Brand identity is an effective way to create emotion and perception around your product or service. But a strong identity can also cause problems for companies that want to expand product or service offerings. Branding is expensive, and many efforts can lead to an inconclusive return on investment. And when your brand identity is a negative one, turning around perception is costly and difficult.

Brand Dilution

Branding your business in the local community usually results in positive reputation building for the goods or services you sell. But when it comes to expanding your products or services, solid long-term branding can stand in the way. Because the local community has associated your place of business with what you currently sell or do, it’s hard to change their perception, leading to the possibility of brand dilution when you try to expand your business. For example, a retailer known for selling women’s engagement rings may run into problems if expanding into the men's watches category. That’s because the community has already built the perception that the jewelry store is only a specialist in women’s engagement rings, resulting in the brand’s loss of reliability as it attempts an expansion into men's goods.

Price

The price of maintaining a brand identity can be an expensive piece of the marketing pie for many small businesses. Because a company must maintain its public perception through continued advertising and marketing efforts, an appropriate budget must be allocated for these endeavors. According to Distility, expert branding can range $20,000 to $90,000 per campaign -- even budget branding ranges in the thousands.

Quantifying Return on Investment

Branding is a form of marketing that has an intangible return on investment. Direct response marketing can quantify ROI with hard numbers, for example, how many customers used your coupon, but branding takes on a different form entirely by focusing on the feel of your brand in the public eye. Public perception, therefore, is more difficult to pin with hard numbers. So when a company decides it wants to work on its branding, it may run into problems on analyzing its ROI.

Other Considerations: Negative Brand Identity

If your place of business has suffered from negative perception in the community, these undesirable sentiments can linger for years to come. That’s why solid, consistent branding is an essential ingredient to any marketing strategy, because once people adhere to their feelings about your business, it’s hard to change their view. In 2002, Kmart, one of the original discount superstores, declared bankruptcy after “[losing] track of where it really stood in the marketplace,” according to Forbes, due in part to a negative reputation and a failure to reinvent itself. In the same year it filed for bankruptcy, Kmart also launched a $40 million advertising campaign to help turn around its negative brand perception. Negative brand identity is challenging to rectify, although not impossible. Once a negative reputation takes hold, it is difficult to overcome.