Building Brand Value Over Time

From: alexhormozi

Building brand value is a long-term endeavor that yields significant returns [00:52:22]. It’s considered the most valuable thing a business can possess, offering benefits like increased returns on advertising, the ability to price products significantly above market value, and fostering customer loyalty [00:52:26]. This process took the speaker a decade to truly understand and began to yield results only in the last few years [00:52:47].

What is Branding?

Branding is simply the association people make between something they already know and like, and something they don’t yet know (your business) [00:52:55]. Over time, the positive attributes of the known thing transfer to your brand, eventually allowing your company to stand alone with that positive association [00:53:04].

Three Pillars of Brand Building

Associations are built in three primary ways:

1. What you say or show This is directly controllable through advertising and content creation [00:53:15].
2. What other people tell them This includes word-of-mouth from those who have interacted with your advertising or product [00:53:31].
3. What the customer experiences This is the strongest factor, as direct experience with your product or service shapes their opinion most profoundly [00:54:21].

Brand and product are deeply interrelated. To generate positive word-of-mouth and strong reviews, the customer’s experience must be exceptional [00:55:01]. Building a brand involves making a significant promise and consistently delivering on it [00:56:11].

Benefits of Strong Brand Value

• Enhanced Returns on Advertising A strong brand significantly increases the return on advertising spend (ROAS) [00:58:00].
• Pricing Power Price is the most powerful lever on profit [00:56:33]. The strength of a brand can be measured by how much it allows a business to charge above the commoditized market price [00:56:48]. Companies like Nike can command a premium for their products due to their brand [00:56:56].
• Customer Loyalty and Retention Once customers buy from you and have a positive experience, they are less likely to risk trying a competitor, even if another product might be “better” [00:59:48]. This creates a competitive moat [00:59:59]. Apple is cited as an example, where customers consistently choose Apple products despite alternatives [01:00:01].

Long-Term vs. Short-Term

Direct response advertising offers immediate returns, similar to a paycheck: when you stop spending, the money stops coming in [01:00:09]. Brand building, however, is a long-term investment, akin to a 401k, where initial investments may not show immediate compounding but eventually grow into a formidable asset [01:00:09]. It takes time for this compounding effect to materialize [01:00:48].

Importance of Quality and Product

Quality is paramount. The goal is to create products or content so good that people will share it, regardless of algorithms [01:11:36]. Investing 100 hours into one exceptional thing is better than 100 mediocre things [01:11:58]. Quality will always win in the long term because consumers seek “value per second,” not just “seconds of value” [01:13:13].

Strategic Growth and Product Excellence

Inspired by Chick-fil-A’s founder, Truett Cathy, the philosophy “better, not bigger” suggests that focusing on continuous improvement will naturally lead to growth as customers demand more [01:36:36]. Boston Market, which grew rapidly by prioritizing scale and funding, ultimately failed due to diluted talent and a lack of focus on product [01:37:00]. In contrast, Chick-fil-A grew responsibly, focusing on product and experience, which ultimately led to its long-term success [01:37:06]. This highlights the “missionary” approach (believing in the product and experience) over the “mercenary” approach (solely focused on money and rapid scaling) [01:37:59].

When entering a new market, it’s advised to be an “order of magnitude better” than existing solutions [01:39:33]. Elon Musk’s decision not to enter the candy market was based on the inability to create a product significantly better than what existed [01:40:06]. His success with SpaceX and Tesla stemmed from offering products and services that were vastly superior or offered a 10x improvement over competitors [01:40:16].

Practical Steps for Improvement

Instead of constantly chasing growth, prioritize making the product or service “absolutely insane” from a quality perspective [01:41:07]. This involves:

• Identifying one thing to improve in each business function (e.g., contacting leads faster, testing ad hooks) [01:41:17].
• Building on previous improvements rather than abandoning them, creating a cumulative checklist of quality [01:41:43].
• Focusing on “100 golden BBs” (small, consistent improvements) rather than one “silver bullet” [01:42:05]. This approach leads to strong word-of-mouth and increased customer lifetime value (LTV) [01:42:12].

The Problem of Mediocrity

Many entrepreneurs are unwilling to face the “brutal business truth” that their product or service might be mediocre [02:23:50]. The “magic you’re looking for is in the work you’re avoiding,” which often involves improving the core offering [02:23:17]. If a product is mediocre, increasing advertising simply informs more people about its mediocrity [02:25:29]. Businesses should aim for their product to be so good that customers can’t help but tell everyone about it [02:26:07].

The speaker’s investment in School.com is an example of prioritizing product excellence: the platform was growing organically with zero marketing because its product was exceptional and generating word-of-mouth growth [02:26:20]. This established a strong foundation before adding marketing efforts, ensuring that customers stay due to the product’s value after being introduced to the brand [02:27:26].

The Long-Term Arbitrage of Product Quality

The speaker’s own business journey demonstrates the power of product-driven growth.

• Early gym business: 30:1 return on advertising, partly due to underpriced Facebook ads [02:27:34].
• Gym Launch: 100:1 return in the first year, making $10millionfrom$100,000 ad spend [02:27:53]. This “absurd return” was largely due to the product being so effective that customers generated massive word-of-mouth, especially in a niche market where “everyone knows everyone” [02:28:25].
• This illustrates that when a product has strong margins and a very low customer acquisition cost due to word-of-mouth, it feels like “printing money” [02:29:19].