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For those who are new to The Sociology of Business and also for those who missed last week’s edition on K-shaped aspiration, you can check it out here.
A few weeks ago, Tayler Haney, the founder of Outdoor Voices, opened up about the things she learned. By now, these sort of confessionals have become a business genre that has more to do with specific VC-powered growth dynamics than with the founders themselves. The high failure rate and mediocre median returns of this growth dynamic ask for a new approach in decoding the signals of a company’s potential.
In this new approach, a rapid short-term success is a fake signal of a company’s long-term value and cultural relevance. The real signals are grouped into four categories: culture, consumer, category and company.
A brand has a cult object. iPhone, Tesla (and Tesla tequila, apparently), Birkin, Peloton, White Claw, original Vejas are all aesthetic totems. They elevate commodities to the level of ritual objects: “there ain’t no laws when you are drinking Claws” and nurture a taste regime around them. Tesla tequila, which started as a joke in 2018, recently launched as a very real $250-per-bottle premium spirit, already out of stock on Tesla’s website (the rumor is that the demand for it was such that people started selling their empty bottles).
A brand is attractive to collaborators. Brands that are in dialogue with other brands, art and culture, influencers, communities and social institutions are able to communicate their values in the cultural language. They also organically expand their footprint. Chobani is known for its work with local farmers and paying off lunch debt in schools across states. Banana Republic recently made the iconic RBG dissent collar, all the proceeds of which will be donated to the International Center for Research on Women. GANNI recently collaborated with Levi’s on a recycled denim collection. Supreme collaborations are now a matter of cultural lore, and span from Colgate to Louis Vuitton. Brand growth is a network effect.
A brand’s cultural presence is correlated with its sales. A brand buzz is directly reflected in its financial performance (this is where Outdoor Voices, Everlane or Brandless didn’t deliver). They all had awareness without profitability. In contrast, lesser known and more organically-growing brands like Caskata, Atoms, Tracksmith or 12.29 are powered by their strong economics.
A brand has empathy for a particular group of people. A good number of brand founders - Atoms, DÔEN, Caskata, East Fork, Monocle, Fly by Jing, GOOP - are part of their target audience, and they respond to the gap that exists between what this audience looks for and what the market is offering. The outcome is that the audience feels like there’s nothing like it out there.
A brand has fans before it has customers. A brand that prioritizes organic, community-driven growth versus rapid customer acquisition develops a lasting social influence. One way to kick-start this process is to give consumers a platform and the tools to create influence in their own local communities. This lends consumers social status and cost-effectively expands a brand’s social network. Nerdy Nuts, a peanut butter company, took advantage of TikTok, Supreme-style drops, and scarcity to reach $500K per month in sales. Underwear brand Lively’s brand ambassadors are given the opportunity and the tools to host their own Lively brand events. DÔEN features its customers frequently in their editorial. Atoms shoes’ founders are very active in their local communities and proactively support other businesses.
A brand pursues the portfolio strategy. Rather than trying to cater to mass audience in a superficial way, a brand like Netflix goes deep and narrow in pursuit of niche viewers. Fenty Beauty does the same. Both brands achieved scale through growth strategy focused on aggregation of niches. This growth strategy allowed Netflix and Fenty Beauty to create a global market made out of micro-communities with their niche tastes and of all shades and skin colors.
A brand asks what would be missing if it didn’t exist. Often, the answer to this question redefines a category, expands it, or creates a new category. If Fenty Beauty didn’t exist, a lot of women and men wouldn’t have the foundation that is the exact shade of their skin. If Ca’lyah didn’t exist, traditions of craftsmen around the world wouldn’t reach urban audiences. Atoms and Veja create a new category of sustainably-produced shoes that are very hard to imitate, thanks to their design characteristics, materials, production practices, and the obsessive customer-focus of its founders. Companies with a clear idea of their role in the world (Fenty, GOOP, IKEA, Veja) achieve double brand-value growth than companies that are focused purely on profit generation.
A brand purpose is generative, not restrictive. A brand purpose is defined in a way that it does not limit a brand to a specific category, but instead it opens up opportunities for future expansion and cross-market growth. IKEA is a “source for affordable, well-designed everything.” Uber is a global urban infrastructure for shipment and logistics. A very clear and robust brand purpose allows a company to keep renewing its brand identity and to position itself for the market expansion and cross-category growth. For IKEA, this growth today includes electronics, sports, scent, technology, sustainable materials and apparel. For Uber, it includes on-demand rides, ride sharing, black car service, a credit card and food delivery.
A brand cannot be confused with any other brand. Companies that operate according to the economics of singularities - like Apple, Aesop, Tesla, Peloton, Uber, Atoms, Caskata - are gradually building their own incomparability. They are not just a representative of their category, they have a cultural identity unto themselves. This identity can be reflected in an enduring brand’s style and language (Nike, White Claw, Patagonia), stylistic idiosyncrasies (Apple, GOOP, Fenty, Tracksmith) or semiotic invariants (Aesop, Supreme, MSCHF). Incomparability secures both high differentiation and high durability. "We're trying to do stuff that the world can't even define" says MSCHF founder Gabriel Whaley. Aesop doesn’t talk about being “better” than other personal care brands, but instead puts forward a story that only it can own, like these VERY detailed instructions on how to cleanse skin.
A brand can be described in 3 words. These three words are consistent among a company’s leadership and consumers alike. A clear and consistent brand perception, internally and externally, builds brand equity and protects premium pricing and market share. Companies that stand for something specific, like Fenty or Veja, achieve double brand-value growth than companies that are focused purely on profit generation. The world’s 40 strongest brands give almost double return to shareholders of an investment over the course of 20 years ending in 2019.
A brand is part of the balance sheet. A company understands that it is in the business of cultural creation. A brand unites a company’s business and cultural side. It directs business decisions by asking how a specific brand extension (a product line, service or experience) part of the big plan; how does it bring a brand closer to its vision; does it execute its purpose and confirm the 3-word brand description. It also defines the key objectives of a brand extension (awareness, acquisition, loyalty). Peloton, thanks to its focus on its community and the social and cultural dynamic around its training programs can easily expand into apparel. IKEA, thanks to its corporate structure led by its strong brand, can expand into literally anything. Having both functional and symbolic sides as part of the balance sheet allows a company to protect its pricing power, ensure high margins, create trust, and cut transaction costs.
A brand founder/leadership know what they DON’T know. Recently, I spoke with the founder of the exquisite tableware brand Caskata, Shawn Laughlin, and it was clear that the secret of her brand’s long-term success was in her willingness to acknowledge what she still doesn’t know and to keep learning. Brands that keep moving, improving and innovating are more likely to enjoy a continued cultural relevance.
There are brands that are strong in all four quadrants above, across all twelve criteria. Others have a less-balanced growth map. Yet others underperform across the board. In the second part of this analysis, The Brand Checklist, going live on November 30th, I will evaluate performance of selected brands on criteria outlined in the four quadrants.
Last month, I had a great pleasure of being a guest at Jasmine Bina’s exceptional podcast, Unseen, Unknown. Jasmine recently launched series on Systems in Flux, and we talked about how class and taste are in flux the modern aspirational economy. In Jasmine’s own words: “In the past 10 years, new brands have emerged, specifically in luxury and premium categories, that point to a divergence in our social systems around what class and taste are, and how they are achieved. Ana talks about the rise of the Modern Aspiration Economy and how the brands of this new economy have done something remarkable: they’ve successfully decoupled class from money, and taste from wealth.” Listen to our conversation here and subscribe to Jasmine’s podcast here.
My book came out on October 27th. It’s about what happened to taste, communities, and social influence when the economy shifted from manufacturing things to manufacturing aspiration. It’s also about how this shift changes what we find valuable and worth paying for and how brands should transform their strategies to adapt. You can order from a number of mainstream and independent booksellers listed here.