Does B2B Branding Still Matter?

Last year, I published a post here titled Why B2B Branding Still Matters. As the title of that post suggests, I argued that branding is still important for most B2B companies. In a book published earlier this year, Itamar Simonson and Emanuel Rosen provide a different and provocative take on the value of brands and brand building. Given the importance of this topic, I think it's worthwhile to look at both sides of the issue.

Brands Still Matter

Recent research by both CEB and McKinsey & Company provides strong evidence that branding remains critical to the success of B2B companies and that brand building is therefore still an essential marketing function.

In a 2013 study (From Promotion to Emotion), CEB looked at the impact of a strong brand on various buying behaviors. CEB compared the behavior of high brand connection customers - those who gave brands high scores for trust, image, and industry leadership - with the behavior of no brand connection customers. The CEB study found that high brand connection customers were:

• 5 times more likely to give consideration to a brand
• 13 times more likely to purchase from a brand
• 30 times more likely to be willing to pay a premium for a brand's products or services

Research by McKinsey & Company has also found that strong brands create significant value for B2B enterprises. For example, B2B companies with strong brands generate a higher operating profit (EBIT) margin than other firms. McKinsey's research found that, in 2012, strong brands outperformed weak brands by 20%, up from 13% in 2011.

The McKinsey research also revealed that brand plays an important role in the purchase decisions of business buyers. In the US, for example, McKinsey found that the brand was responsible for 18% of the purchase decision, compared to 17% for the efforts of the sales team.

The Importance of Brands is Declining

In Absolute Value:  What Really Influences Customers in the Age of (Nearly) Perfect Information, Itamar Simonson and Emanuel Rosen argue that technological innovations - aggregation tools, advanced search engines, online user reviews, social media, and easy access to expert opinions - are driving a fundamental shift in how consumers evaluate and purchase products and services. Simonson and Rosen contend that consumers used to make purchase decisions "relative" to other things, such as a brand name, their previous experience with a company, or a brand's advertising messages. In essence, potential buyers used brand reputation as a mechanism for estimating the value and satisfaction they would obtain from a product or service.

The authors contend that easy access to an abundance of more objective "third-party" information now makes it easier for potential buyers to know the "absolute value" of products or services, thus diminishing the importance and value of the brand.

My Take

The central argument made by Simonson and Rosen in Absolute Value is credible and persuasive. There is no doubt that information-based purchasing is becoming prevalent in more and more product categories. Consider, for example, the following data points:

• 70% of consumers surveyed by Nielsen in 2012 indicated that they trusted online reviews.
• 30% of US consumers begin their online purchase research at Amazon, which makes extensive use of user reviews. Essentially, Amazon has become a clearinghouse for product information.
• In 2011, research sponsored by Google found that the average shopper uses 10.4 sources of information in the purchase process, which was almost twice as many as in 2010.

Despite these facts, I contend that a strong brand is still critical to the success of most B2B companies and that brand building is still a critical B2B marketing function. A strong brand mitigates the perception of risk that accompanies significant investments and alleviates some of the fear that buyers inevitably experience when they're facing a major purchase decision.

The marketing techniques used for brand building have certainly changed. Encouraging, cultivating, and supporting positive third-party information is now clearly part of the brand building process. But, this doesn't mean that branding no longer matters.