{Thanks to the irrepressible Phil Bernstein of Portland, OR for this insightful post on the value of brand advertising, reprinted here with his permission.}

Recently I met with the Executive Vice President of a phone and Internet company in the Midwest. They are a relatively small company going up against giants such as AT&T and Comcast. 80% of their revenue comes from business to business sales, and their value proposition for these businesses is that they offer a local presence, better customer service, and the ability to more readily customize a solution than the big boys can.

Many of their products and services were not available everywhere – much depended on the laying of fiber-optic cable, and even within individual towns there were neighborhoods they couldn’t reach. For this reason, they used television and radio for “branding” only; they would use direct mail, door hangers, geographically-specific digital strategies, and cold calling to make direct response offers in the neighborhoods they could serve.

This strategy worked pretty well, and the company grew. But over time it became clear that while they could easily track the results of their direct mail, cold calling, and digital marketing, it was much more difficult to quantify the results of their branding efforts on radio and TV. Since there was no offer that viewers or listeners could respond to, there was nothing to measure.

Because they couldn’t figure out the return on investment, the marketing committee decided to eliminate all advertising whose results they couldn’t directly measure. They canceled their radio and TV, and focused entirely on their direct response marketing.

An interesting thing happened, the executive told me: for the first month or two, there was no change. But then, their direct response numbers began to drop.

Their return on investment decreased significantly for their direct mail and digital advertising; their salespeople had more trouble getting their phone calls returned and setting appointments. Their potential customers stopped hearing and seeing the branding messages, became less familiar with the company, and became more reluctant to do business with this less-familiar company.

The company had learned something significant: even though it is sometimes difficult to measure, effective branding has real monetary value. At the time of our meeting, the company was preparing to launch a major broadcast campaign to re-insert their brand back into the minds of their customers. Their hope and expectation is that once they regained the awareness they had given up, the results of those activities they could measure would go back up.

Branding’s gotten a bad rap lately. In an economy that has made marketing money increasingly difficult to come by, it’s not unreasonable to want a measurable return from every single dollar invested.

Because branding campaigns generally don’t have a measurable response mechanism — or even an offer to respond to — it’s easy to conclude that they don’t have any effect.

Sometimes they don’t. But sometimes, a paragraph like this one jumps out of a Wall Street Journal article:

On a recent afternoon, at a supermarket in Chicago, Laura Gilligan confronted a salad-dressing aisle filled with dozens of varieties spread across two dozen brands. After staring for nearly a minute, Ms. Gilligan, a computer-company manager, chose Kraft Foods Inc.’s cucumber-tinged light ranch. “There’s too many choices,” she said. “I just went with Kraft because I know Kraft.”

What caused her to choose that dressing? It wasn’t a coupon, or a direct-mail pitch, or an email, or a pay-per-click ad.

And yet, something did. A recent study by the British Brands Group confirmed that “shoppers use mental shortcuts – heuristics – to notice and recognise products as they simply do not have the time to assess rationally all the options available to them.”

Faced with “dozens of varieties spread across two dozen brands”, shoppers often just grab something familiar and throw it into the cart.

What “worked” was the years, and dollars, that Kraft invested in building the equity of the Kraft name.

This doesn’t mean that the direct-response advocates are wrong. But they aren’t completely right. Even in today’s economy, there’s real, tangible value in good branding.

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Phil Bernstein is a marketing executive with Jim Doyle & Associates.