Why Branding Makes You Money | Ep 760

0:00You guys want to hear something absolutely insane. I was able to take home more in a year than the CEOs of McDonald's, Ikea, Ford, Motorola, and Yahoo combined as a kid in his 20s. And I have continued to for over half a decade. Which results in a$200 million per year portfolio and$100 million net worth by age 32. And no one is more surprised than me. Me expressing that fact will create envy in some, anger at others, skepticism in most, confusion in old people, and inspire a select few. But before I dive in, raise your hand if you'd like any of the following things to happen. To be able to charge two times, five times, ten times more than your competition for the exact same thing, like Yeti.

0:48We have basically identical cups and somehow they're able to charge$40 versus$10 simply because of what's on the cup. If you'd like to be able to have customers buy from you over and over and over again without considering competition, like Harley, once you're a Harley guy, you stay a Harley guy for life. And if you'd like to virtually guarantee sales in any new business or product that you launch, like Apple, a lot of people just wait in line. They say, just leave my credit card, just bill me and send whatever you're gonna come out with. And that's more or less how a lot of Apple buyers are. Once they become an Apple person, they become an Apple person for life.

1:24So if you like that stuff, great, because that's what this talk is about. And so I couldn't figure out how these brands, these companies were able to do this, demand these prices, get people to stay loyal for a really long time. And I felt like for me, I always had to like big borrow and steal and I had to squeeze and push so hard just to get people to buy. Whereas these companies made it look effortless. And it's because I didn't understand this one thing, and that's the subject of the talk today, brand. And the thing is, even people who claim to understand it often don't. And the few who do understand it do a terrible job teaching it.

2:01So this definitely isn't going to be marketing one-on-one class on branding, presentation colors, and logos. And this definitely isn't going to be about feelings, presence, intuition, or whatever. This is about making money. And this concept that I'm going to explain to you is how I built a 7.8 million person audience, across all these platforms. In the past 40 months or so, I sold over a million copies of my last two books, and your deal's worth hundreds of million dollars in our holdingcompanyacquisition.com. That is why you build a brand, or at least that's why I built mine. So let's start with the first one, what branding is.

2:35So when I decided to build a brand, I looked at what many popular marketers said about it. Here are some popular definitions that I have removed the marketers from them. This is not throwing shade, so I'm just saying them. A brand is a person's gut feeling about a product, service, or organization. A brand is not what you say it is, it's what they say it is. A brand is a set of expectations, memories, stories, and relations to that. Take it together, account for a customer's decision to choose one product or service over another. A brand is emotional shorthand for accumulated and assumed information.

3:04A brand is present when the value of what the product, service, or personality means to its audience is greater than what it does for the audience. A brand is a product, service, or concept that is publicly distinguished from other product, services, or concepts, so that it can be easily communicated and usually marketed. Branding is the process of creating and disseminating the brand name, its qualities, and personality. The promotion of a particular product or company by means of advertising and distinctive design. If these sound vague and confusing, it's because they are. And I was just as confused as you when I was trying to figure this out.

3:35Because none of them told me what to do. And so after looking at all these marketers' words, I think I pieced it together. At least enough that once I started thinking about it this way, in a different way that I'm about to share with you, my brand grew and it grew fast. And the reason this is so important is that if you don't know what to do, nothing's going to change. Fundamentally, if you don't change your behavior, obviously nothing's going to change as a result. And so I wanted to find this one term before we get going. Learning. So learning means same condition, new behavior. And so if I wanted to teach someone a phone script, then after teaching you, the phone rings again and you say the new script, you learned.

4:14Learning occurred. On the other hand, if I tried to teach you the script and then the phone rings again and then you change nothing, no learning occurred. You learned nothing. And that's why none of this stuff that these guys said helped me because I didn't know what I could do. I didn't know what behavior I had to change as a result of this. So I didn't know how to do it. And so here's how branding happens. Branding is a deliberate pairing of things through an outcome. So I'll say that again. Burning is a deliberate pairing of things through an outcome. So let's use Coca-Cola, drinking it and liking it as our example.

4:53The yum, aka the outcome, that's what people get. They pair that with drinking the action. That's what they do to get it with Coca-Cola, the product. So the next time you want some yum, you're probably going to reach for a Coca-Cola if that was paired for you successfully. And so branding is a deliberate pairing of things through an outcome. That's it. But sometimes businesses pair their stuff with things that people don't like. That's bad branding. This leads to losses for the business. Now, some of you guys may have seen this. This is Dylan Mulvaney doing a collaboration with Bud Light. There was a lot of press around this advertisement.

5:35This advertisement was actually a great advertisement. And you might think I'm crazy, but it was. Let me explain. It's just not the way you might think it was. This is a great advertisement because it let a lot of people know about their stuff. It let a lot of people know about the product, about Bud Light. By the way, if you're curious, that is the definition of advertising, not branding. Advertising is letting people know about your stuff. Branding is the pairing that occurs as a result. So it was good advertising, but bad branding. Many customers hated this pairing. Lots of people found out, but a lot of people hated it.

6:08Good advertising, bad branding. And so as a result of this bad branding, people not liking the pairing, fewer people bought the product, which netted a loss for the business. And so to fix this, Bud Light paired their product with stuff the audience liked. Like Shane Gillis, who was a man's man comedian. And the UFC, a man's man of sports, if you will. And sales began to recover. So that's the 101 explanation of branding. Let's go into 201. So to go a little deeper, because the better you get at this, the more money you will make. Like the more nuanced you can understand how to brand and build a brand for yourself, the more money you will make.

6:46I promise you that. And so to some people, the Dylan Mulvaney pairing was actually good in general, both good advertising and good branding. Hear me out. For others, it was bad, obviously. all pairings have positive and negative results. And that's because everyone's different. Everyone has different preferences. But for a business, you can objectively see if a pairing was good or bad, whether it netted you more money. So more people dislike the Dylan Mulvaney pairing, so sales suffered, making it a bad pairing. So this isn't opinion. They objectively made less money, and so this pairing was a bad one for their ideal audience.

7:29Now, the 301 version of this is, is there a company or a product where the Dill & Mulvaney pairing could have been both good advertising and good branding so that the majority of people would have bought? I think the answer is yes. It just doesn't necessarily mean it's Bud Light for conservative males as the primary audience. And on the other hand, some people love the new Gillis and UFC pairings, and some hated it. But more of the audience that is their ideal customer, liked it, saw it as good. And so the business netted sales result and they made more money. Good branding. And so for Budweiser, and I just want to call this out, this is specifically for Budweiser and their customer base.

8:08It's not that Shane Gillers for the UFC is magic in some way, or Dylan Mulvaney is un-magic in some way, but for that specific audience, yes, the pairing mattered and how much of the base liked it or disliked it. so if you're anything like me making money is the point so let's drive this home if you made a pairing of your thing and your customer and you got to choose which outcome you had happen so you have your product and they drink it there's an outcome that happens afterwards right that pairs with it on one hand 75 % like it and 25 % hate it or on the other hand 25 % like it and 75 % and hate it, which would be the bottom example.

8:46Which would you choose? More money good, the big green one. Yes, of course, the top one, because it would make you the most money. And so to be clear, for the 201 level of understanding, branding always happens. Branding always occurs. But our goal is good branding. And good branding is a deliberate pairing of our business with good outcomes for our ideal customers. And so what you pair your business with determines two key things. One, who pays attention to your business? And two, whether they go towards your business, like the UFC example, or away from your business, like the Dylan Mulvaney example.

9:28And so at the beginning of this, I said I was going to cover three things. The first thing I said is what is branding? But now that we have gone through that, I want to re-say what I walked us through, which is what good branding is. Ideally, what we're shooting for. So now that we've covered that, let's talk about why it makes you money. Why good branding makes you money. Branding, as I define it, happens everywhere all the time. But businesses use it for profit. So let's look at some of the earliest uses of branding to figure out how we can use it. The earliest version of branding that we can think of, or at least that I can think of, happened on livestock.

10:00It was literally a brand. They would heat up metal, they'd sear it into the side of a cattle and they would get a lovely little logo. Maybe we'll have a Nike swoosh cow someday. And so they literally burn these symbols into animals. And those symbols had a magical effect. So let's say you're walking around and you see a cow with no brand. You say, hello, cow. The cow says move back and it has nothing on it. This is just a cow. You might leave it alone and that might be it. On the other hand, let's say the cow has a brand you recognize. Say it's your neighbors. You might be like, hey, that's Bill's cow.

10:33Now, if you like Bill, you might grab the cow and pull him by the whatever you pull cows by and probably return it to Bill. If you hate Bill, then the cow may stay lost in the wilderness forever and become lunch for your family for the next month or two in the form of delicious burgers. But either way, for better or for worse, the brand affected what you did it affected your behavior and so to take this to the 201 level what if you see a branded cow but you don't recognize the brand you might be like who dis i see a logo but i don't know anything about it well then you would treat it how you treat branded animals in general in that you just know that it belongs to someone and so you would treat it the way that you'd treat it as though it belonged to anybody else and even if only a tiny bit you would treat a wild cow different from a branded cow in general.

11:30So if you had one that was wild and you had one that you didn't recognize but was branded, you would still probably treat them differently. So that just shows you the power of brand as a concept because it dictates a tie between that cow and a human being or some complex animal that can brand cows. And so these are all effects of brand in general. So that's how it affects what people do. And so now I want to get tactical on how we translate that concept and getting them to buy. So let's say we pair our brand. So this is more getting really tactile and this is like, okay, if you don't have a brand, this is the step-by-step right now.

12:01So you have a weak brand and we say it's a weak brand because it's starting up. You don't have a lot of association. Fantastic. So now you want to pair it with people, experiences, other stuff that your ideal customer likes. So in this instance, I'm using little Nike pairing with LeBron and Tiger who are champions, world-class, goats, et cetera. And so people who like sports and competition would see that probably as a positive pairing, aka good stuff. And so if we do that pairing or we make that pairing, for the majority of people, branding will occur. And so the brand grows. And so the question then follows, what's the benefit of a strong brand versus a weak brand?

12:39And so the weak brand is before the pairing, the strong brand is after the pairing. So a strong brand turns commoditized products like a$5 white t-shirt plus the strong brand into a premium product, a higher value brand name product. And premium products with a strong brand then get customers to want to pair themselves with the product so that they can associate the outcome themselves with the outcome the brand delivers, which they do with their money. So how do they make that association? They give money, they get the shirt, the association happens based on what they've seen where that logo has been elsewhere.

13:17And so then they go from, I want to be a winner to exchanging money and saying, now I am a winner or I feel like a winner. That's how this works. And so this means that if the ideal customer likes sports winning and competition, et cetera, then they're more likely to buy stuff from a brand paired with those things. So let's lay it all out. Weak brand paired with stuff customers like creates a strong brand. Strong brand gets put onto a winning product, transforms a generic to winning product. Then the customers want to associate with that winning product. So they buy the product and they put money into your bank account in order to do it.

13:55And so as long as you net a positive between what it costs you to associate with Tiger and LeBron and how many t-shirts you can sell a result, you make money. And so here are some steps in words for those who are more word people. You start with a brand that means nothing. You have a logo, just like the cow that the other person didn't recognize. People know that it is a brand. They just don't know what that brand means yet. So it means nothing right now. Then you pair that brand with something or someone that your customers ideally like. Third, your brand starts to mean the thing customer likes to them.

14:28Then they want to associate themselves with that thing they like or get more of it. But they can't buy that thing. But they can buy a tiny sliver of that association. So they buy the shirt with the logo that means that thing to them. And so they get the shirt, you get the money and it all happened because you deliberately paired it with something they like and this happens everywhere so dolce and gabbana classic example they paired with kim kardashian they made a line specifically for her and so for a lady who wants to associate with fame beauty wealth that would be a pairing that makes sense and so that lady who wants other people to associate her with fame high class money luxury well will then buy dolce and gabbana and be like I'm just like him.

15:14Now, she might not say that directly because she might just associate with the values, but the transfer still happens. And so when someone looks at two products that on the surface are generically the same, you've got two t-shirts, one that has a weak brand or no brand and the other that has the strong brand, the person that has the strong brand, they're going to be more likely to buy and pay more for. And this happens because they actually by the elements that we've deliberately paired with the brand, which they identify with. And at this point of building a brand, you do this to change customer behavior.

15:48And that is the point of building a brand to change customer behavior in your favor when they see it with a product. And so this is a quote from Warren Buffett that I like a lot, kind of sigifying some of the elements of the benefits of brand. So the single most important decision in evaluating business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by 10%, then you've got a terrible business. And so if we have an unbranded t-shirt for$5 and we say, you know what?

16:18We think we have a strong enough brand that we can raise the price. And then boom, we can raise the price and still not lose that many sales. But we, in this case, 12x the price, good branding drives that premium pricing. Good branding also improves advertising. So with the generic brand, if you're marketing this white t-shirt, you might get half a percent of people. There are many white t-shirts. There are many like it. This one is mine. Just kidding. So the point for those of you got the reference. So if you have a 0.5 % click-through rate on something that's generic, there's nothing special about it.

16:51On the flip side, if you have a Nike brand t-shirt, same identical t-shirt, and it has the swoosh, now you might get six times as many people to click and buy at a higher price. See how these things stack together. That is why these brands exist for such a long period of time and make so much money. So they get cheaper customers, they get higher returns, and they have better response rates in advertising. And on top of that, as if that weren't enough, good branding also drives customer loyalty, aka they buy more stuff more times. And so like the Apple example I gave earlier, once you buy one Apple product, you tend to buy more and you tend to keep buying them.

17:29And so this also, a good brand, also protects your business from competitors stealing that customer in the future. And so as I promised the beginning, who's seeing how this, all this stuff allows you to one, be able to charge 10 times more than your competition to get higher returns in advertising. So you can scale that much more, that much faster. And then three, get people to keep buying for life, compounding your money, making skills for good. Okay. Which is why building a brand will make you lots of money. It's also why brands outperform commodities in every single industry and give a lasting competitive advantage that, to be fair, is theirs to lose.

18:07So here's another quote from Uncle Warren. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.