Sunday, April 11, 2021

How Brand Marketing Improves B2B Financial Performance

Persuasive evidence shows that most B2B companies will maximize growth by balancing the use of long-term brand marketing and short-term demand generation marketing. Yet few companies have adopted this approach. This post explains why the disconnect exists, and what to do about it.

Earlier this year, I wrote about the "Cold War" between B2B marketers (and agencies, consultants, and technology providers) who focus on the various forms of demand generation marketing, and those who advocate the importance of brand marketing.

It's clear that the proponents of demand generation marketing have been winning the war. For the past several years, the primary focus of most B2B marketers has been on using data and technology to improve the performance of their demand generation programs. Meanwhile, only a relatively small cadre of marketing thought leaders have continued to make the case for B2B brand marketing.

The preference for demand generation marketing is due to several factors.

Demand for Short-Term Results - Most B2B marketing leaders are under intense pressure to prove the value of marketing programs, and more specifically, to execute programs that will produce results quickly. Many marketing leaders emphasize demand generation programs because they usually produce measurable results faster than brand marketing programs.

Ease of Measurement - The performance of demand generation programs is relatively easy to measure. Such programs are usually designed to elicit a behavioral response from potential buyers, and those behaviors are easy to track. And because demand generation programs produce results quickly, the measurement timeframe is short. In contrast, the objective of most brand marketing programs is to evoke a change in the minds of potential buyers. For example, they are often designed to raise brand awareness and increase brand salience. These objectives are vital for growth, but they are difficult to measure because they don't involve observable behaviors.

Research Focus - Most of the research regarding the benefits of brand marketing is focused on B2C brands, while there is an abundance of research about the benefits of improving the effectiveness of B2B demand generation programs. This imbalance of evidence makes it easier for B2B CMOs to persuade their CEO to invest in demand generation.

Traditional Perceptions - The traditional view is that B2B buying decisions are primarily rational, and that personal selling is the primary driver of revenue generation. These perceptions cause many B2B company leaders to undervalue the contribution of brand building to revenue growth.

How Brand Marketing Creates Value

In order to convince CEOs and other senior company leaders to make appropriate investments in building the brand, B2B marketing leaders must be able to explain how brand marketing will drive important business outcomes. The chart below illustrates how effective brand marketing contributes to revenue growth, increased profitability and cash flow, and ultimately to increased company value.

The model depicted in the chart was inspired by the brand valuation model developed by the Marketing Accountability Standards Board (MASB), an organization composed of marketing industry professionals and marketing academics. The mission of the MASB is to develop evidence-based standards for measuring marketing performance and linking that performance to business financial outcomes. The chart specifically relates to the role of brand marketing in a B2B company.

This chart illustrates three major points about B2B brand marketing.

Customer Preference - Cultivating customer preference is the linchpin goal of all B2B brand marketing, and in fact, it's the primary goal of all forms of marketing. Customer preference is what ultimately drives sales, and in B2B, customer preference is formed from a combination of rational and non-rational factors.

Brand Marketing Operates Directly and Indirectly - Effective brand marketing operates directly to increase buyer awareness and familiarity and to cultivate customer preference. But it also works indirectly by improving the performance of demand generation programs, as research has shown.

Impact on Revenue/Profit - By  cultivating increased customer preference, effective brand marketing impacts four key measures of revenue and profit growth. More specifically, an effective brand marketing program will contribute to increases in:

  • The number of sales
  • The velocity of sales (shortened sales cycles)
  • The average gross margin earned on sales (by reducing price sensitivity)
  • Market share
Parting Thought

Brand marketing is an integral part of a complete marketing strategy in a B2B company, but its importance and value are often not appreciated. The model discussed above can help B2B CMOs have meaningful conversations with their CEO and other senior company leaders about the need to make sufficient investments in building the brand. 

Top image courtesy of EdgeThreeSixty via Flickr (CC).

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