Think of a brand. Any brand. Apple, Coca-Cola, FedEx, Dunkin’ Donuts—doesn’t matter. We’re pretty big fans of Apple around here, so we’ll go with that.

What is the Apple brand? It isn’t computers and phones and other cool stuff we can’t live without. Those are the products Apple manufactures. And it isn’t slick TV ads or dramatically staged presentations or chicly minimalist storefronts. That’s all marketing and advertising. It’s admittedly pretty cool marketing and advertising, but still, it isn’t the Apple brand.

It turns out the Apple brand isn’t any thing in the true sense of the word. You can’t hold it or hear it or even touch it. But that doesn’t mean it isn’t the single most valuable thing that Apple owns. To understand why a brand is so valuable it’s best to break it down into three easy questions: What is a brand? How does it work? And why is it worth anything at all?

What is a Brand?

A brand is the way in which a company, organization, or individual is perceived by those who experience it.

Because it’s intangible, a brand isn’t as easily defined as, say, a fish. But the way in which they’re defined is very similar indeed. You’ll probably agree that the most basic defining characteristic of a fish is where it lives. Fish live in water. That’s what makes a fish a fish. The same fundamental criterion applies to brands. The answer to the question “what is a brand?” starts with where a brand lives. So where do brands live? Brands live in people’s minds. They live in the minds of everyone who experiences them: employees, investors, the media, and, perhaps most importantly, consumers.

Simply put, brands are perceptions.

As branding expert Marty Neumeier puts it, “A brand is a person’s gut feeling about a product, service or organization.” Ashley Friedlein, CEO and co-founder of Econsultancy, has a similar take: “Brand is the sum total of how someone perceives a particular organization.”

Elements of a Brand

As perceptions, brands comprise a multitude of different elements. It helps to take a look at the most important ones, as these are the purview of the next concept we’ll explore: branding. The fundamental elements of a brand include the brand compass, company culture, name and tagline, identity, voice and messaging, website, and brand architecture.

Brand Compass

The brand compass is a summary of the most fundamental truths about your brand. It’s the outcome of the work done in the brand strategy phase, including research and positioning. A brand compass shows the direction your brand is headed and why. It is made up of five parts: Purpose, Vision, Mission, Values, and Strategic Objectives.

Company Culture

Company culture is a spirit of collective purpose and inspiration that drives your brand. It’s more than just fiery leadership speeches and ping pong tables in common areas, though. The strongest company culture is founded on a brand’s core values, those principles that define how your brand engages with the world and why. Rock solid company culture results in internal brand alignment—the ideal state of being wherein a brand’s employees understand it at the deepest level and are motivated to act as its ambassadors.

Brand Personality

What is a Brand Brand Personality Ignyte Branding Agency

Brand personality is the unique spectrum of thoughts, emotions, and behavioral patterns that are intrinsic to a brand. Its personality includes a brand’s most individualistic traits. It is what makes Apple the chic, minimalist auteur, or REI the rugged, pioneering outdoorsman. A brand’s personality is the reason it is identifiable to its loyal customers and the basis for the highly personal relationships they form with it.

Brand Architecture

Brand architecture is the coordinated system of names, colors, symbols, and visual language that defines a brand or brands. Superior brand architecture is highly intentional and intuitive, founded on research into customer experience. Brand architecture systems are commonly categorized as either monolithic, endorsed, or pluralistic. Monolithic brand architecture comprises a singular master brand and multiple sub-brands. Endorsed and pluralistic architectures comprise parent brands with varying relationships to the divisions over which they preside.

Name and Tagline

What is a Brand Naming Ignyte Branding Agency

A brand’s name and tagline are its most immediate face to the world. They should be replete with meaning—either intrinsically or as the result of methodical brand narrative. A lot goes into the creation of a brand’s name and tagline. In depth market research, brainstorming, refinement, testing—the process is designed to ensure that these monikers are not only meaningful but ownable as well. The complicated nature of creating names and taglines is testament to their importance. A strong name conveys a brand’s unique value propositions, differentiating it from the competition and leaving a strong impression on those who experience it.

Brand Identity

What is a Brand Identity Ignyte Branding Agency

Your brand’s identity is more than just its logo. Identity is the visual encapsulation of the deep truths revealed about your brand in strategy and positioning. An effective identity will embody all of the defining characteristics of your brand, including its personality, promise, and purpose. Your brand’s identity is its stamp on the world—an aesthetic symbol full of meaning that has the power to communicate your brand’s essence in a visual instant to all who experience it.

Brand Voice and Messaging

Brand voice and messaging are critical to a brand’s engagement with the world. They distinguish your brand from its competitors by conveying its purpose, promise, and personality. Brand voice and messaging humanize your brand, making it identifiable to your customers. In every instance in which your brand’s voice is heard, whether via marketing collateral, advertising scripts, or website copy, your customers should be able to recognize it immediately—like an old friend on the other end of the telephone.

Brand Website

What is a Brand Websites Ignyte Branding Agency

Your website is the most complete and centralized manifestation of your brand. A good website brings your brand to life with compelling content and engaging design. These days, websites are no longer confined to a desktop experience. They travel with us, on our mobile devices, to every corner of the world. Websites remain one of the most impactful and cost-effective ways to deliver a holistic branding experience to your target audience.

Now that we’ve parsed the various components that make up a brand, it’s time to look at how and, more importantly, why those components are created: branding.

What is Branding?

Branding is the act of shaping how a company, organization, or individual is perceived.

Customer perceptions themselves don’t go out and buy iPhones. But they are critically important for one reason: perceptions dictate behavior. Even perceptions that we’re unaware of have the ability to profoundly affect how we act. Research in experimental social psychology has shown that while we might think we’re in total control of our actions, our behavior is often influenced by stimuli we’re completely unaware of.

In sum, how an individual perceives a brand (consciously or unconsciously) wholly determines how he or she will engage with that brand. The power of branding hinges a very important truth about perceptions:

Perceptions are malleable.

Branding has the power to shape our perceptions because those perceptions are susceptible to being shaped. They practically cry out for it. Whether we know it or not, we are constantly searching for meaning and order in the world around us. Without it, we’re lost. We want our realities to make sense.

As far as our brains are concerned, there’s no practical difference between perception and reality. What we perceive is what is real to us. This is where the real power of branding lies. If branding can shape our perceptions, and our perceptions are our reality, it follows:

Branding has the power to shape reality.

Did I just blow your mind? It’s wild stuff, I know. The power of branding to architect consumer reality is why companies like Apple spend millions of dollars on it every year. When you effectively leverage the ability to architect reality, you’re able to sway consumers’ purchasing behavior in immeasurably valuable ways.

Why Invest in Branding?

What is a Brand Why Invest Ignyte Branding Agency

The hesitancy of some companies to invest in branding boils down to a matter of perception as well. It isn’t easy to draw direct correlations between successful branding and quantifiable returns. But the simple fact is you can’t put a price on the value of developing a truly authentic brand.

So, why invest in branding? The operative word here is “investment.” Too many companies see branding as just another expense counted against their marketing budget. But when you understand how integral branding is to influencing consumer behavior, you see that it’s more than just a tactic. It is a long-term strategy that can yield measurable returns throughout life of your company. Take a look at just five of the top returns you’ll get from your branding investment:

Attract Ideal Customers

Central to any branding initiative is customer research. In-depth interviews, focus groups, and online surveys enable you to precisely identify which customer types align with your company’s purpose and values. With this information, you can create clearly defined audience personas and craft marketing messaging that’s specifically targeted at your ideal customers. Ideal customers aren’t just more likely to buy what you’re selling; they’re also significantly more loyal in their relationship with your brand. And few things are more valuable than brand loyalty.

Increase Marketing Effectiveness

The easiest way to make your marketing efforts more effective is to invest in the brand they stem from. When your brand is cohesive and well-articulated, your marketing initiatives will be too. Branding encompasses the essential “first steps” that define your core messaging, brand personality, and tenable marketplace position. As we just mentioned, the customer research involved in branding allows you to develop targeted marketing campaigns that are highly relevant to your most valuable customer segments. A bold new identity makes every marketing touchpoint more engaging, while the guidelines and templates that come out of branding will save you time and money on the content of all your future initiatives.

Close Deals More Easily

Ask any salesperson on the frontlines of commission warfare and they’ll tell you: Well-defined, strategically positioned brands are just easier to sell. That’s because their value propositions are built into their brand narrative. The argument for the distinct superiority of a well-positioned brand has already been clearly articulated. This takes a huge weight off of the shoulders of its sales team because a good portion of their work has already been done well before they engage with potential customers. Branding gives your sales force a unique advantage, better enabling them to close deals quickly and confidently.

Command Higher Prices

It’s true what they say: customers don’t buy products, they buy brands. And customers are willing to pay premium prices for brands they perceive as superior. A white t-shirt from Hanes will cost you about $5. A white t-shirt with an Armani tag will run you north of $150. Effective branding enables you to position your company as an industry leader with value propositions that none of your competitors can offer. This type of meaningful differentiation has tangible value built into it. It solidifies your worth and allows you to command higher prices for your goods or services.

Boost Business Value

Never underestimate the power of brand equity. In addition to justifying increased price points on your offerings, it can also have a positive effect on your share price. Stronger brands realize stronger financial performance. The long-term result of branding is that your company itself is worth more when you’re ready to exit. Not unlike the cost of home renovation, an investment in branding delivers valuable returns when the time comes to negotiate a selling price.

The Takeaway

In her seminal book Designing Brand Identity, branding expert Alina Wheeler encapsulates the internal/external upshot of branding like this:

“Branding is a disciplined process used to build awareness and extend customer loyalty. It requires a mandate from the top and readiness to invest in the future. Branding is about seizing every opportunity to express why people should choose one brand over another. A desire to lead, outpace the competition, and give employees the best tools to reach customers are the reasons why companies leverage branding.”

Leading an industry as an organization, outpacing the competition, empowering employees—according to the experts, branding is an indisputably powerful process. When you understand what a brand is, how it is created, and the measurable returns that come from investing in branding, this power becomes evident. Branding pays dividends over the life of your company, enabling to attract better customers with lower marketing costs, all while commanding higher prices for your offerings. Smoother sales, increased customer loyalty, the multifaceted benefits of brand equity—the list of benefits goes on. At the end of the day, though, your brand is the way the world perceives your company. What could be a smarter investment than shaping that perception?

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A prolific blogger, speaker, and columnist, Brian has more than a decade of experience in design and branding. He’s written for publications including Forbes, Huffington Post, and Brand Quarterly.