What is Brand Purpose?

Brand Purpose is a brand’s raison d’être, or its reason for existence. It goes beyond the obvious financial motivations. It could be a simple statement, such as Coca-Cola’s “to refresh the world and make a difference,” or something tied to a larger societal need, like Google’s mission “to organize the world’s information and make it universally accessible and useful.”

What Brand Purpose Isn’t

However, Brand Purpose is not about having opinions on issues such as sustainability and diversity, expecting consumers to buy because they share these views. It is not about social or brand activism either. Rather, Brand Purpose is a complex balance between envisioning the future and making a tangible impact today.

Organic Growth

Organic growth, in the purest sense, refers to a business’s expansion through its internal processes rather than external acquisitions. It involves enhancing current operations, diversifying product or service offerings, and exploring new markets. For instance, imagine a local bar that consistently attracts a loyal customer base, not because of aggressive marketing or promotional campaigns, but due to the quality of its services and the unique ambiance it offers. This is a classic example of organic growth, where the business thrives on its inherent strengths rather than external factors.

Sustainable Business Models

A sustainable business model is not just about environmental consciousness. It is a comprehensive approach that combines economic viability, social responsibility, and environmental stewardship. In the business context, sustainability means creating long-term customer and employee value by embracing opportunities and managing risks derived from economic, environmental, and social developments. For instance, software companies are often lauded for their sustainable business models due to their high margins, global reach, and high customer retention rates.

Local Engagement

Local engagement involves a business’s active participation in its immediate community. It could be through local sourcing, employing local talent, or contributing to local causes. The idea is to build a strong connection with the community, which, in turn, fosters customer loyalty and business sustainability. For instance, a business that sources its raw materials from local producers not only supports the local economy but also establishes a reliable supply chain.

The Brand Purpose Gap

The Brand Purpose Gap refers to a disconnect between what consumers say they want and what they actually do. Consumers may express the desire to buy brands that align with their values, but their purchasing decisions often revert to brands that meet their basic needs at affordable prices.

Bridging the Gap

Bridging the Brand Purpose Gap can lead to increased brand strength, sales volumes, and the ability to charge a premium. However, this requires a deep understanding of what matters to consumers and the ability to communicate your brand‘s purpose in a way that resonates.

Is Brand Purpose Right for Your Business?

Not all brands need a Brand Purpose. For some, focusing on building mental and physical availability and advertising consistently throughout the year can drive growth more effectively. However, for brands in certain categories, a well-defined Brand Purpose can be a key driver of long-term brand performance and strength.

The Role of Brand Values

Brand Values tell consumers what to expect from a business. They humanize your brand and allow you to connect with consumers on a deeper, more emotional level. If done correctly, Brand Values can drive higher growth than others by influencing consumer decisions.

The Importance of Authenticity

When choosing Brand Purpose and Brand Values, authenticity is key. Selecting values that do not match your culture or business activities will create a disconnect, even if the issues matter to your customers. Therefore, brands should strive to identify a unique position that aligns with their business objectives and resonates with their target audience.

The AI Obsession and Its Pitfalls

The current tech landscape is abuzz with discussions around Artificial Intelligence (AI) and its potential to revolutionize various sectors. However, it’s crucial to avoid getting carried away by this hype and losing sight of the fundamentals of building a solid business.

While AI can indeed bring about a productivity boost, the hype often overshadows the fact that most things take longer than expected. Massive funding rounds and acquisitions are not necessarily indicative of a strong foundation. Much of the injected capital often goes into the development of models without a proven or clear business model, which may not always lead to great venture investments.

Building Scalable Business Models: The Key to Success

Despite the allure of tech innovations, business success depends on leveraging technology to build scalable and profitable models, not the other way around. Any business model, whether it’s a neighborhood bar, a mobile consumer app, or an enterprise software solution, essentially boils down to customer acquisition, retention, and expansion.

Margins and Revenue

While revenue is a crucial metric for any business, it isn’t the most important. Gross margins, defined as (Revenue – Cost of Goods Sold) / Revenue, matter more. High-margin businesses can reinvest the cash generated from each sale back into growth, leading to a robust cycle of expansion.

Acquisition Velocity and Reach

Customers that love a product or service tend to stick around, leading to high customer retention and recurring revenues. Many software companies can charge clients a year, sometimes two, in advance, providing a significant influx of cash to reinvest in marketing and sales.

Retention

Software companies typically have high customer retention and expansion rates. Acquiring a new customer is often much more expensive than retaining an existing one, making growth from existing customers a more profitable venture.

Predictability

Predictability in business models leads to more consistent and exponential growth. More predictable revenues and profits mean more valuable business models, especially at scale. Financing teams to find early signs of these models is what the typical venture capital model is for.

Communicating Brand Purpose Effectively

Once you have successfully aligned your purpose and values with those of your target audience, they should become the underlying basis for all key decisions, impacting every business function from HR and operational processes to brand positioning and pricing structures. To be effective, brands must communicate their Brand Purpose and Brand Values in a way that resonates with consumers, employees, and other key stakeholders.

The Potential Pitfalls of Brand Purpose

However, if not approached or communicated in the right way, Brand Purpose can backfire. Some companies simply try too hard with their chosen purpose and values, resulting in a disconnect with consumers. Other times, consumers may not care about Brand Purpose and believe that brands should concentrate on selling their products and services. Thus, it’s crucial for brands to balance their Brand Purpose with more functional elements such as price points and meeting consumer needs.

While the idea of aligning a brand with societal causes and values seems noble, it can also be challenging to implement. Not all consumers value brand purpose, and some even prefer brands to focus solely on their products and services. Therefore, brands need to strike a balance between their purpose-driven initiatives and their core business offerings.

Conclusion

In the end, the key to building strong brands and driving growth lies in going back to basics. It’s about focusing on organic and sustainable growth, engaging with local communities, and building brands rooted in authenticity and relevance. While buzzwords like AI and brand purpose may offer exciting opportunities, they should not distract businesses from their core objectives and values.