Insights

The Case for Brand Accretion

By Steve McKee

Marketing is an investment, not an expense. You've heard that before, of course. But it's one thing to invest in marketing when times are good, and quite another to continue spending at a steady clip when things are getting tight. Before you cut your budget or rush headlong into an all-new approach, consider brand accretion.

What?

Brand accretion. The dictionary defines accretion as the process of growth or enlargement by a gradual buildup. With respect to branding, accretion is the simple principle that the more you invest – and the more consistently you invest – the better your long-term returns will be. Everybody accepts the principle of accretion when it comes to real estate, the stock market, and even collectibles. Invest in solid assets, hang on to them, and watch the value of your holdings grow over time. (The mortgage meltdown notwithstanding, real estate has historically been a good long-term investment.) Accretion is the opposite of dilution, something nobody wants—for their balance sheet or their brand.

Branding is a Process
Unfortunately, many companies neglect the power of brand accretion. They treat marketing as if it were just another expense, valued only for the benefits it can provide today. That's foolish. Expenses are about immediate gratification – that "new car smell," a high-definition picture, or a faster computer – but the value of those assets declines over time. Investments, however, are different. Investments provide long-term impact that matches and often outweighs their short-term benefits. Investments should be evaluated differently than expenses.

In a branding context, accretion means that none of your marketing efforts exist in a vacuum. Sure, you want them to have an impact today, but they also add to, and are interpreted within, the context of your past and future efforts. Think of branding as a process, not a static point in time; if your message is steady and consistent, you can build significant brand equity. If, however, you continually change your approach, carelessly cut your budget, or seek only short-term benefits, you'll be compromising your own long-term interests.

When I set aside money in my retirement fund, I get some measure of satisfaction that I'm saving for the future, but it's nowhere near the pleasure I'd get from a vacation in the Bahamas. Still, it's a smart thing to do. In the same way – rain or shine, good times and bad – you can always find a Tiffany ad on page A3 of The New York Times and The Wall Street Journal. Tiffany's small-space newspaper ads are almost as iconic as the now-famous blue box it introduced way back in 1837. Tiffany is an iconic brand because it has leveraged the power of accretion.

Learn From Your Losers
Marketers who judge their efforts only by the immediate gratification of the hits, visits, or sales they quickly generate fail to see the big picture. James Gregory's marketing firm, CoreBrand, has conducted years of research about the long-term effects of marketing investments. He says it's rare for even a one-year surge in advertising spending to generate measurable results in image development; it's usually at least three years before you see real change. That's a long time if you're starting from zero, but if your efforts are continuous, the power of accretion will continually work on your behalf.

Branding is like baseball: You may throw a bad pitch, but it's a long season. If you execute steadily and consistently, the statistics will work in your favor. That's why Anheuser-Busch creates dozens of commercials to determine which six or eight will make the cut to appear during the Super Bowl. They run the commercials in test markets in the weeks leading up to the game, determining which ones perform best. Those that don't make it aren't a waste of money; they're part of the company's investment in a better final product.

It's likely that your company has neither the century-plus history, nor the marketing budget, of Tiffany or Anheuser-Busch. That makes the principle of accretion even more important to you. The smaller your brand-equity nest egg, the more important it is that you invest in it steadily and consistently. Any knowledgeable investor knows that changing your investment strategy willy-nilly is ill-advised, and that every dollar that remains uninvested is a dollar that can't benefit from the power of accretion. The same thing is true for branding.

Originally published on Bloomberg Businessweek

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Steve McKee

Co-founder and author, Steve specializes in addressing the most meaningful problems. Call Steve when you want to change the world. He’ll have a thought (and some research) on that.

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