Adapt or Die: The Nature of Brand Strategy
There is no such thing as a universal rule of business, and there is no such thing as a universal rule of marketing. Despite this, marketers and marketing scientists have for decades chased the impossible, a universal code to brand-building, at the expense of effectiveness. Instead, theory and practice point us towards a much simpler truth: that great marketing and enduring brands are built on adaptation, on individual understanding not general principle. Businesses should learn to adapt, or they will die.
Byron Sharp has a favourite metaphor. Marketing managers, he is fond of observing, are the modern-day equivalent of a “medieval doctor”, working from anecdote and myth rather than data and fact. Brands, in this story, suffer through a metaphorical procession of “esoteric quackery” equivalent to that inflicted on patients in the 13th century, to no benefit. The work of the Ehrenberg-Bass Institute, which he leads, is the miracle of modern medical science: informed by experimentation, documentation and verification. The work is the medicine, he is doctor.
The comparison is remarkably apt - remarkable for a correct conclusion reached entirely unintentionally. For Sharp is no medical doctor; his science is worlds away from the natural science that guides decision-making in hospitals. It is, instead, the science of a doctor who assumes that because every animal breathes the same air they require the same cure, who would offer the same treatment to a beloved hamster as a beloved sister. It seeks to apply a single set of rules without allowing for nuance, history or context. It allows no difference.
Yet, the comparison is not without value, because, like medicine, good brand-building rests on understanding the natural world. Just as doctors must understand and adapt their approach to the unique biology of humans both collectively and individually, great brands only survive by understanding and adapting their approach to the unique challenges of external conditions and internal strength. Those businesses unable to grasp the need for nuance, who try to solve specific problems with universal rules, cannot and will not succeed. Their choice is to adapt, or to die.
The nature of business
The worlds of business and of nature share one telling similarity: their inhabitants go extinct at the same rate. The pattern, identified by the British economist Paul Ormerod, suggests an inevitability to corporate lifespans, where a handful of successful firms fight the odds to last for a long time, whilst, just as happens in the natural world, most of their competition quickly disappear. Ormerod’s model shows that firms are bad at acquiring the knowledge required to beat these odds, and its implication is that either every actor is equally bad and that knowledge acquisition has no role in corporate success, or a handful are very good at it and that is what perpetuates the inequality of outcome. Either way, it proves almost all businesses are not taking on the knowledge required to cheat extinction.
But, for the businesses in that existential battle, which possess the means and intellectual capability out of the reach of most animal species, their problem is less about demand than supply. For the emphasis in business thinking has long been about the identification of universal lessons and application of universal principles – be they the leadership advice of The 7 Habits of Highly Successful People, the corporate management advice of Good to Great or Built to Last or Grow, or the future-of-every-business concept at the heart of Clayton Christensen’s Innovator’s Dilemma – that leaders can steal, irrespective of the needs of their respective business. (In a telling example from John Carreyrou’s recent Bad Blood, the author recounts the founder of doomed healthcare start-up Theranos, Elizabeth Holmes, unwisely enforcing Apple-esque consumer design standards on blood-testing equipment.) Yet, as Phil Rosenzweig has demonstrated, no matter the examples chosen these universal rules or behaviours or strategies almost never keep paying back in the long-term; the performance of the cherry-picked firms celebrated as symbols of a new era generally reverts to the mean after publication. Whilst those individual theories are easily discarded, it’s generally only after their lessons have been absorbed by business-people hungry for inspiration and applied - often disastrously. It isn’t, as Ormerod surmises, that firms are unable to learn; it is simply that they are taught the wrong lessons.
These lessons are wrong because the basic ambition underpinning them – the creation of create universal rules, a skeleton key of a solution capable of unlocking any business challenge, regardless of context – is, and always will be, impossible. Strangely, this appetite for the universal runs counter to our lived experience of business, where our intuition would suggest that different companies have different challenges; who would believe successfully running a discount supermarket is the same challenge as running a luxury shoe brand? But it also runs counter to our empirical understanding of business: different businesses really are different. We know, for example, that business size is related to productivity and profitability; there is no universal outcome even if universal theories are applied appropriately. But that application is also highly likely to be inappropriate, because of how different businesses offer different - often alien - challenges. Established economic theory tells us that different types of product are assessed and bought in different ways by the same people – a financial service provider, for example, is bought very differently from a cabbage. These problems are echoed in the weakness of even the most famous theories: Clayton Christensen’s much lauded “Disruptive Innovation" fails, as Ben Thompson has argued, because its initial research focused mainly on business-to-business markets; move towards consumer products and the evidence base deteriorates quickly. It is clear that specific CEOs become less successful when they move outside of the category in which they made their name. Even surgeons struggle to maintain performance when they move to a different hospital. Not all challenges are the same; not all knowledge is transferable; successful solutions are not neutral of context.
Unfortunately, as a tool of business, marketing is afflicted with this same mistaken desire for universality. From Rosser Reeves’s USPs to Adam Morgan’s challenger brands, Byron Sharp’s mental and physical availability to Al Ries and Jack Trout’s Immutable Laws, marketing’s thinkers claim the same ability to discern a set of rules capable of powering growth for all. Yet, over time, there is little sign of advertising being made more effective or brands more resilient. It is clear that we, as an industry, need a better way of thinking about marketing.
It starts with rejecting the universal.
Averaging the unaverage
A few years ago, Les Binet and Peter Field partnered with the IPA to publish The Long and Short of It. Following previous releases in 2007 and 2010, the research confidently countered the frenzy of hype around new digital and social platforms in the late 2000s and argued for a more prudent, expansive and consistent approach to advertising. Of its eleven core recommendations, none would become quite as iconic quite as quickly at the 60:40 rule.
The 60:40 rule encapsulated The Long and Short of It in one sentence. In its insistence that the average brand should invest 60% of its advertising spend in long-term brand-building, consistently supporting (preferably) famous, emotionally-resonant messages, it was the entire body of work in a single statistic. It remains, perhaps not by the authors’ choosing, the perfect example of how our insistence on finding universal rules distracts us from the true nature of brands.
There really never was a 60:40 rule: apply it to a brand selected at random, from a category selected at random, and it’s likely that 60% would be the wrong amount of investment for long-term brand-building. 60:40 is an average, which encompasses a huge amount of variation, close to being accurate for a big brand (where the 60:40 rule becomes 57:43) but hugely failing both the medium-sized (where it becomes the 76:24 rule) and small (43:67). (That there are more medium- and small-sized brands than big should be an immediate alarm.) And that doesn’t acknowledge the variety in category-level data: in services of the financial kind, the rule was 77:23; in non-financial services it was 37:73. (What does one do if you’re a big brand in non-financial services, or a small brand in financial services?) It was a generalisation, but, as with much in marketing science, it was unclear as to whether the data was generalisable. The 60:40 rule requires most brands to be alike. But the data from which it is created tells us that they are not.
In isolation, Binet & Field’s popularisation of the 60:40 rule would simply be another example of how not to think about marketing or business, no different to any other, easily worked around. But in their 2017 follow-up to that 2013 study, Media in Focus: Marketing Effectiveness in the Digital Era, the pair noted something interesting: marketing effectiveness, by their calculation, was on the way down. Their conclusion was that brand owners and their agencies were not taking enough notice of their advice, but their advice, and the advice of thinkers like them, had received a huge amount of attention in the same period where marketing effectiveness was on the decline. What if their universal rules are unintentionally part of the problem for some, rather than part of the solution for all?
Breaking the rules
When it comes to understanding the science of rules, there is no better authority than Sir Karl Popper. Popper, ever the arch-rationalist, insisted that science be defined by falsifiability, that theories should be things to disprove, interrogate, disassemble and disrupt; he realised that because it was easier to find confirming evidence for your hypotheses, good science is the search for disconfirming evidence. In his view, the very best theories should be both predictive and prohibitive. Good theories tell you what won’t happen as much as what will; “the better the theory, the more it forbids”.
A brief autobiographical diversion may illustrate why Sir Karl would likely look disapprovingly on what are considered universal rules in marketing. I was born in a household where Sky TV, much to my schoolboy chagrin, was banned because of my parents’ political persuasion (my pleading for access to sport would eventually result in a subscription to a competitor). My childhood bedroom saw posters of exotic German cars plaster the wall, despite me never having set foot in one. My younger brother was one of the few who ignored the physical and cultural salience of Sony’s PlayStation 2 to invest, unwisely, in a Sega Dreamcast. At the time of writing I own an expensive watch, one saved for across multiple years and bought as a celebration. On the very weekend I am writing these words I have the time and money to visit a cinema, something I love, and yet I will refuse to watch Bradley Cooper’s A Star Is Born, a film I am acutely aware of, and have been for months, despite there being a screening within 10 minutes’ walk from my house and despite me having read multiple positive reviews of it during the last 48 hours. At the same time, my other half is in Chicago, preparing to run a marathon, which she will do in Brooks’ running shoes, despite the occasional difficulty she has in buying them; she will run after having visited the marathon expo, to buy a new vest from Nike, her favourite sports brand, and declining to buy their new shoes despite watching her favourite runner break the marathon world record in them two weeks’ prior. One thing I will do is book a restaurant for the two of us to visit upon her return, yet I will go out of my way to find somewhere we’ve not been.
If the rules of marketing science were up to Popper’s standard, much – if not all – of this behaviour would be forbidden. My parents’ attitudes towards pay-TV providers should have been governed by their behaviour, not pre-existing beliefs, and I shouldn’t have developed an unshakeable preference for an Audi over a BMW or a Mercedes before having sat in one. I shouldn’t have lusted after a specific brand of expensive watch ten years before trying one on. My brother shouldn’t have gone out of his way to buy a Sega Dreamcast, especially since he had previously owned, and enjoyed, a Sony PlayStation, and my other half – for whom Nike is the most mentally and physically available sports brand in her life – shouldn’t have a functional preference for Brook’s running shoes. My rejection of A Star Is Born defies laws of familiarity and availability, as does my insistence on finding a new and novel restaurant regardless of it being harder to choose and to visit.
My life and family is not representative, yet the anecdotes show the weakness of seeing brands and advertising as single problems with universal solutions repeatable across categories and needs and audiences and businesses. For when we move up, and out, not to average out difference but to look for reliable disconfirmation, we see how easy it is to defy the predictive and prohibitive power of our rules. We are told, for example, that brands should not sell to their heavy buyers: true, but only inside product categories; portfolio businesses like Disney, for example, have created structures allowing them to resell to the same people over and again, selling theme park visits and toys to the same people who watch their films. Brands should target the entire category in which they participate: true, if your price point, proposition and resources can attract the entire category; almost every successful brand, from Nike to Netflix, has started by targeting a niche and broadened out as it has matured. Attitude should follow behaviour with brands, except for the evidence it doesn’t, and except for the watch on my wrist or the Audi posters on my bedroom wall or the opinion I have about films I haven’t seen. Emotional advertising works better, apart from when it doesn’t, and looks particularly good when we ignore the businesses who don’t use it – businesses like Booking.com, built on boring old search, spending 30-35% of its gross profits every year on performance marketing and barely a fraction on brand (its version of the 60:40 rule is 10:90), yet growing said profit 552% since 2010 without a hint of an IPA Effectiveness Award. Don’t be different, we’re told, except when you have a “functional difference”, and – by the way – we should probably also try not to remember the time Steve Jobs got on stage in 2007 and launched a phone that he promised would “reinvent the phone” whilst standing in front of a giant picture of four phones he was aggressively differentiating his new phone against. Even NBD-Dirichlet models, which predict purchase patterns, apply, as Ehrenberg, Uncles and Goodhardt note, to “repeat-purchase markets”; as they admit, not all markets are repeat purchase markets. Not all challenges are the same; not all knowledge is transferable; successful solutions are not neutral of context. We generalise the ungeneralisable.
That these rules don’t work in the way rules are meant to work – that they do not uniformly predict the future across markets and that they do not seemingly prohibit the literal opposite of what they anticipate – is more than an inconvenience to be explained away. Popper noted that the making of exceptions is possible but comes at the price of “destroying, or at least lowering, (a theory’s) scientific status,” and lowering is exactly what we need to do. We need to understand – and be comfortable understanding – that our universal laws are instead specific laws derived from, and applicable to, specific categories and specific brands. Sometimes they work, sometimes they don’t. Universalism is our problem, and one we need to overcome.
The nature of competition
Universal rules are our problem not only because brand challenges are different, but because brand challenges are competitive. Every business is locked in a competition for customers, and, as Andrew Ehrenberg observed, “not all can grow”. Inevitably, as in every competitive market, there is a limit to the resources available and, therefore, every contest for resources is a contest some will lose; those losses will, in the short-term, open gaps in performance that naturally expand over time. Cumulative advantage means that, over time, winners can work less hard to gain further revenue, their marketing increasingly effective and their rivals’ increasingly ineffective. It is a trend present in both advertising payback studies and Ehrenberg’s concept of double jeopardy, where smaller brands (by customer base) see lower levels of both market share and repeat purchase. All gains should be thought of as relative; it is not so much a question of “how do we add customers?” as “how do we add more of our competitors’ customers than they add of ours?”. Any business choosing not to focus on share growth is choosing to neglect long-term survival, because they are in a fight to the death.
Critically, these competitive dynamics help explain both Ormerod’s business extinction pattern and why that same pattern is mirrored in the natural world. In the natural world, just as in business, these same competitive dynamics are present, best highlighted by Georgy Gause’s so-called competitive exclusion principle. The Soviet scientist recognised what was implicit in Darwin’s concept of natural selection: that “complete competitors cannot co-exist”. That is, if two separate species occupy the same ecological niche in the same geographic territory, and one of those species multiplies in even the slightest way quicker than the other, then the latter will ultimately be rendered extinct. When one species gains a short-term edge in its fitness, that advantage will, over time, accumulate to the point where it renders a competitor extinct. All gains in the natural world are relative, too.
And just as animals need to ensure they take on enough energy through food to sustain their biological needs, businesses’ lifeblood remains the acquisition of new customers. Because customers frequently drop out of markets or build a repertoire of different brands to meet their needs, businesses see their customer base churn and their existing buyers constantly lost, just as animals burn through the calories contained in their food. The consequence is that even to stay still – to maintain current size – businesses need to find a method that allows them to consistently recruit new customers, just as animals need a consistent source of nourishment. As such, attracting new customers, quicker than the competition, should be the singular obsession of external marketing.
The difference is, of course, is that whilst animals will adapt to their circumstance in both the short- and long-term, universal rules for marketing render businesses unable to effectively compete, despite their relative resources. For even if we ignore the possibility that certain products might require different tactics, employing universal marketing tactics in a competitive business environment can only lock in the status quo. Firstly, even if those rules are correct, their successful application will mostly be affected by relative resources, and that will be almost wholly driven by existing position: the biggest will be able to buy more of the right solution than the smallest. Secondly, if the application of those rules is done in public – and with marketing, unlike product development, it inevitably is – then leaders can react to anything a rival does, and allow them to take the risks they don’t need to. It’s a pattern that governs most competitive sailing, where the leader usually matches the approach of the boat behind; “if you have the lead, the surest way to stay ahead is to play monkey see, monkey do”. Whilst that becomes more complex in a market with multiple players, businesses have more time than sailors to make their decisions, and a good leader will be able to pick the most effective tactics from the most effective competitors.
Therefore, even if you decline to recognise any meaningful difference in market, customer or business – and we will shortly come on to why that belief is deeply deluded – the outcome of that universal application is inevitable, grinding inertia, Paul Ormerod’s pattern of business extinction – a handful of winners win big, everyone else rapidly departs – left unchanged. That animals can manage to keep their own species alive without the intellectual or financial capability of business in the human world can be attributed to their adaptability. If businesses want to defy those odds with the resources available, they need to learn the lesson of the natural world: adapt or die.
The existential importance of adaptation
In the natural world, adaptation is a critical part of an animal’s ability to survive. Animals adapt to the characteristics of the diet available to them in their habitat, to the competition for that diet, to broader changes to their habitat, and to relative levels of hunger or need. Adaptation is a process rather than a physical form, something that happens to an animal; the result is an adaptive trait, a change in its physicality or behaviour that increases its rate of surviving or reproducing. Adaptation is, therefore, based on the interaction between the animal and its external environment, the extent to which its capabilities or advantages should change based on its habitat to promote its survival.
In that sense, the adaptation animals undergo to survive in the outside world should be little different to the way in which businesses craft their brands to help them survive in the outside world. For if animals gain adaptive traits based on the interaction between internal advantage and external threat, so should businesses with their brands; a brand exists, whatever your preferred definition, as a medium, something that sits between buyer and seller, external demand and internal capability, smoothing the purchase on both sides. It makes specific items easier to identify, more attractive or better understood for buyers; for sellers, it encapsulates whatever information you think is most necessary, or effective, in helping buyers make a purchase decision. Just as animals survive by producing adaptive traits that mould internal advantage to external conditions, a brand should be a business’s means of survival, evolving its own internal advantages to match external conditions.
The process of brand-building should exist, therefore, in response to the external environment that a business finds itself in, not the generic market you might be able to create through averaging out the characteristics of hundreds of individual markets. There is, after all, no single set of adaptive traits that allow any animal to survive in the outside world because there is no generic habitat, no generic diet and no generic mate. Even across orders, animals with the same genetic lineage, adaptation to external environment shapes huge variance in traits: witness the difference contained within the order Perissodactyla, which encompasses all odd-toed ungulates, including horses, tapirs and rhinoceroses; rhinos and tapirs stayed in – or close to – the jungle and retained different traits to horses, which adapted to life on drier, flatter land, their teeth and digestive systems changing for a new diet and their physical form allowing them to navigate different terrain. Family members unable to adapt, like the Megacerops, were rendered extinct by changing external conditions. Yet brands are told not to adapt: they are told to adopt a “coherent” approach they “stick with over time” , for at least three years, with heavy investment. This myopia is a choice, fuelled by articles of faith we do not spend enough time questioning, and fails us all.
The articles of faith
Specifically, there are four persistent articles of faith inside the marketing industry that allow us to maintain our belief in the illusion that universal rules can help us grow.
First, we assume when building brands that no consumer market has any meaningful difference, yet this isn’t true even in highly related sectors. Take retail, for example, which is often is treated as a single distinct market, yet disguises a huge amount of difference between distinct sub-sectors. In grocery retail, for example, the functional, quotidian nature of need, the fierce, never-ending price war and the size of spend means that physical presence is by far the most important factor in surviving as a business, much more so than any consideration of brand. In the UK, for example, between 2014 and 2016 the correlation between size of store estate (as measured by total square metres of floor space) and market share (even accounting for changes) was almost perfect (an r-squared of 0.99); Dentsu Aegis’s own proprietary data shows a disproportionately high influence of first-hand experience in shaping brand perceptions compared to advertising, which you may expect from businesses with such low barriers to entry. Yet retail would also include home furnishings, a sector in which many purchases have a higher cost and a lower purchase frequency. As such, with customers spending more money on items they may only buy once every few years, it’s likely that most will be willing to put effort into purchase, and ease of access will be less important; IKEA, the UK’s market leader, has always had few physical stores and has been relatively slow building its online presence, yet it has been outgrowing the market for years. We don’t need to mention fashion or luxury or car dealerships or discounters to be clear that what is a rule in one part of the retail world doesn’t apply in another; brands should recognise the relative differences of the customers, effectively their own food supply, inside their specific market or sub-sector.
Second, whilst many view the attempts of individual businesses to evolve their brand as mistakes to be ridiculed, we choose to overlook the often essential ways in which highly successful businesses have evolved their marketing to respond to competition, culture and technology. Take McDonald’s, which, despite its worldwide fame, is a business whose history is defined by change. McDonald’s only appointed a national advertising agency more than twenty years after its founding, having spent its early years driving footfall with couponing; its Golden Arches were a restaurant feature that its management realised would be a useful branding device (its original mascot, Speedee, is long forgotten), whilst it introduced its most iconic item, the Big Mac, at the prompting of a franchisee. Ten years ago in the UK, it overhauled its menu, marketing approach and restaurant experience to meet changing customer expectations – and saw above-market growth; today it is experimenting further with table service, new menu items, delivery and in-app ordering to meet new competitive pressure. The McDonald’s experience of today, and its marketing of that experience, is almost unrecognisable to that of the late-20th century, bar the Big Mac and Happy Meal, which was unrecognisable again to that of the mid-20th century - but the business is bigger. Nike is a similar story of change, having focused its early marketing on getting shoes on the feet of athletes. But, as Phil Knight realised, “when the formulas that got Nike up to $1 billion… stopped working” it was time to change; they recognised Reebok, especially, were beating them because they had focused more on image, and changed customer expectations. Businesses successfully adapt their brands to external environment more than our rules theoretically allow.
Thirdly, we are also told that brands themselves cannot or should not be positioned as different, merely distinct, yet this defies the evidence deployed by the advocates of this very rule. Only those with “functional differences” should attempt to present themselves as different, concedes Byron Sharp, yet the very examples he uses to make this argument – Aldi and Subway – contradict his point. He sees outliers to be avoided, yet in Aldi and Subway he has unfortunately picked two of the most successful businesses in the world in their respective markets over the last two or so decades: Subway became the world’s biggest single-brand restaurant business by emphasising difference of product (sandwiches) and proposition (customisation, value, health) versus fast-food competition, whilst Aldi continues to expand by presenting a radically different model of retail, both in terms of price (low) and proposition (reduced number of items, fewer brands). Are we to suppose that Aldi would have been more successful if it had presented to the world a generic mid-market grocer to take on Sainsbury’s or Kroger or Tesco or Carrefour, using only a different logo and colour palate? Do we believe that Subway could have become the world’s largest restaurant brand by ignoring sandwiches and building a McDonald’s me-too with a Big Mac alternative but a different name? Difference - if your business has it, and if your business can animate it through marketing - can very clearly be a driver of growth.
Lastly, we’re also asked to overlook any possibility that shape or size of brand should influence your approach; the universal rules allow only one route to growth, and even those proposing new models of brand-building, such as Adam Morgan’s “challenger” concept stick unwittingly close to the older maxims. Yet this ignores both the strategic imperative and lived history demonstrating that smaller brands need to be more aggressive, and embrace more variance in outcome, to close the gap with more established competitors; playing by the rules of the leaders with fewer resources is a guarantee of failure. Most of the great underdog stories are really stories of calculated risk, be they the use of different pricing models, sacrificing margin in pursuit of longer-term growth as Amazon or Xiaomi or Spotify have done, or different approaches to creating fame, such as the early promotional shamelessness of Uber or Paddy Power or even the Michael O’Leary-powered Ryanair, or different approaches to brand and product, highlighted by the constantly evolving brand worlds of AirBnB (originally airbedandbreakfast.com) or Uber (currently on its fifth logo). It is clear that risk should be embraced by some, but avoided by others.
What becomes clear, through these examples, is that there are four key adaptive variables upon which better marketing is founded. First, and most critically, businesses should to adapt their brands to the characteristics of their FOOD, the customers they need to acquire; they should adapt to their ENVIRONMENT, and how the effects of culture, competition and technology have shaped it over time; they should adapt to their own ADVANTAGE, the strength their business has; they should adapt their level of RISK based on how hungry for growth they are. In short, they should F.E.A.R. the death of their business and ruthlessly adapt to avoid it. Nothing should be considered universal other than those four steps.
Adaptation through F.E.A.R.
1. Adapting for FOOD
1.1 The difference between, and inside, markets
Ultimately, the reason why brands first need to understand the characteristics of their customers in the market of their choosing – a brand’s equivalent of an animal’s food source – is that people make fundamentally different decisions in different markets and sectors.
Economists have long understood this to be true, and their use of the basic “Search-Experience-Credence” framework, which divides products and product-types by the amount of information available to buyers before purchase, is instructive. “Search goods” are the most basic, where buyers innately understand – or will easily learn over time – what constitutes a good purchase before buying. We know without much teaching what constitutes a reasonable lettuce before buying it, and at point of sale we can further compare before we commit to buying, but the same principle might be applicable to an energy supplier or other highly regulated, commoditised markets. “Experience goods” is a wide category where people need to rely on more intuition before buying, but will eventually learn how well an item fulfills their needs having tried the product. This encompasses short-term experience – goods like chocolate or wine or basic t-shirts where price is relatively low and the product will be consumed quickly, shortening the feedback loop – to longer-term experience, which might include the buying of a car, where its ultimate benefit is measured over years, or high fashion, where you are seeking reaction from friends, family and colleagues, or financial services, where your interactions aren’t frequent enough to build an accurate picture of quality quickly. Finally, you have “credence goods”, where it is almost impossible to understand product quality, pre- or post-purchase. These might be situations in which there are asymmetries of knowledge between buyer and seller – how would you judge whether private hernia surgery was better quality than the NHS option? – or in categories where you might only ever buy once or twice and have no opportunity to build the comparisons required to judge.
This spectrum is flawed – for example, it doesn’t account for the fact that certain purchases will shift categories for individual buyers over time as those people build up more knowledge – yet it is useful, because it poses a simple question: to what extent is someone buying on faith? As the product benefit becomes less tangible and harder to compare, reputation becomes more important, the transaction requiring a far greater amount of trust between buyer and seller before purchase. For some this may get uncomfortably close to a picture of economics based on rational actors long since ignored, yet echoes of the concept can be heard in the data most people use to draw universal rules. It is clear, from Binet & Field’s own data, that the market in which brand communications are most powerful is financial services – a market that the above concept would suggest requires brands to emphasise reputation, because of the lack of information available to buyers pre-purchase – and the category in which it is least powerful (excepting the non-specific “non-financial services”, which seems a catch-all) appears to be retail – a category in which customers have a much clearer picture of what they are buying before they do so. (In their newest data, they show that categories in which we are most uncertain - where we spend more time researching pre-purchase - demand more brand investment, reflecting this pattern and our need for greater trust.) Our data, at Dentsu Aegis, substantiates this further: when looking at the drivers of consideration at a market level, we can see that the role of direct experience is much less powerful in financial services, responsible for only 20% of an individual brand’s reputation, than in retail, where it accounts for 79%; unpick the contribution of communications, our best proxy for brand reputation, and financial services see 67% of their consideration come from the cumulative effect of advertising, and retail a mere 11%.
If brand choice is different inside different markets, there must also be a difference in what information a business needs to communicate depending on what their product or service is being bought for. There is no such thing as a generic reputation-led market: a reputation for cleaning floors requires a different sort of information to be communicated than a reputation for protecting money, but the information for those two is radically different than the information required to communicate a reputation for looking stylish or signalling status. It is only so useful to create broad categories of brand type; what constitutes the right communication needs to adapt based on how, what and why people buy inside that market compared to others. Understanding comes from specificity.
The most obvious examples of market-specific nuance can be found in fashion and luxury. From the outside, these markets look highly similar, with successful brands in both markets often having an inverted relationship with price and distribution; that is, higher prices and lower physical availability are drivers of purchase rather than inhibitors. But there are significant variations inside markets or even sub-sectors that brands must consider when considering what they sort of reputation is required amongst an external audience. For example, fashion isn’t really one market but multiple, and brands must decide on where they best fit and how to communicate as a result. Some luxury fashion brands are bought to signal wealth or class, so price, heritage and distinctiveness become paramount. But some brands are bought to signal knowledge or style, so whilst distinctiveness remains critical, topicality might be more important than heritage, and price is flexible. And some others might reinforce group identity, membership of some sort of elite, whereby access and distinctiveness are critical, but mass appeal might want to be deliberately avoided. For a lower-cost brand like Topshop, putting a logo on a bag or a t-shirt is to be avoided, lest its customers are mistaken for employees; for Chanel, a logo or motif is largely mandatory. But for brands like Supreme or Vetements, which allow their customers to signal their status as part of a small, knowledgeable elite, restricting access (though price, availability and outright weirdness) is key; Supreme strictly controlling access to stores and releases in limited editions, whilst Vetements’ avant-garde, high-fashion – and high-price – collaboration with unfashionable brands like DHL are obviously not for a mass audience.
Lest we think this only applies to fashion or luxury, price can still be influential even when external signalling of status is less important: AG Lafley, the former CMO of P&G, recalls having to increase the price of the reformulated and rebranded Olay by nearly 50%, because people didn’t take its efficacy claims seriously at a lower price. This, however, is where the similarity between beauty and fashion ends, because for all the signalling benefit of high-priced fashion, beauty is often consumed in private; the benefit is often found less in what the brand communicates about you and more in how it makes you look to others or feel about yourself. It stands to reason, therefore, that when shopping for beauty, a reputation for efficacy is much more important than aesthetics alone. And it’s clear that because of customer motivation, merely having the easiest brand to buy won’t be as powerful; shoppers are more likely to go out of their way to get a good product than they are when buying potatoes or soft drinks.
The reputation you require might also be related to how a market is shopped or experienced. Take, for example, British Airways, a brand built mostly on its dominance of a strategic asset, Heathrow Airport, and the world’s most profitable route, London to New York. Its control of the latter drove profit in the short-term, and its control of the former, because of the equity tied to Heathrow, built its brand in the long-term – flying BA from Heathrow was simply more attractive than the same routes from other airports, because of its heritage, associations and wealthier, business clientele. As such, its association with London’s most desirable airport, with its most affluent catchment, locked in competitive advantage regardless of marketing, yet it also provided the British Airways brand with an intangible quality it would be able to rely upon regardless of the tangible experience of its flights.
That none of the tactics mentioned in the two paragraphs above would be of benefit to Coca-Cola, for example, should be both unsurprising and entirely the point. We wouldn’t expect Coca-Cola to require the reassurance of a far higher price than Pepsi, nor would we expect that limiting people’s access to it would increase their desire, nor would it be possible for them to build equity by only selling in Waitrose. But in each of these pieces of common sense a little more is revealed about what we know to be true of a soft drink and of a fashion brand, and how those differ. If Olay requires a higher price to sell having reformulated and made claims for greater efficacy, it tells us that customers in that market require something other than familiarity and ease of transaction; it suggests that thinking of the challenge only as one of availability and superficial distinction isn’t likely to be enough. If Supreme is a brand built on exclusivity, on perspiration and commitment and what it says about what you know to be cool, it isn’t enough to be salient; you are buying because of what you understand to be true about other people’s reaction to your wearing of it. It is nothing without that reputation, which must be communicated somehow. But beyond the fading allure of Coca-Cola as a symbol of mid-20th century Western capitalism, Coke has none of the signalling value of Supreme, nor should it – it is a brand whose ubiquity and accessibility is the point, yet whose ubiquity and accessibility would be the ruin of others.
How, then, might we harness these differences to get to some reliable way of adapting for the food we need to sustain our brand? There are four key components to consider, in order: faith, cost, consumption and motivation.
1.2 The importance of faith
If certain brands are bought almost completely on faith and others not, this should change what we think the role of a brand is in certain markets for certain customers. For widely available consumer goods, low stakes purchases with an immediate benefit, little faith is involved and the role of a brand is mostly about continuity, heritage and ubiquity: reminding the buyer that what is in the box, the wrapper or the tin is the same as what it was the last time you had it, and that wherever you see the logo you can expect the same benefit or experience you had the time before. (It is for this reason the reformulation of Coke into “new Coke” in the 1980s was so disastrous.) These types of brands, advertising agency staples, are really the sorts of brands that require most authentically the Ehrenberg-Bass principles of marketing: emphasise your availability and drive product experience, maximise the distinctiveness of what has already made you distinctive, build positive associations over time, speak broadly, turn ubiquity into a positive. But these principles don’t even stretch to the next supermarket aisle, let alone outside of the store: wander 20 metres into the household section, and you’ll be confronted with a host of brands whose benefits are much slower (if ever) to reveal themselves, things like detergent and floor cleaner and soap. Does detergent X leave your whites whiter than detergent Y? Does soap A kill more bacteria than soap B, or smell better than soap C? Does floor cleaner 1 cut through tough stains quicker than floor cleaner 2? Brands like these require more faith if they are to demand higher margin, they will be replenished less often, and they make bigger promises. You need more, and you need something different, just as you do if you’re selling a film, a holiday, a car, a coat, a sofa, a phone, a TV, a bank account, an insurance product or thousands of other types of items. More faith demands better reputation.
1.3 The importance of cost
If the extent to which purchase is based on faith is the defining characteristic of a specific market, there the cost of what you’re selling (and the cost that people expect to buy for) is the next thing you must consider. Lower costs reduce the risk for customers, helping lower the difficulty of driving trial and shortening the feedback loop between purchase and product experience. In these markets it is difficult to manufacture additional margin with communication, because buyers are sucked into a purchase process that demands evenness of quality and consistency of experience, and advertising needs to recognise this reality; to succeed against strong incumbents, whose distribution and salience lock in advantage, it is likely that challengers will need to find some way of increasing customer expectations with their communication, or disrupting habits entirely. Comparatively higher-priced markets or sectors will require brands to build and maintain a level of reassurance, credibility or enhancement to succeed, but they will require comparatively less availability – people will go out of their way to find products they deem as “special” or irregularly purchase.
1.4 The importance of consumption
Thirdly, the place of consumption should change how you present your brand: if the product is used in public or has a public component, such as conversation, you need to underline its peer approval or image benefit. This, at its most basic, applies to chocolate and soft drinks as well as cars, but it is best thought of as a spectrum that judges to extent to which the public usage defines the brand and its benefit. At one end you might have a family of snacks or chocolate bars, all of which might be regularly consumed in public but few of which have any image benefit for the user connected to the public consumption; these brands generally need to be permissible to consume in public without demanding any greater image or status effects. At the other you have high fashion and luxury markets, which exist largely for their signalling benefit, and your communications programme needs to help buyers feel as if your product will help buyers convey the right things about themselves at the current moment. It is at this end where physical availability becomes less important than physical demonstration, getting your brand in the right places and on the right people. Incidentally, this is why IKEA can lack both physical availability and desirable locations: they are relatively high-priced enough to ask people to go out of their way, but without the status benefit that demands high-priced sites.
1.5 The importance of motivation
Lastly, there is a question as to what your customers’ motivations are when buying your product. The motivation of your buyer, much more profound in decision-making than emotion alone, should point towards the type of reputation you require – do you need a reputation for cutting through grease, for rebuilding plaque, for delivering faster, being funnier, tastier, more enjoyable? – and the tactics required to accomplish it. Sometimes, as with McDonalds and Coca-Cola, the motivation might be disconnected from the conscious behaviours of the category itself, and what you offer is a certain level of universal acceptance, and the reputation you need isn’t necessarily about quality but instead consistency and reliability. There might also be multiple motivations in play at once for your products, especially for a more mature business or one with a portfolio of products. But the motivations of your shoppers, combined with the extent to which they can judge your solution as meeting their needs before purchase, the cost of your solutions and the method of its consumption, are the first steps towards successful adaptation.
2. Adapting for ENVIRONMENT
If it is critical to adapt your brand to the characteristics of the shoppers in your market, it is also important to recognise how their decision-making will change over time, partly due to successful marketing efforts by players inside those markets, but also because of changes in culture, competition and technology. A brand that does not constantly adapt to changing external conditions is one that cannot hope to maintain effectiveness over time.
2.1 The right (and wrong) way to think about the outside world
We have previously mentioned the changes in marketing and brand-building made by Nike and McDonald’s in response to changes in their own market position and the changing expectations of their customers, but those brands are not alone in taking a progressive, responsive view of external circumstances. All markets are changed over time by the tides of culture, competition and technology. Rather than responding with the self-obsessed inflexibility most marketing theorists present as a virtue, thinking only about their own assets and associations, the most successful are better at understanding when these changes represent an existential threat to their business, and what to do as a result.
That markets evolve over time is a concept so thoroughly, literally, ordinary it shouldn’t require debate. Take, for example, the grocery sector of today in any major developed economy versus that of thirty years ago. Not only has competition forced the quality of food to become better and more consistent, demographic change and the diffusion of new and different cultural influences has required a more diverse set of ingredients, meals and cuisines to be stocked. Traditional “scratch” cooking habits and skills have declined, leading to the use of more meal kits and ready-prepared offerings from grocers, and the combination of low wage growth and competition from discounters have reduced category margins. It seems unlikely that in this world a grocery business could succeed by sticking with what had brought them success in the 1980s or even the 1990s, nor does it seem likely that - in a world where customer demands are demonstrably different - could marketing focus on something as simplistic as general “mental availability” as a driver of success.
Indeed, we don’t need to look very far for businesses that have failed precisely because of their inability to adapt with these changes. In the UK, fashion retail has been catalysed by successive innovations in design, manufacturing and marketing, allowing the most sophisticated businesses to keep pace with the vagaries of taste whilst reducing cost; both BHS and Marks and Spencer failed in large part because they were too consistent and too conservative, riding tired product and stuffy brands to varying degrees of decline. And whilst these examples are only from one market, we could likely play this game with consumer electronics or air travel or insurance, where price competition and technology has eroded margin and reduced inflation-adjusted cost, or beer, where the popularisation of stronger lagers has recently given way to craft beers, or cars, where a wider range of considerations, including environmental impact, design, geography and economics, have up-ended the category, or banking, where almost half of our interactions with our financial provider are done remotely. Ask yourself: have brands survived in these categories by being consistent, or have they had to adapt to their circumstances? In a world where mobile banking is more important than ever, is it simply about maintaining a modern sense of “physical availability” – the mere presence of an app, quality be damned – or is it important to have a high-functioning digital experience that reflects the trust required to sell something as critical as a financial service? In a world where fashion changes quicker than ever, can you ignore those shifting tastes and simply rely upon making your brand prominent?
Meanwhile, as much as the creed of Bezos encourages us to focus on “what isn’t going to change”, the success of his own company and many others like his reveal a need for flexibility around your core mission. Amazon, after all, is a company that both sets and follows new paradigms in demand and expectation, from its pioneering use of Prime to circumvent its delivery charge problem to its popularisation of voice technology in the home. Netflix won the war for on-demand movies not simply because it was unique is foreseeing the shift to online consumption, but because it was better at making the changes necessary to win in that new world than its core rival . Microsoft has revived its fortunes under Satya Nadella by focusing more on corporate customers and building its cloud computing and mobile commerce brands, whilst positioning itself as a partner of business rather than a supplier, becoming more collaborative and open in its behaviour to suit new expectations. Meanwhile, in the UK, Tesco has returned to growth under its new CEO Dave Lewis by improving and communicating its core food offering, adapting to the competitive threat posed by discounters. Each business understood the changing landscape and adapted to it, out of necessity rather than simple boredom, from product to brand.
The difficulty is separating the fundamental change from the false alarm. Pepsi’s marketing over the last decade is a good illustration of this dilemma, because their recent history is an unusual mix of change anticipated well and change anticipated badly. In 2010, anticipating a rapid decline in the effectiveness of their traditional broadcast approach owing to the dramatic success of social media platforms, Pepsi decided to take budget away from the former and build a new type of brand campaign, the “Pepsi Refresh Project”. The Refresh Project sought to donate $20m of Pepsi marketing budget to social projects that its fans could vote for; 80 million votes were cast and 37% of Americans became aware of the campaign. The downside, however, was that Pepsi lost share throughout the campaign and dropped from second to third in US sales, behind Diet Coke. Not only did Pepsi misjudge the role of brand in how its own customers make decisions, they overestimated the power of social media and underestimated the continued strength of traditional broadcast. In 2017, with brand purpose being increasingly positioned as a necessity for brands by some industry observers, Pepsi then decided it had to respond to this evolutionary change in culture with an advertising campaign that reflected “people from different walks of life coming together in a spirit of harmony”; like the Refresh Project it was a disaster, and lasted mere days before being pulled. They again misunderstood the nature of this cultural shift and its role – or lack thereof – when it came to people buying soft drinks. However, despite these costly executional mistakes, PepsiCo has been smarter diversifying and developing its brands outside of carbonated beverages, managing to grow the overall business in terms of both share price and revenue by approximately 80% in the last 11 years despite its core market being locked into a seemingly intractable long-term decline.
2.2 Better understanding what is important
To avoid the hit and miss approach of Pepsi, marketers and agencies looking to adapt brands to an uncertain future might do better to draw on the advice contained within Philip Tetlock and Dan Gardner’s Superforecasting, built on the former’s lifelong study of the science of predictions. As their book makes clear, the art of prediction – and it is one practised by every marketing or advertising professional every time they sit down to discuss a brief, a task or a problem for the following year – is one built on a consistent, deliberate approach to how you think about what you’re predicting, how you’re doing it and with whom. As the authors point out, more realistic predictions about changes in the world around us start by identifying and deconstructing the right sort of problem; too simple and you could use a basic rule of thumb (“Will people keep spending extra money on their Christmas shop?” is one you could answer without any research), too complex or far in the future and you shouldn’t bother. In this instance, a business should be focused on identifying and maintaining a short list of the likely changes in culture, competition or technology that pose an immediate existential threat to its existing brand health in the next two years (any further and predictions begin to get unreliable).
Starting with that question, Tetlock and Gardner would advise the breaking down of it into constituent parts: what is your brand’s existing strength (perhaps, for our purposes, better phrased as “what has allowed us to survive so long?”), the emerging cultural trends that might affect people’s interaction with the brand, the most compelling competitors (those who are best suited to those emerging trends) and technological change that could quickly disrupt your market. To answer those individual questions you should have the right attitude (humility, openness, tenacity) and look for experts outside the field – as they write, “no problem is 100% unique”, and many of the problems afflicting one market today have already been faced down by others yesterday. Your answer should use as varied a set of informed opinions as possible. For Pepsi in 2010, answering this question honestly, using the right external voices, might have led them to conclude that there was little need for them to jettison the proven benefit of broadcast advertising, and that social media wasn’t likely to change the way people purchased; it would likely have identified a diversification of spend and an increased threat from waters and hot drinks.
The nature of the process means that it is something advertising agencies should be particularly well-suited to. In combining knowledge and understanding of multiple markets, agencies should be able to foresee the effect of similar cultural, competitive or technological changes on markets that haven’t yet been subjected to them (but which have enough similarities that they might eventually). For example, agencies today might observe the technological change pulling apart the insurance industry, separating it into two adjacent markets, one defined by price and convenience, with purchase conducted through comparison engines, the other defined by product superiority and brand trust, with purchase conducted direct with the best providers. They might also note how that same process could soon affect brands in certain retail markets, and note the need of their retail partners to adapt in a way that suits their sector and what their customers want. But without a willingness to adapt after hearing those observations, it isn’t worth starting the process.
3. Adapting for ADVANTAGE
If you understand the characteristics of the shoppers in your market, your brand’s food supply, and you understand how your external environment is changing, in terms of culture, competition or technology, it is critical that any resulting adaptation of brand utilises a business’s inherent advantage. Every business has a reason for its continued survival against the odds, be it propositional, operational, financial, reputational, geographical or historical, and the best brands will use tap into that strength. Every single enduring brand in history is, at heart, built on a clear conception of its business advantage in market.
3.1 Brands built on advantage
BMW was a brand built on a clear understanding of its advantage in market. The history of the business is much less consistently successful than often thought – it was on the verge of bankruptcy as late as 1959 – but what success it has enjoyed has consistently come from one thing: its engineering capability. As Kay has noted, “BMW cars are not the most powerful, or the most reliable, or the most luxurious”, nor are they “especially innovative… the design of the company’s cars is conventional and the styling of its models is decidedly traditional”, yet it found a way to succeed because of what made it strong, not what made it weak. It therefore focused on engineering quality, maintaining a highly-skilled workforce in Germany, manufacturing the high-performance saloons this capability was well-suited to creating. It sold to the emerging young professional class of post-war Europe, and quickly gained a reputation for the superiority of its cars; the reputation for quality allowed it to charge a high margin on its models, a margin maintained today, in part because of its emphasis on production standards and supply-chain management. In a market where decisions are faith-based, both in terms of rational benefit – is this car high enough quality to be worth spending more money on? – and emotional – will it make me look successful? – the business used the engineering capability to build a superior brand reputation. It did not need to be particularly accessible, nor would it need to emphasise direct experience, because the reputation was based on heritage and social power; you would have to trust them. Its brand was adapted to its business advantage.
IKEA was another brand built on business difference and strength. Ingvar Kamprad created a business that worked like no other, collapsing the divide between warehouse and storefront, asking customers to work for their furniture, emphasising product and future benefit at the expense of immediate experience. Their brand advertising in the UK during the last five years, hugely successful in its ability to improve brand perceptions, built on this implicit strength by looking past the experience and focusing potential customers entirely on the eventual benefit, just as the business requires. It assumes that people will make effort for the purchase, and makes less effort than rivals to make itself accessible. Aldi is another; “like brands, only cheaper” is the purest distillation of what the business represents and how it manages to compete, and it chooses not to compete in quality of experience because it is honest about that trade-off. John Lewis’s work dramatized its role as the store of choice for occasions – and people – that matter, and chooses not to compete for purchase occasions that do not matter, both through deployment of advertising and placement of store. McDonald’s brand is built on its role as a sanctuary for people of all ages, backgrounds and persuasions, and it stresses its universality, reliability and heritage as a benefit in its external communications; unlike IKEA or John Lewis or BMW, availability and ease of access is critical in this effort, and it is therefore useful for them not just to open outlets all night but communicate it too. All of them have a true sense of self – what makes them different, and how to draw attention to it in the most flattering light – and reflect the benefit of the brand. That benefit, such as with BMW, might be tangible. As with John Lewis, it might be based on service, and with McDonald’s it might be based on incumbency, but the best expressions are credibly different. What looks like an expression of generic benefit from McDonald’s forgets that McDonald’s created that entire market; simply because there are other restaurants that sell burgers doesn’t mean they have the same shared memory or shared audience. Brands don’t have to offer different products to sell in different ways or play to different strengths.
3.2 Adapting for your advantage
Ultimately, this conclusion – that successful brands must be built on business advantage – is unavoidable is because it gets to the heart of business strategy. All businesses seek to grow, and they make distinctive choices through which to pursue that growth and compete in their market; unless you are blessed with extraordinary, pre-existing wealth, choosing to pursue the same goal with the same tactics as your competitors is unlikely to be successful in the long-term. As the work of Michael Porter has shown, businesses must choose from if they are to grow: they can or offer something broadly equivalent (or a little inferior) in terms of function for a lower price, they can offer something superior, or different, and aim for a higher margin. It’s critical that anyone working on, with, or for a brand understands which of these paths their business has taken.
Pricing is a critical choice in competitive strategy; it might be possible to sell a more limited product for a lower cost, but, as Clayton Christensen as pointed out, you often need to attract a different sort of customer with different expectation for product benefit or function. The alternative, especially in consumer rather than business markets, is to use your communications to seek to bend your market or your customer to your will. You can see echoes of this approach in the early brand decisions of easyJet and Ryanair, who both sought to deliberately commoditise air travel through a combination of proposition and communication. With rivals controlling infrastructure and brand images that attempted to justify a price premium, the budget airlines sought to remove all glamour from the decision; advertisements spoke merely of price, with Ryanair’s press copy often in black and white (the colour ad would cost marginally more), emphasising the bare-bones approach. Travellers were pushed to new airports lacking the allure of Heathrow, and publicity encouraged them to see anything more than the most austere of experience as somehow frivolous. Notably, their tactics worked: British Airways has responded to their success by cutting back on in-flight experience and expanding into the airports (such as Stansted) and audiences that the low-cost carriers had claimed as their own.
If you can’t challenge on price, you challenge on superiority. Apple “reinvented” the phone in 2007 and continue to positions theirs’ as the best quality through an aggressive pricing strategy (their use of price rises is, in this case, both a branding device, signalling their superiority and the buyer’s status, and a business benefit, helping them to become the world’s most profitable company), the use of expensive advertising to act as a proxy for that quality, and reminders of core functional benefits (like camera quality, or the power of iOS) that allow it to justify such a high price point. Nike’s running shoes are presented as the world’s fastest, using the world’s fastest runner, setting the world’s fastest running times. Tesla trumpets its 0-60, or its autopilot function. Nationwide claims its status as the Which? Bank Brand of the Year, and Richer Sounds does the same for its Retailer of the Year award. Even the Lynx Effect, long since discarded, was a claim for superiority.
It's clear that what it means to be superior should change based on your market, because, as the Adapting for FOOD section made clear, customers look for different things in different markets. Sometimes they are making a faith-based decision in a market that has no social signalling value and require more rational reassurance; sometimes they are a teenage boy making a faith-based decision about the deodorant other people might notice the smell of, and need (perhaps) the emotional reassurance that their objects of desire will appreciate it. Other times, in less faith-based categories, what it means to be superior changes: we are looking for consistency, for reliability, for popularity, reminders that this thing we’ve tried and liked is still as we remember. And whilst it’s become fashionable to insist that superiority is irrelevant – one only needs to be more distinct, more salient, more available – this ignores that in some categories these ideas of salience and availability are what makes a product superior. Rory Sutherland’s observation that McDonald’s succeeds because in familiarity we trust it not to kill us is a useful example: its ubiquity, its safety, its sheer lack of difference is the point. Advertising illustrates its incumbency – ‘lots of people eat here and enjoy it!’ our unconscious notes – but we forget, in many markets, incumbency is a benefit. It may not be tangible, but it is a form of superiority; tolerable incumbents make lives easier, especially in markets where functional difference is low. Yet in other categories it is equally clear that tangible superiority does matter and mere incumbency is not enough, that certain credentials matter and certain judgements are made. Product reviews might not have made a difference to Sony when they were market leader in TVs, but they probably did to Samsung as their TV division was trying to overtake them; US car manufacturers might not have worried about quality perceptions or word of mouth as they sold millions in the 60s, but Honda needed to as they entered the market; Nike might not need the biggest athletes in the world to recommend their shoes now, but they did when they were a plucky upstart challenging Adidas.
However, these examples illustrate an ongoing balancing act, adaptations of a business’s inherent advantage for its external brand, given its market and its environment. Nike’s claims of superiority in running shoes are tailored not just for its own shoes, but in the context of the market for those shoes: in running, a sport focused less on immediate experience and more on tangible accomplishments and the times you run, Nike focused its marketing on running times and more rational reassurance. It is difficult to imagine a similar approach for basketball or soccer. easyJet has long since accepted the commoditisation of its category, and, like IKEA asking people to overlook the drawbacks of its retail experience by focusing on life after a store visit, it asks its potential customers to dream of destinations. BMW has moved from engineering as an explicit message to an implicit one, moving towards the end benefit of driving experience whilst introducing newer, more contemporary examples of its engineering prowess through its electric vehicles. Brands need to recognise the business advantage they draw upon, rooting their appeal in the tangible, but they also need to adapt that advantage to both the characteristics of their market and their environment.
4. Adapting for RISK
The need to adapt your brand to the characteristics of your market, to your external environment, and to your business advantage is critical, but, just like animals in the wild, it’s critical to recognise and respond to own level of need. The hungrier or more desperate your business is for food, the more critical it is to recruit customers to stay alive, the more risk you need to embrace when building and communicating your brand.
The smaller or younger the brand, the more tenuous its existence. Less mature brands likely have less cash on hand, a harder time raising it from benefactors and a harder time generating it from day to day operations. This lack of money – or fucking money, as Silicon Valley legend Bill Campbell memorably put it – leaves smaller businesses less resilient, more vulnerable to external shocks. It is not an exaggeration to say that it is easy to accidentally go out of business in the early days of your operations; Paul Ormerod’s extinction pattern shows a huge number of businesses that disappear before they ever reach anything approaching maturity. Conversely, it’s clear that the opposite is true for large incumbents, that it’s easy to accidentally grow when you’re a market leader; if the market swells unexpectedly, or a rival makes a mistake, you may easily sweep up additional cash without trying, or even whilst actively doing the wrong thing. This is, simply, the idea of the Matthew Effect: the rich get richer and the poor get poorer. It should dictate the level of risk you adopt, because adhering to the status quo leaves the small to die.
4.1 The unavoidable necessity of risk
For immature businesses, the status quo – the most likely outcome given the available facts – is that you will disappear in the short-term without seriously good judgement or seriously good fortune. The market leaders will, in most situations, prevent your business from succeeding before they even notice your existence. That doesn’t only mean that survival is critical, but with most immature businesses having fewer resources, it means that survival will involve a certain amount of risk, and the most desperate the need, the greater variance you need to chase.
This can most clearly be seen in the behaviour of many of even the most successful new businesses of the 21st century. Almost all of them have taken serious risks with their own business models, using their funding to purchase market share by subsidising their own costs: Uber, for example, uses its huge capital reserves to reduce the cost of rides in the hope that once its market share is assured, it will be able to use automation to cut costs and, most likely, its ubiquity to raise prices. But this positive view of risk – that is, risk as the only possible route to undermine strong incumbents – can be extended to marketing. The brands that immature businesses seek to build should amplify and extend this risk where appropriate, taking the chances that incumbents cannot. The immature, with a smaller base, can afford to offend, to stir and to provoke. It isn’t so much that the brand needs to be better adapted for everything, but its presentation needs to take advantage of the things that its rivals cannot say or do.
4.2 Taking the right type of risk
Brands and brand communication for immature brands should use this sense of daring and aggression to attempt to lure incumbents into traps, attempting to create cultural conversations or set agendas that disfavour the bigger incumbents. One might look at Subway’s use of health messaging to contrast itself with fast-food staples like McDonald’s, drawing the incumbent onto ground where it was less sure of success, or Aldi and Lidl drawing bigger brands into a price war that was both unwinnable and only likely to draw attention to their own strengths. The reason this is so powerful is the functional simplicity of everyday decision-making: as Gerd Gigerenzer has pointed out, people often make complex decisions by simplifying the criteria against which they decide. The challenge is to change those heuristics, to shape the criteria against which quality and relevance is judged inside your market; if you bend those to your will, suddenly the extra resources of a bigger rival will be pointed toward something less relevant. This is the most powerful tool in political messaging, the race to define the ground on which your battle of ideas will be fought, characterising the debate in a way favourable to your party or goal, and a lesson that could help brands that need to change the status quo. In business this is the highest of risk, unlikely to work without an offering optimising for the change you seek to create, but if done correctly offers a huge amount of benefit.
And if desperation is the key variable dictating just how provocative and ambitious you should be, it should also dictate how focused you are. In short, the less mature your brand the bigger your bet needs to be, because the lack of resources you have means that focus will help business organise their own marketing efforts internally whilst also allowing them to enjoy disproportionate impact amongst their customers of choice. Think of Amazon starting by selling books, Under Armour focusing on US college sport, Nike on running, Netflix on back catalogue films rather than new releases, Tesla with sports cars; every business started by building an essential role for themselves amongst a single slice of a much larger market where their advantage was magnified or their competition was weak. Smaller brands need to pursue subsets of their customers or sales opportunity, gaining both proof of concept for future investors without demanding huge increases in overhead and being able to build brand equity for deployment in future. BMW’s entry into high-performance saloons with the 1500 – which would eventually become the 5-series – built the engineering equity it would benefit from when subsequently selling the 1-series or its X-series of crossovers to a different audience; Nike’s emphasis on athlete engagement during its early period would provide it credibility when expanding through paid media in the 80s.
Meanwhile, of course, bigger brands – particularly category leaders and particularly category leaders in large markets – should lower their tolerance of risk and eschew focus. The larger the existing size of your base, the more expansive you need to be to grow that base – and the less you can afford to alienate people in pursuit. That means the very biggest brands with the very largest household penetration – Coca-Cola, McDonald’s, Mars, Heinz – can only grow if they present inclusive, universal benefits; use of emotion should be as a means of generating memorability (harmless jokes, sentimentality, appeals to love and happiness) rather than meaningful attention. And, of course, whilst they can further improve their approach by stealing successful tricks for their rivals, those with a winning formula should be reluctant to change aggressively unless there is substantial change in market conditions.
4.3 Matching risk with market
What seems clear, however, is that considerations of food, environment and advantage are as critical for small brands as large. Having previously written about smaller brands in the digital age, my mistake was to focus too much on the individual and ignore the demands of the market to which they belonged. For example, when I insisted that the lesson from the brands I studied was to emphasise product experience in communication, I was reflecting what appeared to be true from the recent history of those businesses. But I was ignoring the extent to which almost all were short-term experience brands, digital platforms where users would get immediate feedback on the quality of their choice, without that experience costing them much, with a social component, building network benefits from broad levels of quick trial. Focusing on product experience, for all these brands, was a necessity given the characteristics of the market to which they belonged, just as the same tactics were a necessity for older brands who were also short-term experience-type goods, priced at a low cost, with a social component (like Coca-Cola at a similar stage of their lifespan). However, if we compare the tactics of a brand like Tesla – who have been able to engender enough intangible faith from excited customers that they will buy product before the factory to make the product has even been built – with the tactics of Uber – where product trial was aggressively sought – then we can see the power of adapting first for your source of food, then to your environment and your advantage, rather than thinking size first.
The F.E.A.R. Checklist: 13 Steps to Survival
The aggregate lesson of the case-studies and data we have at our disposal, from business and nature, brands and animals, is that the only way to avoid extinction, to cheat death, is to relentlessly adapt. For marketers, this means moulding your brand to external conditions, crafting a specific set of characteristics and behaviours around the observable traits of the market your business exists inside.
The reasoning and processes involved in making the most important adaptations are contained within the four areas discussed above, but the approach can be simplified into a single brand strategy checklist: the F.E.A.R. checklist. Adopting the advice from Tetlock and Gardner, you can only reach useful answers that guide positive future action if you are honest about how you answer, seek guidance from a broad set of sources and have the humility to calibrate and re-calibrate your understanding based on feedback and results from the outside world.
If you can commit to this, then the following 13 steps will help you adapt your brand strategy in the right ways:
1. Food: How do we adapt to the characteristics of the customers in our specific market?
· Faith: how much faith is involved in purchasing a product like ours? How slow are the benefits of products like ours to reveal themselves?
· Cost: how expensive are our products, absolutely and relatively? How high are barriers to purchase?
· Consumption: how, where and with whom are our products consumed?
· Motivation: what do customers in our market want from us or products like ours? If we need a reputation, what do we need a reputation for?
2. Environment: How do we adapt to changing external conditions?
· What are the most likely threats to our brand health over the next two years? Break out culture, competition and technology, and be clear that the significant impact will occur in this period.
· What are the most significant of those threats? Assign probabilities and prioritise.
· Where (and why) have we previously over- or under-estimated a threat to our brand health?
3. Advantage: How do we adapt to our business’s greatest strength?
· What is our core strength as a business? Why have we survived for as long as we have?
· How does that strength offer advantage inside our market? In what way is it most distinct?
· Is what we do uniquely well understood by customers in our market now?
4. Risk: How do we adapt to our relative need?
· How far are we behind the category leader (or our target)? Is the gap growing or shrinking? How long has the current trend persisted?
· How focused is our approach right now? If we’re the category leader, are we broad enough to grow our base? If we’re behind, are we focused enough to generate more sales impact or build more brand equity with fewer resources?
· Do we need to challenge how the market is shopped to maximise advantage? If so, how?
These questions will not, or should not, have similar answers across different markets, but some other markets may offer clues, particularly when thinking about the future. Collaborate with people who possess diversity of experience, opinion, and background; look for patterns and connections, ask why certain approaches have succeeded or failed in both your market and those close to it. But most importantly, understand your own brand, its history, the business of which it is a product, as well as brands like it. Appreciate history, context, nuance and difference, and adapt your approach to what works for you and brands like yours. Ignore the universal and thrive.
Businesses die out more frequently than they should because, despite of their huge financial and intellectual advantages, they are told to apply misguided universal rules to their internal operations and external communications. It is clear, however, that when looking outside our own world, that businesses able to adopt the lessons of the natural world, and become more adaptable, are more likely to succeed. This lesson – you adapt or you die – is at its most relevant when it comes to the building and communicating of an external brand, despite the influential industry voices attempting to model a single set of rules applicable to all brands in all markets.
That set of rules we’ve produced as part of the nascent movement towards marketing science – the research of Les Binet & Peter Field, the work of Andrew Ehrenberg and his disciples – should be better understood as tactics that can be deployed successfully in certain contexts and for certain brands. These rules aren’t redundant as much as mislabelled; their application can help, but only as part of a specific set of adaptations unique to individual brands.
To adapt successfully, businesses need to reject this ill-suited model of brand-building and recognise that their survival rests on the F.E.A.R. checklist: adaptation to food, to the customers in your market who keep your business alive; adaptation to environment, ensuring you’re able to respond to changes in culture, competition and technology; adaptation to advantage, bringing internal strength to the fore; adaptation of risk, setting ambition by need. The choice for marketers and businesses is simple: you adapt or you die.
 Sharp, How Brands Grow, OUP, 2010, page 8
 Ormerod, Why Most Things Fail, Faber and Faber, 2005, page 185
 Ormerod & Rosewell, How Much Can Firms Know?, 2004 http://www.paulormerod.com/wp-content/uploads/2012/06/how-much-can-firms-know.pdf
 Carreyrou, Bad Blood: Secrets and Lies in a Silicon Valley Start-up, Picador, 2018, page 31
 A good summary of Rosenzweig’s thinking can be found at https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-halo-effect-and-other-managerial-delusions but his book, The Halo Effect (Free Press, 2007) is a more thorough exploration of this subject
 Chris Bradley of McKinsey has explored this in detail (https://www.marketwatch.com/story/great-companies-are-more-likely-to-do-really-badly-over-time-than-really-well-2017-07-12), as has Richard Shotton for Jim Stengel’s Grow (https://www.huffingtonpost.co.uk/richard-shotton/brand-purpose_b_11679052.html)
 Data2Decisions research, as featured in Admap September 2014 http://www.data2decisions.com/index.php/latest-news/95-adm-0914, shows the role of existing business size becoming more significant over time in its contribution toward profitability
 Kay, Foundations of Corporate Success, OUP, 1993, page 89
 In his essay “What Clayton Christensen Got Wrong” (https://stratechery.com/2013/clayton-christensen-got-wrong/) Thompson argues that Christensen’s “assumptions fail in the consumer market, and this, ultimately, is why Christensen’s theory fails as well”.
 Groysberg, McLean and Nohria, Are Leaders Portable?, Harvard Business Review, April 2006
 Huckman and Pisano, The Firm Specificity of Individual Performance: Evidence from Cardiac Surgery, Management Science, Vol. 52, No. 4, April 2006
 Binet & Field, The Long and Short of It, IPA, 2013
 All data in this paragraph transcribed from Binet & Field’s IPA Eff Week 2017 presentation https://effworks.co.uk/watch-media-context-les-binet-peter-field/
 Binet & Field, Media in Focus: Marketing Effectiveness in the Digital Era, IPA, 2017
 Popper, “Science as Falsification”, (https://staff.washington.edu/lynnhank/Popper-1.pdf) originally published in Conjectures and Refutations: The Growth of Scientific Knowledge, Routledge, 2002
 Sharp, How Brands Grow, page 39
 The Walt Disney Company’s approach to “total merchandising” is discussed in Derek Thompson’s Hit Makers, Allen Lane, 2017, page 292-301
 Sharp, How Brands Grow, page 55
 Nike’s initial focus on running shoes is discussed in Willigan, High Performance Marketing: An Interview with Nike’s Phil Knight, Harvard Business Review, July-August 1992
 As Gina Keating recounts in Netflixed: The Epic Battle for America’s Eyeballs (Penguin, 2012), Netflix concentrated “on back catalog and niche films, leaving Blockbuster with the new-release trade that made up about 80 percent of its business”
 Sharp, Marketing, OUP, 2013, page 59
 The work of Koen Pauwels is instructive: http://www.msi.org/reports/do-online-behavior-tracking-or-attitude-survey-metrics-drive-brand-sales-an/
 Poels, K. & Dewitte, S, ‘How to capture the heart? Reviewing 20 years of emotion measurement in advertising’, Journal of Advertising Research 46, 18-37
 Data from Booking Group’s annual reports, 2010 onwards, saved: http://ir.bookingholdings.com/financial-information/annual-reports
 Sharp, How Brands Grow, page 124
 Ehrenberg, Uncles and Goodhardt, Understanding brand performance measures: using Dirichlet benchmarks, Journal of Business Research 57 (2004)
 Popper, Science as Falsification, 1963
 Shaw and Merrick, Marketing Payback, FT Prentice Hall, 2005, page 31
 Watts, Everything is Obvious, Atlantic Books, 2011, p.72
 Hardin, The Competitive Exclusion Principle, Science, Vol. 131, No. 3409, April 29 1960
 Sharp, How Brands Grow, page 30
 As Peter Drucker said, “the purpose of a business is to create a customer”
 Dixit & Nalebuff, The Art of Strategy, WW Norton, 2008, page 10
 Ogilvy, D, Confessions of an Advertising Man, Southbank, 2013, p.117
 Binet & Field, Long & Short of It, p. 28
 Binet & Field, How Share Of Voice Wins Market Share: New Findings From Nielsen And The IPA Databank, IPA, 2009
 Sharp claims “brands largely compete in terms of physical and mental availability”, making no allowance for differences in market, interviewed here: https://www.intheblack.com/articles/2015/12/01/business-academic-byron-sharp-says-marketers-are-doing-it-all-wrong
 For the purposes of their awards (http://www.campaignmediaawards.com/), Campaign in the UK considers retail a distinct category; in the US, the 4As considers retail a distinct category (https://www.aaaa.org/home-page/client-essentials/retail/)
 Author’s own calculation, using Mintel data sourced from Supermarkets, UK, November 2017
 Dentsu Aegis proprietary “ICE” database, sourced from 1,000+ cross-channel campaign evaluations
 Mintel, Furniture Retailing, UK, July 2018
 McDonald’s history from Love, McDonald’s: Behind the Arches, Bantam USA, 1995
 The McDonald’s “Experience Of The Future” project and their Velocity Growth Plan are outlined in their annual report https://corporate.mcdonalds.com/content/dam/gwscorp/investor-relations-content/annual-reports/McDonald%27s%202017%20Annual%20Report.pdf
 At the turn of the millennium, McDonald’s made roughly $13.8bn in total revenues at an average of c. $494k per restaurant per year; in 2017 it made $22.8bn at an average of c.$613k per restaurant (per 2007 and 2017 McDonald’s Annual Reports)
 Willigan, High Performance Marketing: An Interview with Nike’s Phil Knight, Harvard Business Review, July-August 1992
 Sharp, How Brands Grow, OUP, 2010, page 124
 In the UK, Aldi has grown by approximately 134% in the last five years, per Kantar: https://www.kantarworldpanel.com/en/grocery-market-share/great-britain/snapshot/
 As previously noted, in his focus on “lighthouse identity”, “sacrificing” and being “bold”, with “emotional terms” and “symbols of re-evaluation”, Morgan’s work isn’t “profoundly different to the conventional wisdom of creating a consistent identity, building emotional appeal around distinctive assets in order to create broad salience”, Ebdy, The Hare & the Tortoise, IPA, 2016
 Kay, Foundations of Corporate Success, p.89. See also: Spiegler, “The Market for Quacks”, Review of Economic Studies, 2006, 73; Nelson, "Information and Consumer Behavior", 78 Journal of Political Economy 311, 312 (1970)
 Per Binet & Field’s presentation to Eff Week in 2017, a Financial Services brand should spend 77% of its advertising budget on brand
 AG Lafley, Playing to Win: How Strategy Really Works, HBR Press, 2013, page 13
 Merrick and Shaw, Marketing Payback, page 33
 Per Kay’s analysis in Foundations of Corporate Success, page 310, British Airways’ “brand premium” was worth 3% of revenues on European flights; its “Heathrow premium” was worth 10% of revenues on European flights
 Barden, “All You Need is Emotion. Really?”, Decode Marketing, January 2018
 As former CEO John Antioco wrote in Harvard Business Review (April 2011), the Blockbuster board had noted the shift to online, and the changing expectation around late fees, planning a $400m dollar investment in 2004 that was ultimately rejected by activist shareholders https://hbr.org/2011/04/how-i-did-it-blockbusters-former-ceo-on-sparring-with-an-activist-shareholder
 Of the nine key changes Lewis speaks of instituting three years into his tenure, the first five are all about its food product https://www.tescoplc.com/news/blogs/topics/a-lot-has-changed-in-three-years-a-colleague-message-from-dave-lewis/
 According to the New York Times, “Today, half of the company’s revenues come from healthier drink and snack products, up from 38 percent in 2006.” https://www.nytimes.com/2018/08/06/business/indra-nooyi-pepsi.html
 Tetlock & Gardner, Superforecasting: The Art & Science of Prediction, Random House, 2015, page 277
 IKEA: The Wonderful Everyday, Marketing Society UK Excellence Awards 2017
 Porter, Competitive Strategy, HBR, 1985
 As Christensen explains, “low-end” disruptors will often initially present a more basic, lower-cost version of an established product, and sell to more casual customers at a lower margin before moving up the value chain https://hbr.org/2015/12/what-is-disruptive-innovation
 Horowitz, The Hard Thing About Hard Things, Harper Business 2014, page 23
 “I don’t think we would have gotten as far as we did” without the health-led campaign that made them famous, said founder Fred DeLuca https://www.inc.com/magazine/201305/burt-helm/how-i-did-it-fred-deluca-subway.html
 Gigerenzer, Gut Feelings, Penguin, 2007, page 134