Volume 139: The Conceits of Branding.
1. The Conceits of Branding.
tl;dr: Get better at definitions, be taken more seriously.
In any professional culture, conceits are at play, often memorialized in cliche. The oh-so-smart doctor that lacks self-awareness and bedside manner, the arrogant lawyer, the on-the-spectrum software engineer, the empathetic caregiver, and the flighty marketer with shiny object syndrome, to name just a few.
For those in the branding business, our conceit tends to be how quickly and gratefully we divorce ourselves from reality. A common manifestation being our tendency to talk about branding as if it's the brand and to talk about the brand as if it's completely disconnected from the business when neither could be further from the truth. For example, how often have you heard someone from a branding agency describe a new visual identity system (logo, colors, imagery, type, graphics, etc.) as the client's "new brand?" Plenty is my guess, yet this is entirely incorrect and quite dangerous if we take it literally.
When you rebrand or revitalize an existing visual system, you haven't created a new brand; you have new branding.
Equally, if you create branding for a new company or product - name, logo, colors, type, imagery, etc., this isn't the "new brand," it's the "new branding" or "new brand assets" if we want to be even more specific.
This is because the brand itself hasn't yet had time to be built.
Now, muddling the suit a brand wears for the brand itself is a basic factual error, yet we must call it out because of the implications. So let's start with what a brand is (I'll be perfectly honest; I'm much less interested in having a perfect definition of the term brand than I am in having a sound understanding of how to build one. Too often, attempts to define "brand" are just dancing on the head of a pin).
Anyway, a common definition of a brand is that it's "a promise," sometimes expanded to "a promise, delivered." These will do for our purposes because they get at something important - our brand isn't just about what we do, say, or look like; it's about what people think of us. And that doesn't change overnight just because we have a new logo.
To expand upon this, there are two interrelated forces we need to consider:
First, when a brand makes a promise, it creates an expectation. This expectation could be viewed as the brand: Why do I buy Apple products? Because over many years, the brand has made a promise of design, simplicity, and interoperability that it consistently delivers on, giving me the expectation that Apple will continue to offer this in the future. Because I find these things valuable, I'll likely continue to buy its products even though they're more expensive than less well-designed, less simple, and less interoperable competitors. (And, because Apple is now my first choice, a competitor would need to offer something markedly better for me to switch. This is why strong brands act as moats. All else being equal, it's not enough to be "as good as" the brand leader. You must be "better than" along some dimension that matters to the customer). As a result, I'd argue that a brand isn't so much the promise itself as the set of future expectations created by consistent delivery against that promise.
Second is how we recognize the promise and the resulting expectation amid a noisy and crowded market for our attention. This recognition stems from how the brand is presented, where and when and how, and the consistent use of distinctive assets unique to that brand that the customer won't mistake for a competitor.
So, if I continue the Apple example, I recognize Apple via the name, the logo, the products (which, btw also make use of visually distinctive features, like the notch, the white earbuds, aluminum chassis, etc.), the voice of the brand, and the stores, which are conveniently located and cannot be mistaken for any other retailer.
Add this up, and at a basic level, a brand consists of the expectation created by consistent delivery against a promise (whether stated or unstated), along with the distinctive sensory cues used to uniquely identify this brand relative to the competition.
Now, let's return for a second to muddling up branding as the brand and disconnecting the brand from the business.
I've talked in the past about McDonald's and Burger King, mainly because they're great as a compare and contrast because they talk to investors about things like same-store sales that allow us to make comparisons; they're competitively very close to each other, yet have taken a different approach to brand-building in recent years.
In the brand = branding corner, look to Burger King. It has a fancy new identity system and has openly stated an intent to deliver creativity via advertising to punch above its weight, yet it hasn't done much in recent years to build its brand beyond advertising stunts; its menu has ossified, its stores been left to get ever more old-fashioned, same-store sales have consistently underperformed, and it recently announced the closure of 400 restaurants.
In the brand ≠ branding corner, look to McDonald's. There's no new identity system or advertising stunts, but a consistent focus on threading the needle between store modernization, menu innovation, digital enablement, and consistent marketing communications allied with smart use of the brand's distinctive assets, which, when combined, add up to leadership in same-store sales growth.
So, which is the better brand?
This is precisely why definitions matter. If you mistake the branding for the brand, you might well say Burger King is the better brand - because it has a more interesting and contemporary design system. However, if you view the brand as a broader set of expectations connected to the consistent delivery of a promise people find valuable, you'd most certainly pick McDonald's. It's a better-run business, operating in a more customer-centric fashion, selling more units, and making more money.
Philosophically, this is also why I'm so opposed to brand valuation as a concept (which proves that the conceits of branding professionals run deeper than just the visual side of branding.) How can we possibly remove the brand from the business and value it separately when it's clear that so much of the value in the brand is intrinsic to the business itself? As a thought exercise, if we were to swap the branding from Burger King to McDonald's and vice versa, what would happen? I bet that reasonably quickly, the now Burger King would become the better-performing brand, while the now McDonald's would slide because the respective brandings are now attached to very different businesses, which means consumer expectations would begin to change. (As a practical matter, I'm also opposed to brand valuation because it's about as accurate as a drunken monkey playing darts in the dark after being spun around 20 times, which makes it useless as a decision-making tool. Ironically, this also makes brand valuation one of the most frivolous activities on which any client can waste their money. Oh, Interbrand; thou dost protest too much.)
Anyway, where am I going with this? Well, simply put, definitions matter. And if we, as the professionals in the space, choose to use entirely wrong definitions, then one of two things will happen:
We confuse our clients and encourage them to make value-destroying business decisions. This has been especially acute in startup land, where so many failed to understand that having a $1m visual system made up of a generic name, logo, and identity system created by one of the storied agencies of the moment doesn't mean you have a great brand, no matter what you tell your VC backers. All it means is you have expensive branding, which, very concerningly, often lacks anything approaching a distinctive asset, cough, Helvetica in Pastels, cough, cough. This becomes particularly obvious in businesses that confuse brands and products, thinking they need a new brand for every new product. Yes, creating a name, logo, and identity system has become much easier and cheaper than ever, but building a brand remains a slow, difficult, risky, and expensive business.
This is also acute when rebranding. There are often good reasons for a rebrand (a story for another time), but if the idea is that simply by changing the logo and identity system, we'll magically become a higher-performing business and brand…weeeeeellll, that couldn't be further from the truth. The majority of times you rebrand, you must be prepared to take at least a short-term hit before you see any improvements.We confuse ourselves and then faceplant into a wall when talking to any client smart enough to see through this nonsense. One of the primary reasons clients don't take brand and branding seriously is that we don't present a very serious case. Too often, we fail to clarify that brand-building is a long-game play that is not without risk. That it depends on our ability to consistently deliver on a promise (even if that promise has never been formally stated) to build a set of future expectations in the minds of prospective customers, and if we need to change those expectations, it will take time and discipline for that change to bleed through.
Too often, we make the mistake of presenting branding as the cure to all ills when simply put, it isn't. There are many things a stronger brand can do for a client, lots of value it can help create, and lots of competitive dynamism it can add, particularly in brand-driven categories. But, and this is a big but, as important as having distinctive and differentiated branding may be, the success of a brand brand doesn't stem solely from this branding, not even close. It's merely the identifier of the brand, not the brand itself.
Much more important is the total system of business decisions, strategy, and operations that combine to form the promise you deliver, the expectation this creates in the minds of your customer, and how good you then are at uniquely identifying this expectation in the market so they're thinking of you when it matters most.
2. Bankruptcy Blitz.
tl;dr: What we can learn from Vice & others going bust.
What can we learn from businesses going bankrupt? For starters, we can learn that giving Vice Media hundreds of millions of dollars was a really bad idea, not least because it was borrowing money monthly just to make payroll right up to the very end.
We also learned that Bed Bath & Beyond had a bad strategy, badly executed, that was exacerbated by shoveling $11.8bn of free cash flow and debt into stock buybacks when it could almost certainly have better used those resources to transform the business instead. (Stock buybacks, btw, are a bit like anabolic steroids for business, used to artificially juice leadership performance metrics, like Earnings Per Share (EPS). The idea is that you incentivize earnings per share to encourage management to optimize for profitability, but they've learned that buying back shares (often using debt) makes EPS go up because there are now fewer outstanding shares to divide those precious earnings into. Unfortunately, shareholders don't make enough of a fuss about this because buying back stock also increases the stock price, so the value of their portfolio goes up. So, in a similar way that heroin addicts are willing to give up their future in return for a hit today, managers are often willing to give up the company's future by taking on debt to buy back stock and engineer a financial hit today).
We also learned that Silicon Valley Bank made a “really stupid” bet that historically low interest rates wouldn't rise and that its deposits would be vastly stickier than they proved to be, all in the interest of making a tiny % return. (This is particularly interesting for branding folks because SVB got so many brand questions right: Excellent experience, clear customer target, high NPS, meaningful product innovation…yet failed anyway because no amount of getting the brand right can make up for terrible financial decisions).
Net, net, if you're interested in business and strategy, you owe it to yourself to study companies that fail and why. And, if that's something you're interested in doing, now is a very interesting time because there's lots of it coming. This week on Monday alone, we saw seven significant Chapter 11 bankruptcies, including Vice Media, mentioned above.
The why of this is pretty straightforward. Back in the good old days of, well, 2022, interest rates were at zero. With interest rates at zero, debt was readily available and ultra-cheap, which meant a steady source of capital ready and willing to support underperforming corporations so they could…go deeper into debt. Well, I'm sure they didn't see it that way. Instead, they saw it more as an opportunity to transform, pivot, grow, and, by hook or crook, somehow, someway, find a path to profitability that would ensure their continued existence. All too often, this has proven little more than a pipe dream as debt continues to pile up, and rising interest rates make it impossible to come back from.
So, now we have an economy chock full of zombie corporations. Companies like Vice Media that don’t have enough revenue to cover debt-service costs, so they must borrow more monthly to stay in business.
Now, I'm not one to crow over businesses failing. It's one thing to call out egotistical tone-deaf, self-awareness-lacking executives who are financially comfortable for making bad decisions that kill a company; it's quite another to have no sympathy nor empathy for the people working there who aren't financially comfortable and who now need to find a new job in an increasingly tough environment.
But it serves as a very interesting learning forum, so we can try to ensure less of it in the future. Business failure is often more instructive about strategy, management competence, and the dangers of hubris than success. When you fail, everything is laid bare. When you succeed, you get to re-write your history howsoever you please. And survivor bias is a dangerous thing.
Anyway, I'll leave you with this link to Petition. A newsletter that tracks bankruptcy and business failure, if you're so inclined.