Ask a CEO or CFO for greater brand investment today and you’re probably up for a serious battle. Pricing power can help reframe the conversation in your favour.
Brand is one of the few topics in B2B that can make CEOs and CFOs feel like they’re from Betelgeuse Five and CMOs, Rupert. I’m being nerdy here, but if you get the reference you’ll understand my point: While all three understand the fundamental role brand plays in business, the gap in how a CEO or CFO prioritises brand activity compared to a CMO can feel like a galaxy’s width apart.
The intangible nature of assets like brand and their perceived lack of impact on business outcomes partly drives the overall reluctance to spend on brand building in B2B. There’s also the fact that it’s a long-term play that reaps more rewards the longer you stick with it, making it hard to earn investment when short-termism rears its ugly head in tougher economic times.
But while there may not be an all-encompassing encyclopaedia of knowledge that can help us illustrate the integral role brand plays in growth a la The Hitchhiker’s Guide to the Galaxy, there’s one way to get CMOs and CEOs/CFOs speaking the same language: a little Babel fish called pricing power.
First things first, what is it?
Pricing power is simply how much a change in the price of businesses’ solutions influences demand from the market. You’ve probably heard of it before in chats with your CFO or CEO, but it’s likely not something you use in your day-to-day work life. It should be.
Beyond being a useful financial term that CMOs can use to bridge the gap between the jargon-filled world of marketing and business outcomes, it’s also linked with price elasticity – i.e., the degree to which your customers change their demand levels in response to price changes. Pricing power also happens to be one of Warren Buffet’s top criteria when deciding whether to invest in a company, and he surely knows what he’s talking about.
If you’re the sole player in your market, you’ve absolute pricing power. If you’re competing with hundreds of other brands, it’s inevitably a lot weaker. And here, dear reader, is where brand comes in.
Brand’s effect on pricing power
At Transmission, we’ve consistently made the point that brand should be a strategic priority for any B2B business. Your CEO or CFO may disagree, but the reality is, brand value contributes up to 20% of enterprise value on average. It’s a lack of immediate and granular metrics that make it hard for them to sign off on any sort of budget – especially when they’re being squeezed across the board.
What they might not know, however, is that consistent and focused efforts on brand building directly contribute to customer satisfaction and loyalty. The more satisfied and loyal your customers, the less price sensitive they are to your solutions, and the easier it is for you to launch new ones as the business will already have a segment of warmed buyers and prospects. In other words, you have greater pricing power.
This opens up a world of flexibility for businesses to raise prices as they see fit, aiding profit margins for when growth feels like it’s locked behind one too many pesky doors. Investing in brand building also aids in reducing customer acquisition costs (CAC), increasing customer lifetime value (CLTV), and makes marketing spend more efficient as you’re no longer battling your competitors for 5% of the market; you’re driving demand in the wider 95% for the future.
Your board may turn their noses up at the body of research demonstrating the long-term impact brand has on the roughly 95% of out-of-market buyers in your vertical. They may also ignore the fact that higher levels of brand investment in a downturn can lay the groundwork for greater success in the future, given the fact that 52% of B2B CFOs feel that brand doesn’t drive short-term sales performance. But I’d wager good money that they won’t ignore being able to charge more for your business’ solutions.
So, how can you gauge your pricing power through the lens of brand?
By understanding your business’ brand health (Share of Mind), its Share of Voice (SoV), and Share of Market (SoM). B2B buying cycles are as long as they are complex nowadays, making current and future perceptions of a brand a crucial element of how businesses perform in the long term. Brand health is a trackable set of metrics that measure just that: whether customers and prospects recall a brand in the relevant buying situation and what they think of it.
It’s a huge reason why we conducted our APEX Index benchmarking study to explore the awareness, perceptions, and experiences of 1,200 B2B buyers in four high-growth verticals. Knowing where your brand sits in the market, what others are doing to be category leaders, and how to optimise your brand-building strategies to align with growth goals are all foundations on which business and marketing leaders can better influence revenues and customer loyalty.
When you pair those findings with a view into how your SoV and SoM perform in-market, you’ll have greater clarity on where brand investment should be spent. Investing wisely in SoV helps to influence your target markets, increasing market awareness, credibility, and trust which in turn helps to bolster demand for your products and services. This helps to drive revenues and ultimately, increases your SoM.
They’re two peas in a pod for pricing power and bringing these qualitative and quantitative measures into a single offering is what makes our deep-learning Brand Intelligence service innovation so unique.
What is Brand Intelligence?
Brand Intelligence is Transmission’s managed service that benchmarks your current SoV, SoM, and SoV + SoM against top competitors in addition to your ongoing trends to highlight how to most efficiently invest in brand marketing activity.
By pairing it with a market sample analysis of your key brand health indicators, we can predict the impact of investment in any Excess Share of Voice (ESoV) on your SoM trends – identifying how effective your brand reach is and how much it influences buying decisions compared to competitors is something we explain in more detail here.
Trying to explain the business impact of brand can feel like the oddest thing in the universe at times. Marketing metrics and the ROI of our activity have always been fuzzy to those outside of the marketing department – and even those within it. Pricing power and excitingly, our Brand Intelligence services are two ways CMOs can translate the impact brand has on the business in clear, tangible terms, getting your CFO and CEO on the same page faster than a Vogon hyperspace bypass.
And find out more about how our Brand Intelligence can help increase your marketing spend to revenue efficiency in this blog here!