Why Small Businesses Fail the Recognition Test

Brand Awareness Starts With Brand Recognition

Does passing the recognition test ensure business success? No. But good recognition can help.

Small business represents a vast majority of all businesses in the US. In fact, they account for 99.7%. And the entrepreneurial spirit has never been better. In 2020 there were over 800,000 business startups. And the pandemic has not slowed enthusiasm for new ventures.

“Despite economic uncertainty and a volatile market, the coronavirus pandemic has led to a surge in startups. More businesses are being launched than at any time in the past decade, and existing startups are showing a rapid acceleration.”

But unfortunately, their chance of success is not very good. About 65% of these businesses fail within their first 10 years. And there are a lot of good reasons why the failure rate is so high. But there’s one important and fixable reason that small business can’t make the grade. It is the lack of meaningful competitive differentiation. And it starts with brand recognition.

What Brand Recognition Will Tell You

We recently conducted a small business brand recognition study to better understand the impact of differentiation, relevance, and other key recognition factors. What we found was surprising.

90% of Small Businesses Have Poor Recognition

That might be a little discouraging. On the other hand, it means that 90% of the small businesses have an opportunity. But what do these results actually tell us?

In our study, we randomly selected several small businesses in the home service category. We looked at verbal branding like names and slogans. We examined logos and other graphic elements. And we also looked at brand perceptions. Part of recognition is the association of positive perceptual attributes like trust, reliability, and authenticity. In total we looked at 20 different measures that contribute to brand recognition.

Recognition Insights

  • Distinction Matters. Distinction usually translates to memorability. And, as a brand, what you want most is to be remembered. But it’s also important to be remembered for the right things. Standing out for something that resonates with customers has true competitive value. In the study it was meaningful distinction that separated the good from the average . . . or bad.
  • Meaningless Names. We found that many small business names lacked relevance, meaning, and distinction. For the most part, they were forgettable. Names of an owner don’t mean much to most people unless they are well known. Acronyms and initialisms get lost in a sea of meaningless “alphabet soup”. Generic terms and words are so commonplace they add no differentiation value. Attempting to be cute and clever comes off as unauthentic.
  • Unimaginative Logos. Most small business logos and identity graphics were found to be unimaginative and ordinary. Generic-looking wordmarks, common symbol marks, and failure to exploit an ownable color contributed to poor relevant recognition.
  • Awareness over Recognition. It is understandable that businesses would feel compelled to build awareness through advertising and other promotion. But any investment in awareness could be money ill-spent if the brand lacks recognition. Why invest in a brand that no one will recognize or remember? Awareness and recognition need to work hand-in-hand to be their most effective.

3 Fixes to Help Pass the Recognition Test

1. Meaningful Slogans Help

How often do we see slogans like: “The Best of . . , Most Reliable . . ., Trusted, or Highest Rated? How many of these do you remember? And more importantly, how meaningful are they? Many of the businesses in our study didn’t even have a slogan. Or if they had a slogan it was so generic it could apply to anyone. Creating a slogan that is meaningful and distinctive is an easy quick fix to help boost brand recognition.

2. Relevant Names Matter

A name change of an existing company is not easy nor is it inexpensive. But for a new start-up picking a name is one of the most important decisions in establishing immediate and credible recognition. However it’s surprising how little thought seems to go into naming. It is one of the most important strategic decisions that a new company will make. And it’s something you don’t want to change later. Take the time to carefully consider the most effective name and seek out professional help. It will be worth it.

3. Branding is More Than Logos

Many small businesses make the mistake of thinking that a logo is all they will need to identify their business. But brand identity is more than logos. Establishing an strong identifiable color, for example, will reinforce your brand in surprising ways. Using photography that is unique and relevant to the brand is also essential. There are many elements to an identity systems that can ensure you stand out from your competitors.

The Value of a Brand Recognition Study

A Brand Recognition Study will reveal what you need to do to stand out in your category. And be remembered for the right things. There are opportunities with both your verbal and visual branding that you may not otherwise be aware of. And a recognition study will help you take full advantage of these opportunities. A full recognition study will measure over 20 different aspects of the visual and verbal expression of the brand. This will all be done in the context of competition so you can see your relative strengths and weaknesses.

Look for our latest small business brand recognition study that will provide more insights and findings on why small businesses fail the recognition test.c

The goal of How Brand Works is to share our experience, perspectives and philosophy on the different facets of branding intended to enable an effective brand management strategy.