETR reader in Denver. He said, “As a direct-response copywriter, I’m skeptical about the number of marketing people who are enamored with the need for ‘branding’ or to ‘build their brand’ to effectively market their business.

“I know that brands such as Kraft and Coca-Cola have power and influence with Americans, but I’m not sure ‘branding’ has much of a place with most small- to medium-sized business marketing.”

He posed three questions:

1. What, exactly, is “branding?”
2. Can it be an effective type of business marketing?
3. Can it work effectively together with direct-response marketing?

Brian’s hunch is exactly right. Branding is perhaps the most commonly touted and least understood aspect of marketing. If you believed all the hype, you’d think that you should spend 80 percent of your time and money “building” a brand.

As Bob Bly and I have said in past ETR articles, nothing could be further from the truth.

Branding makes sense for Kraft, Coca-Cola, Nike, and Sony. Huge consumer companies have to spend money on that kind of advertising to keep their names out there in the commercial world. The idea is that when people make buying decisions, they will favor products whose names they know.

Brand-name consumer products almost always outsell generic products. In 2002, Dennis Dangerfield (the vice president of grocery-store cooperative Topco Associates, LLC) pointed out that private-label products accounted for only 20 percent of grocery sales in the U.S. And the reason brand-name products come out on top is not quality. (Many generic products are just as good.) The reason is consumer trust.

Trust comes from familiarity, and familiarity increases sales. But it is very, very expensive to create a household name. We are talking about tens of millions or even hundreds of millions of dollars here – which puts branding entirely out of the reach of any fiscally intelligent entrepreneur, even if he is working with a big budget.

Prior to the Internet boom, small-business owners understood that they couldn’t afford to spend money on branding. To break into new markets, they relied on traditional techniques: big discounts and bigger headlines. But when billions of dollars started pouring into start-up Internet ventures, the idiot-savant CEOs running those operations had to put the money somewhere – so they put it into advertising their brands.

To justify this enormous waste of money, they invented theories to substantiate their foolishness. Most of those theories were versions of the same, stupid strategy: Spend whatever it takes to get the most eyeballs to your website. And after you’ve established first position in the “look-who’s-looking-at-me” contest, figure out some way to profit from it. Profiting from something so nebulous needed its own magical name too. They called it “monetizing.”

Create traffic first by selling the brand… then monetize the traffic… and then go public. That was the program. And dozens of Internet entrepreneurs did just that. Most of that brand building went to naught, of course. Sports stadiums were renamed for unpronounceable URLs, and then they were changed to something else again as the Internet businesses behind them went bust.

It was during that period of chicanery that the modern myth about branding was formed – the myth that the first course of action for any small business should be to build a nationally (or internationally) recognized brand. This myth persists today in books and at conferences and seminars about Internet marketing. But smart would-be entrepreneurs like you have the sense to smell rats when they are rotting beneath the floorboards.

The fact is, most of the profitable business in the world is done without the benefit of brand recognition – and 99 percent of new businesses develop without any money or time spent on general advertising.

I can think of only one exception. The George Foreman Grill began as a small business and morphed quickly into a world-class brand. But you are unlikely to replicate that success by hooking up with a celebrity – even if you could afford the price tag. The George Foreman Grill story was one of perfect timing: the right product with an out-of-fashion celebrity who made a miraculous comeback to the mainstream. It won’t happen again for many years.

The branding myth persists today, even among experts who witnessed the debacle of the Internet advertising implosion. According to a 2005 PointRoll Inc. survey, 70 percent of online advertising professionals cited “branding” as the most important or second most important goal of online advertising. Interaction rate was viewed as the most important measurement of an online ad’s performance, with 53 percent of those responding indicating that the best way to judge an ad’s effectiveness is to measure the percentage of users who interact with it.

What’s missing from that picture?

Profits, of course. As a future entrepreneur, you want to create sales immediately. But they have to be profitable sales – or at least near-profitable sales – or you’ll go broke before your second year of business. There are as many ways to create profitable sales as there are businesses. When you get into your own business, you will have to figure out which way works for you. (I explain how to do this in my book Ready, Fire, Aim.)

Direct-response marketing of a hot product is probably the most effective way to create profitable sales. Promoting your brand through branding is probably the least effective way.

So now, to Brian’s three questions:

1. What is branding? It’s selling the name of a company or product through general advertising – so that later on, when the customer is faced with buying your product versus another one, he chooses the brand he is familiar with.
2. Can it be effective? Not for small businesses.
3. Can it be combined with direct marketing? Not really. Branding is meant to make selling (either direct selling or retail selling) easier. It is not meant to be used simultaneously.

Those questions answered, let me say a few words about where and how branding can work for entrepreneurial enterprises.

First, understand that establishing a unique selling proposition (USP) is not the same thing as branding.

Many, if not most, products and product lines will benefit from marketing that stresses the USP. If, for example, you are launching a business that sells organic pet food, your USP should emphasize the fact that all your products are green. Your company’s name might express that benefit, as should the product names, the packaging you choose, and the layout and design of your marketing materials. And your USP should be a major component in the design of and sales copy on your website, as well as your Internet ads and landing pages.

Doing all of that to promote your USP will have the effect of creating an idea in a potential customer’s mind that will have the same effect that branding has for large businesses. And that effect – which is a higher-than-average initial response rate to your marketing due to consumer familiarity – will also work with your existing customers on the back end.

Thus branding in this limited sense (consistently promoting your USP) works in conjunction with direct marketing as a back-end mechanism – to sell more products to people who have already bought from you. And that’s how people with small- and medium-sized businesses should think of it.

I have plenty more thoughts on this subject, but these are the most important for someone in the early stages of starting and growing a business.

Michael Masterson
Guest Contributor
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16 Comments »

1. Comment by Faliq — July 13, 2010 @ 9:31 am

   A very straigtforward and revealing article about branding.Do you all agree with this statement “In business, reputation is everything?”

2. Comment by Sarah Clachar — July 13, 2010 @ 10:34 am

   Michael,

   Thank you for this - I was smelling a rat as well. Bill Glazer makes the same point that through good direct response advertising that distinguishes your product in your prospect’s mind, you’re essentially “branding” your business. But unlike branding for branding’s sake, you’re actually selling and not wasting your time or your prospect’s time.

   In the natural health world where I do copywriting and marketing I see too many businesses spend wads of money focusing on beautiful images,glossy ads and logos when people simply want the emotional motivation and logical justification for buying your product. Good copywriting (albeit with some nice design work to boot) can do that so much more effectively and put dollars immediately in your bank account.

3. Comment by Derek Fisch — July 13, 2010 @ 10:46 am

   “What is branding? It’s selling the name of a company or product through general advertising – so that later on, when the customer is faced with buying your product versus another one, he chooses the brand he is familiar with.
   ”

   No, that’s not branding. That’s image building, which is only a part of branding, though I agree it’s not effective for small business.

   Branding is EVERYTHING you stand for in the mind of the consumer. It’s what they think and feel when exposed to your company. The USP is only one part of the brand, though most businesses don’t have a truly Unique Selling Proposition. All of your products are green? Not even close to unique.

   100% agree that small business should focus on response instead of image advertising, but gaining ground in the mind of the consumer is always a good idea.

4. Comment by Martha Giffen — July 13, 2010 @ 12:48 pm

   Great article! Everybody wants brand recognition like Coke. One thing that will always be true is you have to have a good product. Or “branding” can go the other way!

5. Comment by Scott — July 13, 2010 @ 12:52 pm

   This is a terribly misguided understanding of branding (which is, unfortunately, shared with many people on both the direct marketing and ad agency sides of the fence).

   1. What is branding? Branding is the creation of a compelling expectation among consumers that your offering will provide a unique, meaningful benefit. And it’s directly tied to a product or business’ USP. Branding is your reputation, not name recognition.

   2. Can it be effective? Is it ever ineffective to tell consumers why they should choose your product over the competition’s?

   3. Can it be combined with direct marketing? See the answer to question 2.

6. Comment by Ken Hoffman — July 13, 2010 @ 1:42 pm

   Talking about branding is like talking about religion. Everybody has strong opinions, and they don’t like them rattled.

   Branding as a marketing strategy is always bad. Branding as a business strategy can be good. Branding may produce some sales, but it is ultimately not trackable. Therefore you can’t quantify or measure its effectiveness. And if you can’t measure it, you can’t improve it.

   But branding as a business strategy is good. In a nutshell it means consistency. Consistency of message, reputation, and USP.

   All the direct response guys usually say branding is bad. When I see a consistent look it does build impressions in my memory, so that I am more likely to act.

   Finally I disagree about his point that branding can’t be combined with direct response. Joe Sugarman always had his little J S & A logo in every DR ad, even though the ad was DR. And I have seen local businesses doing DR ads, but have a consistent format to them, so that every time you see an ad from them, you remember it’s their thing.

   So, bottom-line is DR for dollars. Branding for reputation, longer term consistency in the marketplace.

7. Comment by Dan — July 13, 2010 @ 1:51 pm

   Thanks Michael, This is a great article that brings up a good topic of discussion.

   If you ask 100 marketers what branding is, you’ll get 100 different answers. That in itself reveals a quite a lot about what branding is. I see branding as ANYTHING that is impressed upon the minds of consumers. It could be colors, name, user experience, perception of quality, reputation, etc. You name it, it’s in there. All those things play a part in “the brand”

   Branding doesn’t just include ads that are paid for by the company promoting the product. It includes stuff like what people are tweeting about, blogging about, how the company operates and reacts.

   Heck even things like “it’s darn hard to find a parking spot when I go there” plays a part.

   Toyota is a good example of branding happening outside of their own ads. With all their product recalls, many people have a negative opinion of Toyota now. This is in spite of Toyota spending over $1B on advertising per year.

   With regards to branding ads and effectiveness, I think the real problem is that there’s a major disconnect between financial goals of a business and ad agencies. Ad agencies are more interested in creating ads that have these qualities: creative, cool, fun, unique, funny, exciting, engaging, stimulating. Instead of ones that have this quality: profitable - the goal of the ad agencies clients.

   With the branding ad mindset, it really comes down to if you throw enough money at something, it’s bound to become successful. This is the reason we have farting horses, screaming chipmunks, and rapping hamsters in TV commercials! When’s the last time you’ve seen a USP in an ad that could be easily cited by a consumer?

8. Comment by Jeffrey Crolene — July 13, 2010 @ 2:13 pm

   I have to agree with both Scott and Derek on this one. Everything you do in your business is an aspect of branding your business. Name, logo, tag line, colors, policies, uniform, packaging, marketing, etc.

   The consumers’ first impression is made in under 3 seconds. In those critical seconds, your service, product, or opportunity is being evaluated. How? Comparison to something familiar with the consumer. Ever hear the expression, “the Cadillac of xxxxxx”? Check it out: If you have a well done logo and smartly scripted tag line as opposed to someone who doesn’t, if all else is equal, the scales will tip in your favor when it comes down to the buying decision. Why? The consumer is subconsciously comparing YOU to something they are already familiar with. Nike, Rolex, Mercedes have already invested billions into branding. As a small business, I’ll simply ride their coat tails to become the “Mercedes” of whatever my product, service or opportunity by having a “million dollar image” that consumers can identify WITH.

9. Comment by Bill — July 13, 2010 @ 5:02 pm

   To me, your “brand” evokes a strong, consistent limbic response in your target customer about what they can expect when they do business with you or buy your product or service. There is good branding and bad branding. Wasteful ego-driven branding and smart focused branding.

   Just like creating/building your brand cannot be over-simplified, dismissing branding outright is equally foolish.

   I agree with Michael that the USP is the best focus for small business.

10. Comment by Randy Kemp — July 13, 2010 @ 6:36 pm

    Let me add this word about private labels. A teacher once claimed to be inside a pineapple processing plant. He saw the same assembly line package both name brand and private label canned pineapple. If this is true, then no wonder private label brands equal the name brands in quality.

11. Comment by Dov Gordon — July 14, 2010 @ 3:53 am

    Well said.

    A brand, as I see it, is really just the reflection of how people perceive your company.

    There are two ways to “build” a brand:

    1. Focus on the flashy, costly externals. Hope to get attention and pray that the attention converts into sales. It’s trying to force what I want on my market.

    2. Focus on building a business that really serves your market. Your brand is then built as a natural consequence of the hundreds or thousands of little things you do each day to really have an impact on people.

    Your brand then “happens” without conscious “brand building.”

    I believe in the second way.

    Dov Gordon

12. Comment by James Clark — July 14, 2010 @ 9:43 am

    The best way to describe Branding is like an iceberg. Fifteen percent is above the water surface and the other 85% is below the water level. The visible part is advertising, your website, logo, etc. The reason people don’t buy from you is they don’t trust it.

    With all that being said, you should be working on the invisible part to build trust! The mental connection so to speak, it was the invisible part that sunk the Titanic.

    Think about it, everything you do in the world is about trust. I agree with you about the money being spent to build a brand by big companies. But, it’s been done years ago without the internet.

    In order for you to build a profitable business you must have repeat sales. And, they must be profitable. No one in their right mind disagrees.

    So for example, the internet is unorganized. What I mean by that is a lie can be made to look like the truth. There is a lot of bad information floating around about this stuff.

    If it were left up to me, there should be a system put in place to make sure the basic information about everything is free.

    In fact, over the long haul, your goal should be to build trust and the business will come. In short, you can call it anything you like.

13. Comment by Michael Masterson — July 15, 2010 @ 4:58 am

    I was delightfully surprised to see the reaction I got here. I had no idea that the term had developed into such a precious thing. Of course it’s silly to argue for a sacrosanct definition of any volatile term. On par with spending money on non-essential marketing activities.

14. Comment by walter daniels — July 16, 2010 @ 12:56 pm

    Mr. Masterson, I hope that you will not be offended by a no one like myself daring to say H——T, to small business cannot “brand” an Advertise and Market themselves. That they must focus on the USP alone. Someday, I hope to achieve your stature of credibility, but I am not there yet.
    Over the last 30 years, I have struggled to build/run a total of Four Micro businesses, losing them all to outside problems (medical). I also spent considerable time assisting others running theirs. I believe this gives me a modest amount of credibility on the subject of how to become known, on a Jam (jam two slices of bread together) budget, in a Sliced Roast Beef world.
    For a Small/Micro Business, the brand is everything you do. Yes, spending money can boost it, but cannot change the fundamentals. A true USP adds to, and underlies, the “Brand,” but again is not the brand. The actual brand is every contact with anyone through, but not exclusively: Advertising, community activities, interviews, articles written, etc.

15. Comment by Margy — July 20, 2010 @ 6:59 pm

    Too many people think branding is just logos and a “famous” name. I agree the USP is incredibly important, but the USP is a real part of branding. Branding for a small business is the USP, the customer service experience, the business owner’s personal image and most of all consistency and word of mouth. Your tag line, also a part of branding should express your USP. Where the logo becomes important is as a memory jogger that might just give a small business an edge when competing with its peers or larger businesses. It makes them look more professional. Actually, designing the logo is the LEAST EXPENSIVE part of how we brand our clients.

16. Comment by christi pemberton — July 24, 2010 @ 2:32 pm

    Branding can be done using basic tools..the important thing is to build your product/service and create your identity. You don’t need millions to brand your company, unless you want to be like a Coca Cola. Coca Cola took years and years to get to where they are today. Building an image is a process and an important one…creating a recognizable image is very important for your “staying power”.

    What I believe has happened, and this is included in one of the earlier posts, is the “branding for the sake of branding” disease. You can use basic tools to create your image and market that image, such as an attractive and clean-designed website. You don’t need all the “bells and whistles” to build a website early in your business..you just need a clean-designed website that is easy to navigate, and clearly speaks the message that you need it to speak to your consumers. Having your customer to hear the “real” deal in your content..hear what this product can do for them, is worth much more than a lot of fancy graphics and flashy things. We have seen the “fake and phony” before with some marketing plans using all this flash and flair, but no meat on the bones (a solid developing product or service).

    Starting out in a business, let your voice be the voice of your company…and use the basic tools to convey that. As your business grow, your resources grow to get the message out.