OK, you got me!
That’s Warren Buffett on how to evaluate a business, not on branding per se.
Nor is the quote from or overtly about 2023.
But looked at with the right eyes, that quote says everything about branding in general, and especially about branding during this year.
Why Brand Is the Key to Pricing Power
‘Cause there are really only a handful of ways your business can increase prices without losing business to a competitor:
- You have a monopoly or are part of a price-controlled cartel
- Demand so far outstrips supply that you can basically name your price
- You have a brand that causes customers to see YOUR product or service as worth the price premium.
And since I doubt you’re so lucky as to have either condition 1 or 2 to apply to your business, that leaves brand-building as the only method for creating the ability to build Buffett’s version of “a very good business.”
Why Investing in Brand Will Be Key to Success in 2023
Now, here’s why this especially applies to 2023:
If and when the economy turns south, you’ll be tempted to cut advertising costs.
Specifically, you’ll be tempted to pull back on your branding efforts.
Emotionally, it always makes sense to continue spending for immediate lead generation — even when it makes much more mathematical and economic sense to prioritize brand building during hard times.
And along with the temptation to reduce or stop branding campaigns is the temptation to reduce prices and discount in an attempt to maintain sales.
Unfortunately, such a move will not only hurt your profit margins over the short term, but it will erode your brand power over the long-term.
You’ll have a much harder and longer time “bouncing back” as the economy recovers.
Mostly because it will be enormously difficult to ever convince customers not to view your discounted price as your “real” price — a true reflection of your worth.
But also because your competitors that maintained their branding spend will have leapfrogged your position in the minds of customers.
But don’t take my word on all that — take Buffett’s! He’s been rumored to know a thing or two about business, after all.
And according to him, your brand power is the strongest possible determinant of your business health.