Three ways brand building is similar to compound interest

Einstein famously quipped that “compound interest is the eighth wonder of the world”.

He was referring to the fact that once you start adding a little bit of interest to a sum of capital, you are adding value over time, both to the original capital as well as compounding all the interest previously accumulated.

As incremental interest compounds the amount of the capital sum increases.

And providing you don’t take anything away, and you continue to invest, you continue to compound the interest over time; adding interest to an ever larger sum and eventually the interest that you’re adding is worth even more than the original sum.

Wonderful.

Not quite as wonderful as the Hanging Gardens of Babylon, but in Einstein’s eyes, worthy of a place at the table. Maybe sitting next to The Colossus of Rhodes.

Compound interest is Einstein’s ‘financial wonder’ because while saving takes diligence and consistency over time, that effort adds up, with compound interest acting as a wonderful multiplier.

I’d wager that if he was around today, Einstein would be placing brand building in a similar category to compound interest – the ninth wonder of the world.

Brand building works in three similar ways to compound interest.

Firstly, it builds over time, adding incrementally more value, the more time passes.

When a brand first starts out and develops a set of branding devices, whatever they might be, they start building memory structures in the minds of potential customers.

Like compound interest, each one of those additional memory structures is small to begin with, but over time grows and grows.

Each additional interaction adds more, both to the initial interaction and to the incremental ones. They build over time and the brand benefits from the weight of all the previous interactions.

Creativity is to brand building as interest rates are to compound interest.

It doesn’t matter whether you’re McDonald’s with its visual golden arches, Intel with its audible ‘bom-bom-bom-bommms’ or JCB with, well, J, C and B.

Be consistent, be repetitive, and the compounding interest will take care of itself.

Secondly, the more you invest the greater the impact of compound interest.

Each month and year the compound interest builds up and grows the capital sum, and if each month and year you save more into the capital, then the impact of the compound interest is even greater.

Brand building works similarly; if you invest a small sum, then the impact of compounding brand building is small but builds over time.

The more you additionally invest in the brand, the greater the impact that is had over time, both from that additional investment, as well as from the interest.

It’s December, so John Lewis is doing its Christmas ad thing; this time with an adorable Venus flytrap called Snapper.

When Andrew Tindall at System1 reviewed the work, his first comment on why it was working? It’s a John Lewis ad.

It’s another payment into the John Lewis brand’s savings account. As Andrew puts it: “Viewers clock it’s for John Lewis early on… it’s distinctive and builds on the style, brand and work of the past 10 years.”

It’s Happy Christmas John Lewis for 2023; with thanks and interest from all the previous years.

And thirdly, the more committed you are to investing in the capital the more it will pay back and the greater the impact of compound interest.

Every time you take a break from saving more into your initial capital you diminish the impact of the compound interest; both for the time of that break, from the interest that would have been applied to that break, as well as from all the subsequent growth had you not taken a break.

You can only get back to where you would have been by either investing more, by unlocking a greater rate of interest, or by investing for longer than you otherwise would.

The same is true for brand building. If you take a break you miss out on the impact of brand building for that moment in time, but you also diminish the impact that any future investment of brand building will have.

Asos never invested in brand building, but is about to unleash £30m of investment in 2024; laying down solid brand foundations instead of relentlessly focussing on short-term performance marketing which it sees as a “one-dimensional” disadvantage.

Inside Asos’s plan to ‘rebuild’ its brand affinity and marketing team

Those disadvantages exist until you invest more to catch up, or you accept that it will take longer to get where you want to get to, or until you find a way for your brand building to have more impact.

Finding a way for your brand building to have more impact is the equivalent of unlocking a better rate of interest. The higher the interest rate the greater the multiplier effect on all previous investments and all previous interest gains.

Creativity is a multiplier

Creativity is to brand building as interest rates are to compound interest.

Creativity is a multiplier that adds impact to everything that precedes it. Finding new ways to disrupt, intrigue and persuade customers creates more powerful memory structures. That power exerts itself both in the moment when it happens as well as adding resonance to all the prior interactions with the brand.

Of course, investing in brand building, like savings, is a financial choice.

For new-to-world brands, or brands without either profit or cash flow to invest, making significant investments in brand building may not be possible. They may not have the luxury of a surplus they can put into a savings account each month.

For those brands, that’s where simple and consistent distinctive brand assets can make a huge difference.

Those consistent things (logos, straplines, colours, mascots, tone, experiences) actually cost relatively little to implement, but keep them consistent and over time their impact will compound.

For brands who can invest more significantly in brand the impact will be greater.

Investing in reach, investing in multiple channels, and investing in research that helps you understand how to invest better, and in which areas – those are the equivalent of putting large lump sums into your savings pot each year on which the capital interest then has a more profound impact.

And creativity is accessible to all brands, big and small. It is the panacea. It is a greater rate of interest – maybe even the ninth wonder for those who know what it looks like and where to look for it. If you’re interested in this, I wrote a piece on unlocking powerful creativity.

Whether you’re looking after a small brand or a large portfolio, the impact of the ninth wonder of brand building is worth investing in.

You might be looking after a small new brand where your critical investments are inconsistent brand assets, and incredible creativity in owned and earned media.

You might be looking after a heritage brand with years of prior investment, looking to find new channels and opportunities to invest, or more creative interest rates to unlock.

Or you might be somewhere in the middle.

In any case, Einstein’s advice would probably have been the same as your grandmother’s: Look after the pennies and the pounds will look after themselves.