Branding vs Direct Response Ep 378

Summary Notes


Alex Hormozi discusses the nuances of branding versus direct response marketing, emphasizing the long-term value of branding in building customer loyalty and achieving higher returns. With insights from conversations with top marketers like Dean Graziosi and references to industry leaders such as Gary Vee, Hormozi explains that while direct response yields immediate results, branding creates a lasting impact through storytelling and reinforcing values, leading to a compounding effect of goodwill. He stresses the importance of patience and consistency in branding, arguing that it ultimately leads to greater success and a more sustainable business model, as evidenced by the strategies of successful entrepreneurs like Conor McGregor and Kylie Jenner. Hormozi's personal journey from direct response to a focus on branding reflects a broader industry trend towards recognizing the long-term profitability of building a strong brand identity.

Summary Notes

Introduction to Branding vs. Direct Response Marketing

  • Alex Hormozi introduces the topic of branding versus direct response marketing.
  • He emphasizes the importance of understanding the differences between the two, which can have a significant financial impact.
  • Hormozi shares his background as the owner of and his motivation for making educational videos based on his past experiences and lessons learned.

"I want to break down the difference between branding and direct response marketing. And why not? Deeply understanding the differences costing you millions and millions dollars and ultimately the amount of money that you probably want to make."

This quote highlights the central theme of the video, which is to elucidate the distinctions between branding and direct response marketing and the potential cost of not understanding these differences.

The Concept of 'The Ask'

  • Hormozi discusses the concept of 'the ask,' referring to the moment when a business requests something from a customer, such as a purchase or commitment.
  • He argues that delaying 'the ask' allows for a bigger request later on, drawing an analogy to personal relationships.
  • The concept is likened to a runway where the longer the delay, the bigger the 'plane' (or ask) that can take off.

"The longer you delay the ask, the bigger the ask can be."

This quote encapsulates the idea that building up to a request over time can lead to greater rewards, as the relationship or familiarity with the audience grows.

Branding as a Long-Term Strategy

  • Hormozi explains that many marketers start with direct response but eventually focus on branding.
  • Branding is described as a strategy that builds goodwill and recognition over time without immediate sales promotions.
  • He uses examples of large consumer brands and celebrities who have leveraged their brand to launch successful products.

"And so different examples of this that I think would be important to drive the point home and why I think that many, many marketers start in direct response and then end up in branding is because of what I'm about to share with you."

The quote introduces the transition from direct response marketing to branding, which is a common trajectory for marketers seeking long-term value.

Goodwill Compounding vs. Revenue

  • Hormozi introduces the concept that goodwill compounds faster than revenue.
  • He suggests that while direct asks deplete goodwill, building a brand without immediate asks can increase goodwill over time.
  • Hormozi implies that this compounding goodwill can later be monetized more effectively than constant direct selling.

"Goodwill compounds faster than revenue does."

This quote emphasizes the strategic advantage of building goodwill through branding, which can have a more substantial and long-lasting impact on revenue than direct response marketing tactics.

The Role of Influencers and Celebrities in Branding

  • Hormozi discusses how influencers and celebrities use their personal brands to launch products.
  • He mentions Dwayne Johnson, Conor McGregor, and Kylie Jenner as examples of individuals who built a brand first and then monetized it through product launches.
  • The discussion points to the potential of branding as an arbitrage opportunity for maximizing value.

"You look at Dwayne Johnson, the rock built his huge brand and then said, hey, I'm starting this tequila. You guys should check it out. Conor McGregor. Conor McGregor built up his personal brand that said, hey, check out proper twelve. Kylie Jenner was like, hey, built up a brand and then she did her lip kits."

The quote provides real-world examples of how strong personal brands can be leveraged to introduce and sell products successfully, illustrating the power of branding in marketing.

Direct Response Marketing vs. Branding

  • Direct response marketing involves actively requesting an immediate action from the audience.
  • It's based on a cycle of depositing and extracting value, where the cost to deposit should be less than the gain from extraction.
  • Direct response is measured by immediate return on ad spend (ROAS).
  • Branding focuses on reinforcing values and stories associated with products and services.
  • Branding is not about immediate action but about long-term value and reputation.
  • Large companies tend to focus more on branding than direct response.
  • The difference between the two is the time horizon over which ROI is measured.
  • Branding aims to build a brand that can command higher prices based on perceived value.

And so you're constantly depositing and extracting capital in the relationship. And the hope is that it costs you less to deposit than you make on the extraction.

This quote explains the fundamental principle of direct response marketing, which is to invest in the customer relationship with the expectation that the return will be greater than the investment.

To contrast that with branding, what we're doing with branding is that we are reinforcing the values and the stories that people tell about our products and services.

Here, Alex Hormozi contrasts branding with direct response marketing, highlighting that branding is about reinforcing the narrative around a product or service rather than directly soliciting a transaction.

And the more I studied these massive companies, I was like, okay, so all of these companies all do this type of marketing, whereas little old me is doing this quick jab, right hook, whatever, of just give, ask, give, ask, give, ask, give, ask.

Alex reflects on his realization that large companies prioritize branding over the transactional nature of direct response marketing.

And so why is that? And I would posit, and this is my theory, and this is what I talked to Dean this morning about at length, is the difference between direct response and branding is not the ROI on the advertisement itself, but on the time horizon with which we measure it.

Alex proposes that the key difference between direct response and branding is the timeframe over which the return on investment is considered, with branding taking a longer-term perspective.

If I were selling t shirts, a direct response marketer might have a cool, funny meme thing, aggressively market it, have upsells of two of the same shirts, five of the same shirts, getting on continuity for each meme shirt every month, blah, blah, blah, blah.

This quote gives a concrete example of a direct response approach to selling t-shirts, emphasizing aggressive marketing and upsells.

It would be spending a year talking about what your values are, the stories that you want people to tell about you and your company, and then you can simply put your brand on a t shirt and people will pay $100 for it.

Alex illustrates a branding approach, where a company spends time building its values and narrative, which can lead to a higher perceived value of products like branded t-shirts.

The Role of Consumer Perception in Branding

  • The success of branding is linked to the alignment between the brand's message and the consumer's perception.
  • Consumers ultimately shape a brand based on their perceptions and conversations.
  • In direct response marketing, the reputation can be negatively affected by the aggressive nature of the strategy.
  • Branding is about aligning consumer beliefs with the brand's values and encouraging them to support the brand financially.

And when branding works very well is when what you are saying about your brand clarifies what people are already saying.

Alex Hormozi emphasizes that effective branding occurs when a brand's messaging resonates with and clarifies the existing consumer narrative.

Oftentimes it's not. And this is especially true in the direct response marketing community at large, because people say terrible things about the people who are doing their direct response, and so their brand is the reputation and the things that other people say about you.

This quote points out the potential negative reputation that can come from direct response marketing and how it can impact the overall perception of a brand.

He talked about how the consumer is the one that creates your brand.

Referring to a point made by Elon Musk, Alex underscores the idea that consumers are the ultimate creators of a brand's identity through their perceptions and discussions.

Brand Perception and Marketing Messaging

  • The effectiveness of a brand's marketing message depends on its truthfulness.
  • Companies like Toyota are known for qualities they don't explicitly advertise, such as reliability and high quality.
  • The goal in branding is to give people accurate words to describe your brand.
  • Effective branding involves deliberate actions to reinforce the true characteristics of a brand.

"Ford talked about being reliable and being high quality, et cetera. He said in Toyota, their marketing never said that, and yet Toyota is the company that's known for being reliable and high quality."

This quote exemplifies the idea that a brand's reputation for certain qualities can be established without directly stating them in marketing, contrasting Ford's explicit claims to Toyota's implicit reputation.

Grant Cardone's Influence on Branding Strategy

  • Grant Cardone is recognized for his self-promotion and branding effectiveness, regardless of personal opinions about him.
  • Cardone emphasizes the importance of associating one or two words with a brand.
  • Simplifying a brand's message to a few key words can make it more memorable and relatable to the masses.

"One of the things that he said that I have really taken with me is the one or two words that someone will associate with your brand."

This quote highlights Grant Cardone's strategy of distilling a brand's essence into one or two words that people can easily remember and associate with the brand.

The Power of Simple Messaging in Branding

  • The simplicity of a brand's message aids in public recall and association.
  • Alex Hormozi wants his brand to be associated with being a digital business builder or investor.
  • Consistency in messaging across all forms of content and advertising helps reinforce the desired brand image.
  • True alignment between messaging and reality is crucial for successful branding.

"If you can reinforce the simple message in every single thing, people will begin as long as it's aligned with what's true, to say the same things back to you."

This quote underscores the importance of reinforcing a consistent, simple message that reflects the truth of the brand, leading to public reinforcement of the desired brand image.

Branding vs. Direct Response Marketing

  • There's a shift from direct response marketing to branding among many successful marketers.
  • Branding is seen as a higher ROI activity over a longer time horizon.
  • Large companies focus more on branding, reflecting their values and identity, rather than direct response marketing.
  • Direct response marketers often burn out due to a lack of connection with the brand they are building.
  • The direct response marketing space is young, leading to a predominance of newer lessons and fewer "old lessons."

"And I think that the reason Seth Godin started with direct response and then became and now talks exclusively about branding, the reason Simon Sinek started direct response and then talks way more about branding, the reason that I started in direct response and talk much more about branding stuff now, and at least that's my belief in where I think that it's because that's where you make more money just over a longer time horizon."

This quote reflects Alex Hormozi's belief that the evolution from direct response to branding among marketers like Seth Godin and Simon Sinek is due to the higher long-term profitability of branding.

"And I think the reason that many direct response marketers burn out is because they don't like the brand that they are building for themselves."

This quote suggests that a lack of personal connection to the brand can lead to burnout among direct response marketers, highlighting the importance of brand alignment with personal values.

Longevity in Internet Marketing

  • The Internet marketing space evolves quickly, and being considered an "OG" (original gangster) after only three years is humorous.
  • Brand equity tends to drop quickly in this space, leading to burnout among marketers.
  • Building large-scale, enduring brands requires consistent effort over time.
  • Branding is a natural progression for marketers who have the resources and patience to build something substantial.

"Anyone can consider themselves a, quote, og in the Internet marketing space after three years is laughable, right?"

This quote highlights the fast pace of the internet marketing industry and the humor in claiming veteran status in such a dynamic field.

Branding vs. Direct Response Marketing

  • Branding focuses on building goodwill and relationships over time, whereas direct response marketing seeks immediate revenue.
  • Goodwill can compound faster than revenue because it encourages word-of-mouth and brand loyalty.
  • By continuously giving without asking for a return, you lower the audience's defenses and increase their affinity for the brand.
  • The "give, give, give, get" approach contrasts with the traditional "give, give, give, ask" method.
  • Reciprocal nature of people leads to them moving towards the brand on their own.

"And so if you can delay the ask and you can have the resources and you can have the patience to build something bigger, your goodwill will compound faster than your revenue will in a direct response marketing environment."

This quote explains the strategy of delaying direct sales pitches to build up goodwill, which can be more beneficial in the long term than immediate revenue generation.

The Compounding Effect of Goodwill

  • Goodwill leads to organic growth through word-of-mouth referrals.
  • Clients acquired through brand goodwill often yield better results and are willing to pay higher premiums.
  • This approach creates a situation where demand outstrips supply, eliminating growth bottlenecks.
  • Building a brand over the long term can lead to higher returns on advertising and marketing investments.

"But when you have those types of clients, they get better results, they pay for bigger premiums. And that also gives you implied scarcity within your products and services."

The quote emphasizes the benefits of attracting clients through brand goodwill, which includes better client outcomes, the ability to charge premium prices, and creating an environment of scarcity that drives demand.

Branding as a Long-Term Investment

  • Long-term branding strategies require patience but lead to greater returns on investment.
  • The transition from direct response to branding is a lesson in the value of long-term perspective.
  • Establishing a brand can reduce advertising costs and increase advertising effectiveness over time.

"And so if you can delay the amount of time that you have between when you provide value and when you ask, and ideally you never do, you simply allow the goodwill to continue to compound..."

This quote advises on the benefits of extending the period between providing value and soliciting business, allowing for the natural growth of goodwill and brand strength.

Alex Hormozi's Personal Motivation

  • Alex Hormozi shares insights based on his experience growing a portfolio worth over $85 million annually.
  • The motivation behind creating content is to help others avoid the struggles he faced.
  • The content is meant to provide value to the audience, reflecting the "give, give, give" philosophy.

"But I make these videos because I struggled a lot coming up and I hope that the pain that I went through is not for nothing."

This quote reveals the personal reasons behind Alex Hormozi's efforts to produce valuable content, which is rooted in his past challenges and the desire to help others succeed.

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