From: alexhormozi
Branding is a critical factor in achieving significant financial success for businesses and individuals alike [00:00:01]. It enables businesses to charge premium prices, secure customer loyalty, and ensure sales for new products and ventures [00:00:45].
What is Branding?
Traditional definitions of branding often sound vague, such as a “gut feeling” or “emotional shorthand” [00:03:17]. However, a more actionable definition focuses on deliberate action:
“Branding is a deliberate pairing of things through an outcome.” [00:05:21]
For example, Coca-Cola pairs the action of drinking their product with a positive outcome (“yum”) [00:05:32]. This intentional association leads customers to reach for Coca-Cola when seeking that positive experience [00:05:47]. The goal is to influence customer behavior [00:17:26].
Good Branding vs. Bad Branding
Good branding is the deliberate pairing of a business with good outcomes for its ideal customers [00:10:09]. This pairing determines who pays attention to the business and whether they are drawn towards it or away from it [00:10:19].
Bad branding, conversely, occurs when businesses pair their products with things people dislike, leading to financial losses [00:06:02]. For instance, Bud Light’s collaboration with Dylan Mulvaney was considered good advertising because it increased awareness, but it resulted in bad branding as many customers disliked the pairing, leading to decreased sales [00:06:21]. To recover, Bud Light then paired their product with content their target audience preferred, such as Shane Gillis and the UFC, which helped sales recover [00:07:11].
It’s crucial to understand that while a pairing might be positive for some, a business’s success is objectively measured by whether the pairing results in more money [00:08:03].
Why Branding Makes Money
The concept of branding dates back to livestock, where symbols were burned into animals to signify ownership and dictate how people interacted with them [00:11:08]. This fundamental principle of associating a product with meaning has evolved into a powerful financial tool.
Strong brands make money by:
1. Driving Premium Pricing
A strong brand can transform commoditized products into premium ones [00:14:07]. For example, a 60 or more [00:14:09]. This is because customers are buying the associated elements (like winners or high class) that have been deliberately paired with the brand, not just the physical product [00:14:19].
Warren Buffett emphasized the importance of pricing power:
“The single most important decision in evaluating business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10%, then you’ve got a terrible business.” [00:17:34]
2. Improving Advertising Effectiveness
Good branding enhances the effectiveness of advertising [00:18:10]. A generic white T-shirt might get a 0.5% click-through rate, but the exact same shirt with a Nike swoosh could achieve six times that rate at a higher price point [00:18:14]. This leads to cheaper customer acquisition, higher returns, and better response rates in advertising [00:18:46].
3. Fostering Customer Loyalty
Good branding drives customer loyalty, leading to repeat purchases and protecting the business from competitors [00:18:56]. Companies like Apple exemplify this, where customers tend to buy multiple products and remain loyal over time [00:19:04].
Ultimately, these benefits allow companies with strong brands to outperform commodities across industries and gain a lasting competitive advantage [00:19:37].
How to Build a Strong Brand
Building a strong brand involves a deliberate process of pairing.
1. Identify Desired Pairings
To start a brand, you must know what you want to pair it with to attract your ideal customers [00:20:19]. This includes understanding what outcomes your ideal audience likes and what to avoid [00:20:26].
2. Curate Brand Elements
Think of building a brand like curating a garden or assembling a bouquet [00:20:54]. Individual products, values, experiences, or people are like flowers [00:21:05]. When these “flowers” (brand elements) are repeatedly paired, they form the “bouquet” or the brand [00:21:16]. The brand itself is the association and connection made between these things [00:21:28].
Building a brand involves:
- Starting with a brand that currently means nothing [00:15:39].
- Pairing that brand with something or someone your ideal customers like [00:15:48].
- The brand then begins to embody that desired meaning for customers [00:15:55].
- Customers will then want to associate themselves with that meaning, which they do by purchasing the branded product [00:15:57].
Good branding happens on purpose, not by accident [00:22:57]. It requires intentionally adding positive associations and removing negative ones (“pulling out the weeds”) [00:23:09].
3. Managing Branding Mistakes
Even a single bad pairing can hurt a brand, much like one rotten flower can spoil a bouquet [00:23:56]. To recover from a negative association, it’s necessary to overwhelm customers with more positive pairings until the bad one shrinks into irrelevance [00:24:31].
4. Product Quality and Experience
While external pairings influence pre-purchase behavior, the actual product experience drives post-purchase branding [00:25:51]. If a product with a strong brand fails to deliver a good enough experience, it can damage the brand’s perception and prevent future purchases [00:26:08]. A premium brand must deliver something special to retain business [00:27:17].
Measuring Brand Success
Brand success can be measured by three key metrics:
- Influence: How likely the brand is to change someone’s behavior. This is measured by whether people react to the brand [00:27:49].
- Direction: Whether the behavior changes in the desired direction (towards the brand) or away from it [00:28:03].
- Reach: How many people the brand changes behavior for (i.e., how many people recognize it) [00:28:09].
A small, weak, and neutral brand is recognized by few, and those who do recognize it don’t care much [00:28:22]. Conversely, a large, strong, positive brand is recognized by many, influences their behavior towards the brand, and generates positive reactions [00:28:34]. While some strong brands can be polarizing (e.g., Donald Trump) [00:29:15], it is possible to build a strong positive brand that influences many people towards it (e.g., Taylor Swift, Mother Teresa, Apple) [00:29:55].
When growing a brand, new pairings always carry risk, potentially causing some audience loss [00:32:21]. However, the goal is to net an increase in reach, influence, and positive direction by gaining more new people who like the new pairing than those who dislike it [00:33:36].
This comprehensive approach to understanding brand and product development for business success by focusing on deliberate pairings and their outcomes is key to achieving significant financial impact.