Volume 35: Lemonade, Stellantis and brand design finally takes…

1. Gen Z schtick got them where they are, going mass will make Lemonade truly disruptive.

Tl;dr: Focusing on generational segments is ultimately a fallacy.

Generational segments are one of the biggest business cons we all participate in daily. From my 12-year-old, who gleefully describes anyone older than 19 as a “boomer,” to marketers who are inordinately obsessed with attracting “Gen Z and Millennials.”

The challenge is threefold. First, you must always be careful to avoid over-generalizing groups of 60m+ individuals. Second, when you look at pretty much any generational research, you tend to find that like-minded groups are much more likely to cross generations than neatly fit into a box dictated solely by their date of manufacture. And third, the stereotypes that predicate most generational analyses have proven to be abysmal at accurately predicting people’s attitudes and behaviors.

Why does this matter to Lemonade? Well, this hot insurance startup that recently IPO’d currently drapes itself in the generational flag focusing intently on its customer base of young renters and first-time insurers, talking a lot about, guess what, its appeal to Gen Z and Millennials. Which must have been great when raising money from VCs because it neatly bounds their total addressable market and intended experience into something big enough and simplistic enough for the average VC to wrap their heads around. Their challenge now is that this generational definition is almost certainly more constraining than liberating.

Why? Because insurance is a massive industry with a universally crappy experience irrespective of which generation you hail from and Lemonade has all the opportunity in the world to massively disrupt this via it’s super easy and pleasant sign up and claims experience. But that opportunity won’t last forever, and while insurance companies might be glacially slow to adapt, they will if given enough runway. So not giving them that runway has to be Lemonade’s strategy moving forward, much like Rocket Mortgage refused to give the mortgage industry runway.

If you accept that many/most people hate dealing with their insurance company, are happy to shop online, and that this combination crosses generational lines (all true), then you’re left with the inevitable conclusion that for Lemonade to drive the kind of explosive growth necessary to disrupt the insurance industry, it should go all in on building a mass brand to pull it off. No longer being constrained and limited by artificial generational definitions to truly meet its potential.

2. Brand design finally takes its head out of its ass.

Tl;dr: Days are numbered for the ‘Millennial’ aesthetic.

I have no time for the so-called ‘millennial aesthetic’ that grew up around DTC brands over the past five or six years, and even less for the pseudo-intellectual bullshit used to justify it. Not because there’s anything intrinsically bad or good about it, but because of the simple fact that you're doing something fundamentally wrong when you make every brand look the same as every other brand.

With most DTC rich categories having incredibly low barriers to entry (there are estimated to be almost 200 lookalike DTC mattress companies in the US alone) the job of brand design for DTC startups is incredibly simple - to make the brand stand-out and look unique, not blandly fit in and look like everything else. Crafting a set of distinctive brand assets that helps the brand stand out gives it a fighting chance while fitting in does literally nothing but waste your client’s money.

If that sounds simple, it’s because it is. But few seem to have got the memo. From design agencies that look like they only design the same brand over and over and over again (including themselves, bizarrely) to VCs and founders who misinterpret “doing what works” as “doing what everyone else is doing.” (What works in this case is standing out, BTW).

To demonstrate this in action, I recently chatted with a friend who’s a creative director. His design agency was working with a startup in the incredibly crowded field of “men’s health” (AKA cheap generic Cialis pills). He told me they’d done a competitive visual and messaging audit highlighting how generic and crowded the category was, but rather than see this as a branding opportunity (which it was), the VC board members calling the shots refused to back down from a demand that the new brand "look and sound like Hims because Hims is what works.” Sigh.

Anyway, back to the point. With my extreme distaste for wallpapering New York subway cars and Instagram feeds in generic pastels and sans-serif typefaces just because everyone else is doing it, I was rather pleased to stumble across this newsletter article highlighting that some DTC brands have begun to move away from the generic and indulge in something rather more avant-garde instead.

Finally, it's about time. This is what brand design should be doing: making things look unique, different, and interesting, not bland, boring, and the same.

3. Coca-Cola faces its Night of the Living Dead.

Tl;dr: In 2020, Coke will mostly be killing zombies.

It’s often struck me that CPG companies are inordinately good at maintaining and scaling big brands, while they are inordinately bad at creating and launching new brands to tackle new opportunities and markets.

So, it was interesting to watch Coca-Cola, during its earnings call last week, effectively announce that Odwalla would be the first rather than the last brand it intends to kill off this year. Of the 400 master brands that Coca-Cola currently operates globally, almost half have so little scale that combined, they only contribute around 2% of global profits.

Killing these off makes a load of sense for a number of reasons. First, never let a good crisis go to waste. A retrenchment has almost certainly been on the cards for a while, they were just waiting for the right moment to tell the markets. Second, this frees up resources to ramp up support for bigger and more viable brands to be successful. Third, it simplifies their supply chain when supply chain disruption due to CV-19 has never been so acute. And finally, it focuses management attention on those brands most likely to make a bigger difference to the business, removing the distraction of trying to make outlier zombies successful.

A long time ago, a former colleague and I ran the numbers on how large CPG operators treat new brands and brand extensions. Essentially we found that launching new brands tends to create marketshare spikes at launch due to the effects of excess launch marketing spend, but this tends to tail-off once marketing expenditures are tied to revenue around year 2, at which-point total marketshare (existing brand + new brand) tends to revert to the mean. The only difference being that resources are now being split across two brands instead of building one, which has the unfortunate side-effect of jeopardizing the viability of both brands. Multiply that by around 200 and you can see where Coca-Cola is coming from.

4. What do Stellantis and the Ford Wrangler have in common?

Tl;dr: Big changes happening in autoland.

This week we learned that Stellantis would be the new name for the upcoming merger of Fiat Chrysler Autogroup (FCA) and Groupe PSA (Peugeot and Citroen). Luckily their combined mess of acronyms meant something other than FCAPSA or PSAFCA had to be chosen lest the new corporation be mistaken for a government regulatory department. The name apparently stems from the latin for looking at the stars. A nostalgic retro-fest into 1990s Latin-derived naming conventions that makes me feel a bit like a software engineer delighting over someone releasing something newly built using Cobol.

Of course, my nostalgia for Latin naming doesn’t make the name any good. It’s actually kind of horrible and reminds me more of the founder of EasyJet than anything I’d want to buy a car from. Luckily, we won’t have to buy a car from it. This will be the corporate holding company within which the full portfolio of around 18 brands (I think) will sit. It won’t impact the customer, but rather reflects a brand pointed squarely at investors, employees and regulatory authorities.

In other news, Ford recently released its own Jeep Wrangler, the Ford Bronco. Resurrecting a storied off-road brand that OJ Simpson famously drove very, very slowly down the highway. Resurrecting Bronco and largely exiting the sedan market marks a clear path forwards for the Ford brand strategy, which is to place significantly more emphasis on their niche sub-brands (Bronco, Mustang, Lincoln, Super-Duty) and much less on the core Ford brand.

Why, you might ask, are these things connected? Well, put simply, they’re both responses to a market for cars and personal mobility that’s undergoing a significant global upheaval as the combined forces of electrification, ride-sharing and (eventually) autonomous driving come to bear. To succeed, Stellantis is a bet that economies of scale will allow them to spread transformation and R&D costs across a broad portfolio of brands, while Ford are aligning around niche-brand profit pools they believe will enable them to successfully switch their business over the next 5-10 years as they introduce technology provided by their heavy investments in electric, mobility and autonomous startups.