written by
Bret Carmichael

The importance of branding in solving business problems

Brand 13 min read
A branding metaphor using a lightbulb and idea cloud

Brand designers and business owners need to solve the same problems, but they speak different languages. Closing the gap in understanding means better branding outcomes for everyone.

Defining stakeholders

Three parties are involved in every brand design effort. This is true when branding any company or product. It's also true for personal branding.

The brand designer

In addition to design work, the brand designer facilitates the branding effort. They partner with the client to develop, among other things, brand position and brand identity.

A brand is not a deliverable that the client directly appreciates. This may seem like an odd thing to say, but design isn't the passion of every business leader. It's merely a means to an end; a lever to achieve a positive business outcome. As such, a boast to a client about the beauty and craft of a brand design may yield a resounding, "So what?"

The client

The client hires the brand designer. They cut the checks. They own the business goals. Conversations about branding need to center around client business goals. Brand designers need to speak the client's language, not the other way around.

The customer

Brands are born from collaborations between clients and designers, but neither are the user. The customer is the user or consumer of a brand.

Effective partnerships between brand designers and clients solve customer problems. They can also solve some client problems, but must always solve problems for the customer. Unsolved customer problems become business problems.

Solve customer problems to solve business problems

Business problems often center around money. They may be rooted in perception and service gaps which can hurt performance. Those are customer problems.

The word "problem" is not used to classify something as broken. Instead, a problem is something to improve. It's a gap between the current state and the future, target state. Good brand design and customer experiences help close gaps.

Like ice cream, customer problems and business problems come in multiple flavors. We'll put definition to some of the more common ones. Then, we'll dig into how their outputs can be measured.

Business problems are like ice cream. There are multiple flavors.

Acquire new customers

The desire to access and acquire new customers is a common reason for branding a business; the ambition to grow or the need to reverse an unfavorable trend. Timing sometimes coincides with a change in direction as a result of a product's movement along the S-curve. Customer acquisition is a business problem.

For a startup, creating a brand position and identity helps differentiate the business from its competition. It also inspires confidence, making the startup appear competent. No company wants to work with a business they think will disappear from the map in a month. Neither does any company want to work with a business that can't appear organized, not even to the customers it's trying to attract.

Branding isn't just for new companies. Existing companies have to rebrand and reinvent themselves as part of their natural lifecycle. Your favorite outfit might be new today, but after wearing it a few years, it'll show signs of age. After wearing it for more than 5 years, it'll look out of style. Businesses don't wear old age well. It's not attractive to customers.

Old Spice case study

It's a customer problem when using a product makes customers feel bad about themselves.

Old Spice had a long-standing brand tradition. Then, Axe arrived. It was edgy and appealed to a younger audience. Old Spice lost market share, and it lost mindshare.

On the shelves since 1938, Old Spice had long been associated with the past and elderly gentlemen (I know that the first thing that came to mind whenever I smelled original Old Spice was my grandfather). However, in 2008 all of that changed. Old Spice and Wieden + Kennedy kicked off a new campaign, Old Spice Swagger, and completely transformed the face of the Old Spice brand, as well as their customers. - Megan O'Neill, AdWeek

Market conditions change, so do customer audiences. As audiences change, the things that customers value also change. Brands need to adapt if they want to stay relevant. Otherwise, they won't attract new customers, and they may lose the ones they already have. Affected businesses are sometimes forced to spend more money to reach fewer potential customers. Said another way, as ad spend increases, the rate of return diminishes. The brand needs access to a new type of customer, and it doesn't have it.

With its rebrand, Old Spice set out to solve a business problem. It wanted to double the sales of their former "Glacial Falls" scent. Through their "Swagger" rebrand, it quadrupled sales. In doing so, it appealed to younger customers and captured a new demographic. The "Swagger" branding made young people feel cool when using Old Spice. It solved a problem for them, and Old Spice's audience reciprocated by converting to paying customers.

Repair damage to brand reputation

A company will often rebrand itself after harm has been inflicted on its brand. Wells Fargo launched a rebrand after enduring multiple scandals; precipitating fines, loss of customers, and difficulty attracting new customers.

AIG case study

For its role in the 2007 financial crisis, the AIG (American International Group) brand was so irreparably harmed that it had to discard the AIG name entirely. Many Americans blamed AIG greed for the economic collapse and resulting loss of jobs. AIG had a business problem. It couldn't acquire or retain customers, and no amount of ad spend would help.

AIG's business problem was the byproduct of a customer problem. Customers were out of work and experiencing pain, and they directly attributed that pain to the AIG brand. This pain was exacerbated when the U.S. Government gave AIG bailout funds. AIG was getting money, despite its role in causing the recession. Intense resentment made the brand toxic.

AIG rebranded itself as Chartis Insurance, totally disassociating itself from the AIG name. This allowed them to reach new and existing customers without reminding them of AIG's role in the recession, and it solved the customer problem. It absolved AIG of a lot of negative sentiment. Chartis Insurance connected with consumers as a seemingly new company.

Time heals all wounds. In 2012, AIG recaptured its identity and eliminated the Chartis Insurance brand. "AIG as a global insurance brand is back," said then CEO Robert Benmosche.

Improve customer experience

Branding and marketing attract an audience. The user experience is what converts audience members into paying customers. It's also what keeps them. Customers will walk away from a bad experience, especially if the product or service is undifferentiated from the competition.

T-Mobile case study

T-Mobile attracts new and keeps existing customers with free Netflix and lower prices. It also offers customers free gifts every Tuesday and gifts MLB streaming, annually. Should a customer need help, they can call T-Mobile customer service and reach a real person. There are no mazes of automated attendants.

Further setting it apart from competitors, T-Mobile has its own customer engagement dynamo and brand-personified in CEO John Legere, with his 6.4 million Twitter followers. Every day. he dresses in T-Mobile pink and black. Weekly, he hosts, "Slow Cooker Sunday" on Facebook, where he makes a meal in his crockpot. He even has a cookbook. It too is on-brand.

John Legere's Twitter page showing him dressed on-brand.

T-Mobile was once smaller than AT&T, Verizon, and Sprint. It surpassed and is in the process of acquiring Sprint, and has made substantial gains against Verizon and AT&T.

Internet is undifferentiated. T-Mobile achieved differentiation by delivering a better customer experience and opening dialogue with its customers, inviting them to participate in the brand experience. T-Mobile brands itself the "Uncarrier," and many of its program initiatives originated from customers on Twitter.

Branding metrics

There are several ways that branding can act as a lever to solve customer problems, and in turn, solve business problems. To fully connect the dots between the designer and client, metrics are needed to determine brand effectiveness.


Revenue is the money a business earns. In the context of a branding effort, a client might establish a goal for revenue growth. "I want to increase sales by 25% year-over-year."

Branding alone won't achieve a revenue goal. A brand's existence, however resonant, doesn't guarantee reach just because it exists. Customers must be aware of a brand to engage with it. Thus, in order to tie a revenue goal to a brand launch, the branding needs to be combined with marketing.

Many brands operate a substantial portion or all of their business online. It's worth noting that, a website's user experience can play a major factor in achieving any revenue goal. If branding and marketing get someone to visit a website, it's the website's job to convert the visitor to a paying customer. It must be fast, easy to navigate, provide a clear call-to-action, and be void of friction. It needs an effective sales funnel. Otherwise, the customer will abandon it, and the opportunity will be lost.

With a client's goal in mind, to increase revenue by 25%, the right question for the brand designer and the client to ask is, "What customer problems can we solve to grow year-over-year revenue by 25% or more?" There's no such thing as a guarantee. However, if the brand designer and client are tracking progress toward the goal, they'll have the opportunity to adapt their approach if something's not working as they expect.

Customer Acquisition Cost (CAC)

Revenue is the money a business earns. Customer Acquisition Cost is the money a business spends to earn new customers. It's an important metric.

A business can earn a lot of revenue if it's willing to spend an unlimited amount of money to acquire new customers. For obvious reasons, an approach like that introduces a business problem. It undermines financial viability.

Most businesses need to invest marketing dollars to win new customers. Related spend must be measured. Customer Acquisition Cost can be especially informative for measuring the effectiveness of a rebranding effort. If, through its former brand, a business spent $1,000 to acquire 100 customers, that could be good or bad. If that same business spends another $1,000 and earns 200 customers for its new brand, that's a definite improvement. It's a sign that the business's new brand message is resonating with more people.

Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) is the amount of money a customer is worth to a business over the lifetime of their relationship. Ignoring the importance of this metric is a risk to businesses. They might lose opportunities to earn new customers.

CLV is a meaningful metric to subscription software or SaaS (Software as a Service) businesses. It's equally valuable to financial services, legal services, and a multitude of other service industries. A customer is worth more to a business than the amount they spend on an initial purchase. The same is often true for physical goods. Surely, if you buy this year's iPhone, Apple would like you to buy another iPhone at some time in the future. It's worth it for them to spend some money marketing to you if it might get you to switch from Android.

It costs a business more to acquire new customers than it does to retain existing ones. It's important for both the brand designer and the client to know how much a customer is worth over their lifetime. No one wants to spend $1,000 to earn $500 of revenue. However, if $500 represents only one of many future revenue earnings from a single customer, then the customer's CLV is much greater than $500, so much more so that, spending $2,000 per customer could even be justified.

CLV to CAC Ratio

As the name suggests, the ratio of Customer Lifetime Value to Customer Acquisition Cost evaluates the value a customer returns to the business over the lifetime of their relationship with the business, versus the money invested by the business to acquire the customer. It's the return on investment for winning a new customer.

The ideal CLV to CAC ratio is famously 3:1. For every $1,000 a business spends to earn a new customer, the customer should return $3,000 of value to the business during the lifetime of their relationship. The 3:1 ratio isn't the sweet spot for every business, but the closer it is to 1:1, the more problematic it is.

Brand designers and clients need to measure movement in the client's CLV to CAC ratio. It speaks to the health of the brand. Assuming that demand in a product category is consistent, if branding moves the ratio in a favorable way, that says the brand is delivering a return on investment.

Troubleshooting CLV to CAC

If branding doesn't move the CLV to CAC ratio at all, there could be a problem of reach or market saturation. The brand isn't tapping into a new audience, or it already was. As a business's market share increases, so too does the amount it needs to spend to add more market share. The business has to convince customers who are satisfied by a competitor to switch. In such cases, a region-locked business may need to expand its coverage area. Otherwise, it's a product problem. The business needs to adjust pricing or introduce a new product.

When a brand negatively impacts a business's CLV to CAC ratio, one of four things are true. The brand is not resonating with the audience it's trying to reach. The movement is temporary because it is loaded with the cost of the branding effort. Demand in the product category is declining, or the market is becoming saturated with new competition that offers a better or cheaper product.

Net Promoter Score (NPS)

A business's Net Promoter Score tells it what customers are saying about the business. Is the business getting free advertising from its customers as referrals? Is the business blocked from reaching new customers, because existing customer sentiment about it is negative, and customers are telling their friends?

There are many ways to measure customer satisfaction and advocacy, but none are so popular as NPS. One reason for its popularity is, it's feedback that the customer can provide quickly. NPS is one question. It's also easy for a business to aggregate and comprehend NPS survey data.

Net Promoter Score is a 0 to 10 scale.

Calculating NPS

NPS is calculated on a 0 to 10 scale. Customers who score a business at a 9 or 10 are advocates. They tend to tell their friends good things about the business and encourage them to become customers.

Customers who score a business from 0 through 6 are detractors. Their sentiment is generally negative. One unfamiliar with NPS would be right to think that 6 is a fair score, but think of what a scoring customer might say when asked about the business, "It's alright, I guess." The person hearing the sentiment won't interpret it as an endorsement. In fact, it skews somewhat negative. The customer is unable to say the business is good.

Scores of 7 and 8 are neither promotors nor detractors. They're discarded from the actual NPS calculation because responding customers aren't saying anything about the business, positive or negative.

To calculate NPS, a business will subtract the percent of detractors from the percent of promoters. If 50% of customers are promoters, scoring 9 or 10, and 30% are detractors, scoring from 0 to 6, then the business's Net Promoter Score is 20. More customers are saying good things about the business than bad. NPS can range from negative 100 to positive 100.

NPS and brand promise

A brand is a promise. NPS tells brand designers and their clients if a brand is living up to its promise. If the score declines after a brand launch, it suggests the business's operational focus needs to be improved to meet the standard established by the new brand. Customers are promised one thing and receiving something less. A negative NPS is a leading indicator of a future business problem: loss of customers. Lost customers are expensive to recapture. The business has to reinvest in customer acquisition.

Net Promoter Score is the difference between a brand's promise and customer experience. When brand designers and clients speak the same language and collaborate to solve customer problems, everybody wins.