Welcome to the Sociology of Business. If you are not subscribed, join the community by subscribing below and share it with everyone you think may find it useful. You can find my book, The Business of Aspiration, on Amazon, and you can find me on Instagram and Twitter. For those new here, in my previous analysis I explored why fashion genres are too narrow of a way to organize how we dress, why we are to expect the Post-Genre Fashion Future, and how to succeed in it.
Brand is a filter for all business decision making, and this makes it a critical part of VC and PE firms acquisition and growth strategies. Investing in a brand is especially relevant for early and growth-stage deals.
As a decision-making filter, brand operates in several ways. It sets the vision for the company and defines where a company would like to see itself in the next 10 years - and what needs to happen today for this vision to be implemented. A company’s mission statement sends investors a signal about what business a company believes to be in and what are its priorities. A brand’s purpose explains why the company exists in the world. A brand also filters who are a company’s products and services for, who it wants to attract and retain and how are its products, services and stories different than anyone else’s. A brand also filters a company’s strategy, and ensures that the company operationalizes its mission and purpose in a way that it achieves its vision.
All product, service, experience and story decisions that lead to a company’s growth come from answers to the questions above. In considering these questions, VC and PE firms do not a choice. High failure rate and mediocre median returns of the VC industry require a fresh approach. Majority of funds’ returns is right now generated by a few superstar companies in their portfolio. Turning a company into a brand improves the odds of its success, increasing the value of the entire portfolio beyond a few high-performers. Companies that invested in their brands marked 67 percent above-average organic revenue growth and 70 percent above average total return to shareholders.
Building and managing a brand requires the same discipline as operational excellence, and there are two mind-shifts that need to happen in the PE and VC world for them to capitalize on the brand-building capability:
Expand time horizons. If brands are managed well, their value and relevance is maximized over time. The outcome is higher ROI, higher profitability and lower chances of failed IPOs.
Focus on the initial consideration set. A company that is part of the initial consideration set is two times more likely to be purchased than a company that is considered later in the decision journey. To become part of the initial consideration set, a company needs to be able to command awareness, but also convey what it stands for: its purpose and promise and values. For example, Nike and Apple offer product innovation and differentiated consumer experience. Brands evoke a specific meaning through its products, services, experiences and stories.
Here is how to turn a brand into a company’s (and VC or PE fund’s) growth engine:
Turn brand into a shield protecting price and market share. Brand is directly correlated with financial performance. Companies that have a clear brand purpose achieve double brand-value growth than companies that are focused purely on profit generation. Brand equity protects product price, as customers are not waiting for discounts and sales in order to buy a product. It also protects market share by creating a clear differentiation versus the competition.
Use it as a decision-making filter. Brand clarifies decision-making criteria. It guides new growth opportunities, product development, operations, and communication. A company that can evaluate whether a specific business action or investment moves it closer to its vision, whether it is true to who it is as a brand, and whether it reflects its values can go faster and more confidently than its peers.
Dial up differentiation. A brand increases the product value by adding the symbolic dimension to it. Consumers are not buying products, they are buying stories. Once they buy into a point of view, a set of values, and a lifestyle, consumers are less likely to treat a product as an interchangeable commodity, and more likely to be loyal to the brand.
Brands is a vehicle to expand the size of addressable market. By default, brands belong in culture. Brand builds awareness for a company beyond its target audience, hopefully propelling it in the domain of culture and increasing its chances to be part of the consumers’ initial consideration set. Through its brand promise and brand values, a company can reach customers who ordinarily wouldn’t consider its products.
Brands de-risk the business. Brand de-risks the business in two ways. It builds customer proximity through qualitative and quantitative data and insights and keeps the company laser-focused on its audience. This laser-focus on the customer increases the chances that brand actions, new products, and services will be a success. Second, having a shared purpose and values creates alignment between an internal culture and the brand. Without this alignment, a company doesn’t have a brand, it has a custom font. Further, having an internal culture that prioritizes diversity, equality, creativity, and innovation is at least risk to spectacularly implode and become a PR disaster fodder than the one that prioritizes relentless and fast-paced growth.
Contagious Magazine recently interviewed me for their issue #69, where we spoke about building distinctive brands. I focused on the remixes as the new form of creativity born out of recontextualization - deftly used by Balenciaga - and on why brands need to address their fans, cultural commentators, observers and customers alike.
You can learn more about the issue below or order your copy here.
In this quarter’s Contagious magazine, we take a look at how Lego tapped into innovation, collaboration and an enduring brand purpose to rebuild its appeal for a new generation, increasing year-on-year profits 140% in the first half of 2021. In our other brand spotlight, we tuck into how Popeyes Louisiana Kitchen turned short-term fame into a brand building opportunity, growing the US business 28.7% in the past two years.
In partnership with Twitter, we explore the decline in distinctiveness and look at some best-in-class case studies to reveal how to avoid the slump into sameness. We also speak to former P&G group vice president Pete Carter about brand building and his 40 years in advertising.
As always, we unveil our pick of the most inspiring creative ideas of the quarter, from brands including Balenciaga, Heineken and Burger King.