When we think of purpose-driven companies, who do you think of?
Ex. I think of brands like Patagonia
Over the last seven years, an idea that is widely promoted in the advertising and marketing world is “brand with a purpose outperform those that don’t have one.”
Brands with a purpose = are that brands which have a purpose beyond profit.
The evidence supporting brand purpose comes from the book Grow, written by Jim Stengel and ex-CMO of P&G.
He came up with his finding after selecting 50 brands with the highest loyalty from Millward Brow’s 50.000 strong database. Then he searches for a link between those 50 brands and he found one, Brand Purpose.
Next, he looked at the chosen brands’ stock value growth between 2000 and 2011. He saw his 50 brands grew with 393% instead of 7% loss for the S&P 500 benchmark.
Stengel’s conclusion was, brand purpose is driving business success.
The book and results had a tremendous impact. Top guru’s and CEO’s of marketing agencies jumped on it, declared that they are “utterly convinced.”
I won’t be me if I don’t dive deeper to see if the theory is correct, the purpose of my speech tonight.
Let’s dive into the next questions:
- Is the data correct?
- Does the theory predict past and future?
- Does a purpose link the brands?
#1 Is the data correct?
Stengel’s central piece of data is that his 50 stocks rose by 393%. But that was not quite the case, some of the companies on the list, like Emirates, are privately held, which means they don’t have a share price.
Other companies like Innocent or Pampers are parts of much larger publicly-traded companies. Ex. On the list, he added Pampers, who is part of P&G or Innocent, who is part of Coca-Cola.
In Stonyfield’s Farm, part of Danone, its 2014 revenue was less than 2% of Danone’s.
And the gravest flow in Stengel’s list was he selected only the best performers. That’s only the top 0.1% of the full database.
#2 Does the theory predict the future as the past?
Richard Shotton, a consultant author and conference speaker, did a check He took 26 brands from the list, with an actual share price, analyzed during five years the evolution after the book became a success. The result: A mere 9 of the 26 companies studied, outperformed the S&P 500 benchmark. Statistically, you would expect 13 out of 26.
#3 For the theory to be valid, the brands in question must be linked by a purpose.
Even that doesn’t seem to be true. When you look at Stengel’s definition, he stretched it so far; it became meaningless.
Try to tell me which brand I am talking about, as I will give you three brand purpose. Tree famous brands:
- exists to transform occasions into celebrations? (Moët & Chandon)
- Exists to epitomize a life of achievement (Mercedes-Benz
- Exists to connect people, anytime, anywhere (Blackberry)
Notice the problem? The brand purposes are just category descriptors. They can apply to any company in that category.
Can we say that brands with a purpose outperform those that don’t have one?
To proof the theory is correct, you need to compare successful brands with unsuccessful ones. You can’t conclude by just looking to an isolated group alone. A research was conducted during five years by examining the worst stock performers. Example Nokia, whose shares plummed 95%
If the ideals were a genuine fit to drive success, you’d expect consumers to recognize these brands. The result was that ideals apply as much to underperforming brands as successful ones.
Frederik, what does this mean, do we need to throw away the baby with the bathwater? Giving up our ideals we believe in?
No, of course not. My company have brand ideals as well. We support LGBT, Black Live Matters, equal pay for equal work.
Those ideals make our team great, and hopefully, the team makes the company great.
What I propose to do: Before you jump on the next marketing trend, do your research, don’t waste time and money on theories that have no valid base.
Because when you do so, hoping brand purpose will give you profit, you hollow out the real reasons why we have to fight for them by using the wrong goals.
I hope you keep fighting for them with or without revenue.