Trading Cool for Credibility
Established companies have to become uncool over time. What is uncool? Becoming publicly traded and having to answer questions on quarterly conference calls regarding your earnings. Uncool is focusing strictly on net income rather than new, risky but possibly innovative ventures. Uncool is being so large that the founder no longer knows everyone’s name that works at the company. Being a grown-up company is uncool.
But customers love cool companies. Customers love telling their friends that they shop at the new cool place. Novelty is addicting. But novelty can’t be a strategy, by definition. So what are companies doing to ensure that they build a long and sustainable company but at the same time, feed their customers need for “cool”?
American Express / Foursquare
There are eighty million millennials in America alone and they represent about 25% of the entire population, with $200 billion in annual buying power. They have a lot of influence over older generations and are trendsetters across all industries from fashion to food. Companies have been struggling connecting with this generation because many of the traditional methods of advertising have proven ineffective at capturing their attention.
American Express Bank founded in 1850 found itself with a with a millennial problem. How could a bank so old reach out to people born after 1980? How would they bring their brand into the 21st century and leverage social networks and other assets which has these millennials?
Foursquare, the popular location based app popularized the check-in, was the quintessential Millennial app. It was mobile first, because that is how companies need to be built nowadays. It was launched at South by Southwest in 2009, a conference around Tech, music, and Film that takes place annually in Austin, Texas.
Because millennials aren’t at all influenced by advertising, Foursquare leverages friends check-ins at venues as a form of advertising and social proof that that venue is in fact worthy. Users can also leave tips fun things to order at restaurants or other cool things to watch out for and pay attention to in other venues. In the center of all of this is disposable income spending. American Express understood that they needed to partner with a company that was facilitating the discovery of places and ultimately bore the responsibility of customers transacting at those venues.
In 2011, Foursquare announced a partnership with American Express to offer discount for card holders when they checked in on their cell phones at certain shops and restaurants. Foursquare ready awarded coupons and digital badges to patrons, however American Express card holders received substantial deals.
So we understand what the benefit of American Express partnering with Foursquare was. What was Foursquare benefits with partnering with American Express? How can a two-year-old company differentiate itself from a barrage of competitors which were popping up? How can a brand new company get in the middle of the checkout transaction, where the real value of the data is. Simple. Partner with a 160 year old bank. Ultimately it’s a trade of Goodwill and all positive associations of American Express are subconsciously transferred over to Foursquare.
H&M / Luxury Fashion Designers
H&M, the popular Swedish clothing retailer, prides itself on being ultra affordable. That strategy works for them. In 2015 they had $25B in revenues. Being affordable is not the best strategy when your publicly traded and your investors want to see income growth.
How can a 50 plus year old company whose value proposition of being affordable, not maintain an air of luxury? How can a 50 plus year old company whose value proposition of being affordable, not maintain an air of luxury?
In 2015, H&M partnered with luxury brand Balmain. The year before, they unveiled a partnership with Alexander Wang. And in 2011, they had a Versace collection.
It’s widely understood that H&M’s designer collaborations, released in limited-edition, make up a tiny percentage of overall sales for the world’s second largest apparel retailer. But the marketing benefits — said to be measured in billions of media impressions, a metric used to determine how many times consumers see mention of the collaboration — can be significant and help boost positive brand perception and drive consumers to H&M stores.
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