Why The Best Brands & Brand Builders Stand Out—Evergreen Business Weekly 6: Brand

The Evergreen Project is a group of aspiring managers, founders, and investors. We contribute resources about one topic each week, which are synthesized and shared in this Weekly Edition. The aim is to learn more efficiently through increased context and focus. Join here to receive the next Edition of Evergreen Business Weekly.

This Edition is built from 6 books, 10 posts, 3 talks. See all of the resources and previous Editions in the Evergreen Business Library [coming soon].

Remember, these are designed to feel like short books, you’re meant to meander and spend ~3 hours on this topic this week. Save some of these links and read them throughout the week. Immerse yourself in this topic and leave the week smarter than you started it!

Brand is Confusing

Brand seems a simple concept at first glance. Surrounded by brands, and constantly reading about the power of personal branding and the brand value of companies, we would guess that brand is well-understood.

Here’s a quote that is oddly comprehensive about the concept of Brand:

“Branding: this idea that gets lodged in people’s brains. I never quite understand how branding works. So I never invest in companies that are just about branding. But it is, I think, a real phenomenon that creates real value.” — Peter Thiel

The complexity behind this quote may become more appreciated as we check out more lessons. It’s difficult to understand, difficult to define, difficult to parse… but there’s no denying that it creates real value.

No one produces a more convincing case of perception creating real value than the incomparable Rory Sutherland. This is a brilliant TED Talk that covers the Branding of the Potato, and the ingenious phrase “Hedonic Opportunity Cost”

The Definition of Brand

As it turns out in the reading and the research, this is one of those concepts where everyone has created their own definition. Let’s see where we can find some common ground amongst these definitions of ‘Brand’.

From the undisputed king of Branding, Richard Branson in his book, Business Stripped Bare:

Brands exist as a means of communicating what to expect from a product or service—or to highlight the family likeness between different products and services.

Another definition from Seth Godin, cited from Brand Thinking and other Noble Pursuits, suggested by David Spinks, as summarized here on Brain Pickings:

I believe that “brand” is a stand-in, a euphemism, a shortcut for a whole bunch of expectations, worldview connections, experiences, and promises that a product or service makes, and these allow us to work our way through a world that has thirty thousand brands that we have to make decisions about every day.

The author of Brand Thinking & other Noble Pursuits, Debbie Millman:

Brands promise a certain affiliation that we end up benefiting from—the benefits come from the association and the affiliation. Then we can use them to project how we want to be seen in the world.

This relationship between brands and consumers is revealing—something that may be uncomfortable to acknowledge. (I doubt many of us would readily admit that we buy Starbucks in order to be perceived as affiliated with the brand values of Startbucks.) Maybe that tenderness hides truth.

Dori Tunstall, a design anthropologist (which sounds awesome), talks about how our historical cultural tendency is toward affiliations with stories.

We almost always used “things” as a way to identify ourselves and to identify others. Let’s start with the human body. In traditional cultures, the art of tattooing was about social coding. A certain number of tattoos meant you’ve been married. Another number of tattoos meant that you’ve had children. This many tattoos meant that you’ve killed a lion.
Nowadays, we have a tremendous emphasis on dress and makeup and in our rituals of buying. I use the word “rituals” very specifically. But our rituals of consumption are no longer as satisfactory to us… because they are empty of human relationships.
There was recently a wonderful study done on garage sales. When people go to a garage sale to buy something, they actually feel very satisfied about the interaction. Most of the time, it’s because the object they buy comes with a story — a very real, personal story about where the object fit into someone’s life. Whether it’s real or not, you connect with that person through the object. So when you take the object, your purchase of it is more satisfactory. Whereas right now, when you go now to a store, there seems to be a lot of emphasis on branding that tells authentic stories in order to… sell more stuff.

This human need for a story reminded me of this excellent TED talk by Simon SinekStart with Why. While he’s not deliberately talking about Brand, he nails it with this phrase:

People don’t buy what you do; they buy why you do it.

Brand is something that lives in minds, it’s not a broadcast from a company. A friend of mine, Camron Gnass, who sells creative services summed this up with a simple, beautiful thought:

Your brand is what people say or think about you when you are not around.

It’s naïve to think that those thoughts or words can be chosen or controlled. The closest that a business can come to choosing those thoughts and words is to create a good impression on everyone (not only your customers). Every small choice, from cleanliness, to phone courtesy, to the colors on the walls are what will determine your brand.

Richard Branson also hits on that idea, in a beautiful complement to his initial succinct definition:

A brand’s meanings are acquired over time. Some meanings will be the product of serious discussions and years of directed and dedicated efforts. Some meanings will just stick to the brand, whether you like it or not. Remember, a brand always means something, and ultimately, you can control the meaning of your brand only through what you deliver to the customer.

Case Studies of Brands

The Fiercest Brand Battle

In pursuing and understanding of Brand, I wanted to see if any businesses were built ONLY on brand. Lots of companies have brand built on top of another core Competitive Advantage (like a trade secret or Network Effect), but are there any industries that are pure branding?

There were fantastic responses, including a bombshell from John January.

John’s point was a fascinating one—water is water is water. I doubt any of us could blind taste-test different water brands, so this is truly a test of Brand. Our bottled water purchase decisions are based on story, emotion, packaging, our associations and our beliefs. With that in mind, looking at this is like looking at a Brand Battleground.

These waters each have a different story, a different image. They each say a different thing about us if we have them. Yet the product is virtually identical. With packaging, narrative, and some subtle language, these products create perceived value which we happily pay for. Impressive.

The Simplest Mechanism of Brand

Imagine this hypothetical situation: You are given $2,000,000 and expected to turn that into $2,000,000,000,000 (yep, Trillion) in 150 years.

That’s the situation (with some more color) laid out and responded to in this post, a transcription of a talk by Charlie Munger.

This story is incredible in terms of relating Brand to Science—specifically, the psychology of Branding. Using only a Sophomore’s awareness of psychology, Munger explains how Coca-Cola creates a worldwide brand through Pavlovian Association and Operant Conditioning.

We can see from the introductory course in psychology that, in essence, we are going into the business of creating and maintaining conditioned reflexes. The “Coca-Cola” trade name and trade dress will act as the stimuli, and the purchase and ingestion of our beverage will be the desired responses.
And how does one create and maintain conditioned reflexes? Well, the psychology text gives two answers: by operant conditioning, and (2) by classical conditioning, often called Pavlovian conditioning to honor the great Russian scientist. And, since we want a lollapalooza result, we must use both conditioning techniques — and all we can invent to enhance effects from each technique.
The operant-conditioning part of our problem is easy to solve. We need only (1) maximize rewards of our beverage’s ingestion, and (2) minimize possibilities that desired reflexes, once created by us, will be extinguished through operant conditioning by proprietors of competing products.

This is the basic mechanism of a Brand—stimulus and response. Do you ever notice seeing a Coca-Cola ad in the exciting moments before a game or a movie? These are strategic placements, reinforcing our impressions of Coca-cola as happy and exciting.

Time plays a huge role in Coca-Cola’s dominance, as they’ve been building this reputation for nearly a century, maneuvering gently to stay modern while growing their brand, and increasingly impenetrable moat.

Munger’s points are absolutely fascinating—one of the most informative thought experiments on brand and business we’re likely to ever hear.

Diamonds are Forever… since 1947

The most impressive application of this psychology approach to Brand is by DeBeers (or whatever name you’d like to assign the Diamond Cartel.)

The massive article, Have You Ever Tried to Sell a Diamond, in the Atlantic in 1982, is still one of the most impressive pieces about the Diamond industry ever written. Here’s some of the background for context:

De Beers proved to be the most successful cartel arrangement in the annals of modern commerce. While other commodities, such as gold, silver, copper, rubber, and grains, fluctuated wildly in response to economic conditions, diamonds have continued, with few exceptions, to advance upward in price every year since the Depression. Indeed, the cartel seemed so superbly in control of prices — and unassailable — that, in the late 1970s, even speculators began buying diamonds as a guard against the vagaries of inflation and recession.

There are a ton of interesting bits in this piece, but the parts on Brand, and how it was firmly installed into our culture by a marketing campaign from a cartel that started just over 50 years ago, are extreme:

In its 1947 strategy plan, the advertising agency strongly emphasized a psychological approach. “We are dealing with a problem in mass psychology. We seek to… strengthen the tradition of the diamond engagement ring — to make it a psychological necessity capable of competing successfully at the retail level with utility goods and services….”
It defined as its target audience “some 70 million people 15 years and over whose opinion we hope to influence in support of our objectives.” N. W. Ayer outlined a subtle program that included arranging for lecturers to visit high schools across the country. “All of these lectures revolve around the diamond engagement ring, and are reaching thousands of girls in their assemblies, classes and informal meetings in our leading educational institutions,” the agency explained in a memorandum to De Beers.
The agency had organized, in 1946, a weekly service called “Hollywood Personalities,” which provided 125 leading newspapers with descriptions of the diamonds worn by movie stars. And it continued its efforts to encourage news coverage of celebrities displaying diamond rings as symbols of romantic involvement.
In 1947, the agency commissioned a series of portraits of “engaged socialites.” The idea was to create prestigious “role models” for the poorer middle-class wage-earners. The advertising agency explained, in its 1948 strategy paper, “We spread the word of diamonds worn by stars of screen and stage, by wives and daughters of political leaders, by any woman who can make the grocer’s wife and the mechanic’s sweetheart say ‘I wish I had what she has.’

Holy. Shit.

Thanks to Max Olson, Caleb Elston, and Mike Gee for contributing this idea and this piece via Twitter.

Like a Virgin

Richard Branson and his troupe at Virgin have achieved a marvel of Branding in his lifetime. The unique trait of the Virgin brand is that it transcends industry. Apple makes computers, Coca-cola makes beverages, McDonald’s makes fat people. Virgin? They fly planes, sell phones, make music, go into space (kinda), open hotels, and more.

Of the top 20 brands in the world, 19 focus on one trade. Then there’s Virgin. Over the last 35 years, Virgin has created more billion-dollar companies in more sectors than any other company. From 2000–2003, they created Virgin Blue, Virgin Mobile UK, and Virgin Mobile US—all Billion dollar companies.

This magic comes from the Brand—they have built a brand around the customer receiving ‘A Virgin Experience’, not one product or service:

We offer our customers a Virgin experience, and we make sure that this Virgin experience is a substantial and consistent one, across all sectors of our business.
[…]
The Virgin brand is a guarantee that you’ll be treated well, that you’ll get a high-quality product which won’t dent your bank balance, and you’ll get more fun out of your purchase than you expected—whatever it is.

One of the interesting things about this accomplishment is that it comes from honesty—not from perfection.

Too many companies want their brands to reflect some idealized, perfected image of themselves. As a consequence, their brands acquire no texture, no character and no public trust.

This pairs very well with this short piece, suggested by Shay Colson, from Jenn Maer, Design Director at the famous design firm IDEO. She mentions building a ‘creative tension’ to make the brand interesting and relatable:

The trouble is, most companies go out of their way to create brand personalities that are single-minded and focused. They’ll come up with a list of adjectives like friendly, trustworthy, caring, and sincere. Lovely traits, all of them. But where’s the hook?
Remember, brands are like people. Have you ever met someone who’s friendly, trustworthy, caring, and sincere, but nothing more than that? You’d probably want to punch them in the face. Sheesh, grow a spine already.
We fall in love with people because of the crazy mix of contradictions that make them unique. So why should brands be any different? Building a bit of creative tension into your brand gives consumers something to fall for, and it offers rich opportunities for design.

When Richard Branson and IDEO both stress a point—it’s worth noting! All of these quotes pulled from his book, Business Stripped Bare.

Original Gangsters of Branding

Proctor & Gamble has been around for 150+ years. Founded in 1837, they’re now a Fortune 500 company worth over $230 Billion. If you haven’t heard of them, you’ve certainly heard of their brands: Bounty, Crest, Tide, Braun, Charmin, Downy, Pampers, Gain, Febreze, Dawn, Scope, Pantene, Vicks, etc. They make household products under dozens of various brands.

Proctor & Gamble‘s Competitive Advantage is turning out and reinforcing Brands. As of 2011, 26 of P&G brands have more than a Billion in annual Sales. No company can compare to them in the composition and defense of brands, especially the sheer volume of brands from one company.

P&G was incredible at this, even back in 1907 when it launched Crisco. Before Crisco, we used to use Lard for cooking fat. Now, lard is vilified and most people wouldn’t consider eating it. What happened? A few things contributed to this (The Jungle, by Upton Sinclair), but Lard was pushed out of favor by P&G in order to sell Crisco.

Planet Money has an amazing podcast about this called Who Killed Lard?

Procter & Gamble perfected the modern art of branding with Crisco. It sent out cookbooks touting how good Crisco made you feel. It shipped samples to hospitals and schools, then bragged about how those institutions trusted Crisco. It rushed onto the newly invented radio waves, sponsoring cooking programs, that featured, what else, Crisco.

Most of these were new tactics for that era, and Crisco conceived and executed them flawlessly. Now 100 years later, they’re accomplishing the same move with new products and an updated playbook in diapers, and cleaning products like Mr. Clean Magic Erase Sponges.

To learn their playbook, understand their brand strategy, and see how they pull off this incredible feat brand after brand, there is no better book than Playing to Win, by Former P&G Chairman & CEO A.G. Lafley. It’s written as a strategy book, but in the case of P&G, that means it’s a Brand Strategy book, and it is packed full of case studies about creating brand value out of small tweaks based on market insights, which end up being worth billions.

The first 15 pages tells the story of Olay, which went from a brand wasting away, to getting the updated P&G treatment. The market was researched, and an insight led them to tweake the product and change the packaging to reinforce a slightly different value proposition. Then the price was changed and a new ad campaign was run.

Following the 2000 launch, Olay had double-digit sales and profit growth every year for the next decade. The result: a $2.5 Billion brand with extremely high margins and a consumer base squarely in the heart of the most attractive part of the market.

There are dozens of stories like this, and incredible deconstruction for the reasons behind the choices. If you want to learn how to architect a brand, this is your book.

Cards Against Humanity

There is an undeniable Brand power in Cards Against Humanity, and I was very thankful to Michael Gelphman for suggesting this concept and sending me this talk from the founder.

The brilliant thing about this video in relation to brand is that he doesn’t use the word brand once—never even acknowledges that he’s creating one. The way Temkin puts it is this: Values -> Strategy -> Tactics. This is a good definition of brand, this is a ‘Why’.

The talk shows a few of his choices in starting the company and launching the product, and reveal how the brand was created directly, yet unintentionally, from his choices. Discipline around values is the lesson here, and how clarity of your beliefs enables disciplined decisions, which creates a powerful brand.

One example of this is their resolve never to sell the game for less than $25. No sales, no coupons, nothing. What did they do on Black Friday, when everyone else in the world is getting noticed for slashing prices? They RAISED their price $5, which created word-of-mouth, which in turn increased sales. Genius. Read the whole story here.

DeWalt Power Tools

This case study from Harvard Business School, recommended by Bo Fishback, details the situation which led to the creation of the DeWalt brand of power tools. It’s a fascinating situation where Black & Decker’s success in one category (consumer) caused a decrease in brand value in their Tradesman category. Men on the job didn’t want to use the same brand of tools that someone might buy from Wal-mart and use at home.

The case follows Joseph Galli as he discovers this phenomenon, realizes what brand factors have created the problem, and what his options are to try to recapture the market in the Tradesman category.

The case shows how purchase data and customer surveys are used to orient within the space, determine strengths and shortcomings, and allow the business to refine it’s offering.

Also, it shows that not every answer is in survey data—while no Tradesman would acknowledge that color was a decision criteria for his purchase, it became an important piece of the launch of the new brand.

Starbucks: Engage or Die

In the world of smartphones and social media, brand is not as simple as it was in years before, when as long as you had the TV ad budget, a brand could be built through impressions.

Now, brands are built through interactions. Through being readily available with information for customers to access, rather than broadcasting it. John Hagel of Deloitte has a great interview on the Marketo blog about how this will unfold:

The market will force us to change. The traditional approach of push-based marketing is not going to work as well as it has in the past when there are more and more things competing for our attention.
[…]
Technology is a key catalyst for these changes, so marketers are going to have to become more and more focused on the Internet to connect and build relationships. The core of the marketing budget used to be traditional media; now that will migrate to the periphery. And what used to be on the periphery will become more and more central to how you pursue these pull-based models. Mobile phone technology will be very important.

Thanks to Matthew Frost for sharing the interview with John Hagel.

Using technology to connect with customers and stay engaged is something that Starbucks has absolutely dominated in the past few years. Shay Colson shared a whole set of links about how they developed and executed this strategy.

Geekwire: Q&A: Starbucks Digital Chief Adam Brotman on mobile ordering, delivery and international availability

Quora: What exactly does Starbucks mobile payments app do, that makes it so successful?

Geekwire: More than 14% of Starbucks transactions are now made with a mobile device

Motley Fool: Two reasons Investors should love Starbucks in 2015

Howard Shultz treats this as a core competency of Starbucks and is pushing hard on the mobile strategy and mobile engagement:

If you are impressed so far, I promise you, you haven’t seen anything yet,” Brotman told shareholders. “We have a robust pipeline of digital and mobile innovations coming down the pipe.”

Starbucks is looking ahead and strengthening it’s brand through constant engagement and technology that enables the company to keep it’s brand in the forefront of customers’ minds. They can’t buy an ad on your Home screen, but they can create an incredible app that you choose to put there, which you’ll see every morning.

Apple

The most valuable brand in the world (with a bullet, more than double Microsoft at #2) deserves a mention here, of course. Apple gets talked about all the time, so let’s mention some of the underappreciated resources for comprehensively understanding Apple’s Brand.

Steve Jobs Biography isn’t often thought of as a book about Brand, but it is the book about Apple’s brand. To understand the choices Jobs made, and more importantly, the context in which he made them, is to grok the brand.

To understand a genius egomaniac’s company, understand the egomaniac.

Another book that has lessons about how Apple’s brand was built is Insanely Simple, by Ken Segall, who worked for Ad Agencies that worked closely with Apple for years. It’s fascinating to hear stories of how Jobs wanted to communicate with us about the company. Also, this book emphasizes the power of simplicity as a decision-making model within Apple—this is an under-appreciated factor of Apple’s powerful brand.

Composition of Brand

This is a huge tangled mess of constants, variables, imaginary things, and undiscovered effects that are not discernible into a set of ingredients. These concepts are easy to pull out in hindsight, and very difficult to project forward or predict. It’s a bit naïve to even start to list what is bound to be unlistable, but there is value in understanding even a few of these ideas that can create a brand.

Differentiation

Brands are only helpful in the context of other brands. Without comparables, few brands would have any meaning. Different, by HBS professor Youngme Moon, relates this simply and poetically.

In her book, she exemplifies brands that stand out in our minds, and helps us understand why. For one example, IKEA is what she calls a Reverse Brand, based on their offering of no-delivery, assemble-yourself furniture:

This is what reverse brands do: they eliminate, but they also elevate. They strip things down, even as they sweeten things up.
[…]
In a saturated world, there can be a fresh appreciation for the elimination of benefits, as long as that elimination is thoughtfully executed. When people are accustomed to having too much, they will luxuriate in the absence of things they’ve come to take for granted.
[…]
And so they offer us a bit of deprivation, sprinkled with an unexpected splash of indulgence—just the thing to bring our taste buds back to life.

There are many examples in this book, and they are each inspiring stories about how Brands position themselves against others in the market, to gain special recognition and awareness.

Narrative vs. Story

Before reading this, the differences between narrative and story seemed negligible. These few lines completely changed that:

Stories are self-contained: beginning, middle, resolution. Something happened, here’s how. A story is about me, the storyteller, or some other people over there. It’s not about you, the listener.
[…]
You can use your imagination and figure out how you might have acted, but the story is not about you. In contrast, a narrative is open-ended, about some opportunity, and whether the listener gets the benefit depends on the listener’s choices. The resolution has not yet occurred. You’re talking about some opportunity that hasn’t yet materialized and the ability to embrace this opportunity hinges on the listener’s actions. A narrative is a call to action. It says, “How it ends is up to you. What are you going to do?”
It’s a different approach. I don’t deny the power of stories, but millions of people have given their lives for narratives–religious narratives, revolutionary narratives, social narratives of various types–that are so powerful they move people to actually sacrifice the most precious thing, their life, in order to influence the ending.
Very few companies have harnessed the power of narrative. Apple is one. The narrative of Apple’s early days was captured in a tight slogan: “Think different.”

This is an excerpt from the interview linked earlier from John Hagel at Deloitte, suggested by Matthew Frost.

Open Questions

There are lots of intriguing questions to ask around Brand, in a philosophical way, where answers may never be right, but are always reflective, ponderable, and welcomed. Here are some questions for your quiet moments of thought:

What was the first Brand?

What is the Brand that you are most bought into?

What Brands do you dislike? Why?

What do you perceive as the difference between these brands? Why are you willing to buy into one brand and not another?

What is the fastest way to build a brand?

What is the cheapest way to build a brand?

What industries’ purchase decisions are not based on brand?

What business relies on brand the least? Most?


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Thank you

Massive appreciation for who suggested pieces of content for this Edition of Evergreen: Max Olson, Matthew Frost, Aaron Wolfson, Bo Fishback, Jason Evanish, Michael Gelphman, David Spinks, Shay Colson.

Many thanks for being a part of this project! Not every suggestion is able to make it to the final edit, but every single suggestion is read and appreciated.

Never Enough

As my Father always says: “There’s always room for the best.” There’s always a better resource out there. These collections can always get better, and I hope that they do. If you can think of anything that was missed, I welcome you to share it.

To share your thoughts, improvements or additions: Email or Twitter.


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Inspirations

This Edition of Evergreen, along with all of my others and the ideas behind this project, are inspired by the excellent content created online every day. To name a few that hold particular places in my heart:

If you liked this, check out other Editions of Evergreen:
Building and Managing a Team:
How to Find and Recruit the Team you Need
How Not to Hire like a Clownshow
Compensation Rules Everything Around Me
Why Employee Onboarding is holding you back
How to Boost Employee Retention
Secrets to Perfecting Organizational Communication
How to Fire an Employee
Strategy and Competitive Advantage:
How to Master the Craft of Strategy
Competitive Advantage: How to Build a Winning Business
The Power of Network Effects
How Cost Leadership Builds Powerful Businesses
Why the Best Brands Stand Out
Building the Business:
How to get good business Ideas: Mental Alchemy of Ideation
Product/Market Fit: What it really means & How to Measure it
How to Failure-proof your business with Customer Development
How Strategy and Psychology Work Together to Perfect Pricing
The Most Important Equations in Business - CAC (Part 1)
The Simple Math Behind Every Profitable Business - CLV (Part 2)
How Psychology behind Word-of-Mouth Works
The Secret Core of Every Successful Business--Distribution
The Most Important Lessons in Sales
How to be a Great Employee:
How to Start a New Job: Handling Career Transitions like a Boss
How to Master the Discipline of Product Management
I've also written about How & Why we started Evergreen:
How a prototype's failure created the next iteration
Mission & Method of Evergreen
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