Stories of modern business.

Courier Weekly Friday 21 August 2020

Courier Weekly Friday 21 August 2020

What do you value, what do you want to pay for, and how does this affect the business model and growth of modern brands? We sit down with brand strategist Ana Andjelic, who shares insights from her forthcoming book, ‘The Business of Aspiration’.

DANNY GIAOCOPELLI: Hey guys, welcome back to the Courier Weekly. I'm Daniel Giacopelli, Courier's Editorial Director. What do you value? What do you want to pay for? And how do you distinguish yourself from others? According to brand strategist, and Courier contributor, Ana Andjelic, all of this has a huge impact on the business model and growth of brands. As part of what she calls the modern aspiration economy, in the not too distant past people collected commodities, Instagram followers and airline miles. But now in the modern aspiration economy, consumers collect knowledge, taste, communities, and influence. All of this has changed the fundamental way businesses operate. But the dynamics behind the scenes aren't so clearly understood. This week on the show, I’m with Ana for a special one on one, to talk about her forthcoming book on the subject, The Business of Aspiration out in October, plus tips for how brands can survive the tough road ahead.

ANA ANDJELIC: I think it was a series of moments in the past five years when carrying out my day-to-day work. I was working as a chief brand officer at a global fashion company, consulting for a large jewellery company; then I was CMO at another luxury company, and even before that, when I was working with fashion luxury lifestyle brands on the agency side, I noticed shifts not only in consumer behaviour on a granular level: in the kinds of media they used and how they were spending their time, but also in how their values were changing, and in decisions of where to invest their time and money. 

It wasn't visible change, it was more subtle. I decided to activate my sociology knowledge, because I have a doctorate PhD in sociology. I focused on how trends spread in society, how social influence spreads, how taste is formed, and how do we develop taste ourselves, and what is taste, what is deemed good taste? And then finally, how people join communities and why? So there are those three levels. One is stage, the other is communities, and the third is social influence that I started thinking about and paying attention to. Being on a brand side that was unbelievably useful in devising the actual tactical solutions and the actual brand strategy in order to appeal to these new behaviours, these new motivations and aspirations.

DANNY: One of the big points of your book that you make is that, whereas once companies were obsessed with making things, now it's all about manufacturing aspiration. What do you mean by that?

ANA: On a very practical level that means, yes, you're selling products, you're in an economic entity at the end of the day. You sell things, tangible things: you produce them, you distribute them, and then you market them and you sell them. That's not enough. 

DANNY: The proverbial widget, I guess, right?  

ANA: Yes, you put it best. That is not enough to successfully compete. You can invest in making your product more innovative, you can invest in making your product cheaper, which is usually the way to go. You can distribute it to more places, and it's still not going to attract the audience that you will attract if you invest in offering intangibles. 

So what does it mean? That means start thinking about a service that, on its most basic level, offers a level of functionality and utility to go with your product.  Not to be completely conceptual, that means do you want to introduce a membership option? Do you want to introduce a subscription? Do you want to introduce a way to reward your customers for buying that product by offering them some sort of information or knowledge or access that didn't have before.That's the first layer of intangibles, but then you can also go further and ask what kind of community you want to create around your brand DNA.

Think about brands like Patagonia, which have a community or the more recent brands like Tracksmith and RAFA; even Glossier has this massive community So think about those brands, they're not about their product at all. Yes, Tracksmith has an amazing design and quality, and it has a very clear aesthetic that is rooted in 70s running, but more importantly, it's rooted in the vibe of long distance running. When you look at their sizing, their sizing is for real runners, they don't go above 32 waist. You can call it a bad idea, good idea in this culture of inclusivity, but they know exactly who they're for. More importantly, they attract those who are true runners, and those true runners don't want to mingle with non runners. So that is an example of a community, in which you would aspire to belong. It's meant for everyone to know about what running in Tracksmith means, it means that you are a really hardcore runner. That's the best way to kind of continue this explanation. 

I didn't want to write another book on the modern aspiration, things have already been written about that. What we think is cool or trendy or valuable has already been observed in the experience economy, wellness industry and people's investing in travel versus possessions. That shift is already obvious. What I wanted to mark is the emergence of new brands in that landscape. So when you think about DTC brands that emerge, let's call them modern brands, it emerged as an approach. That approach is how do you improve the quality of life for a very privileged group of people? Tracksmith is an example of designing for people who have enough time, and can afford to spend $80 on a pair of shorts, who can afford to run three hours a day. It's not for everyone, it's still creating that social distinction. 

The second one is that it's a sector. It's a specific sector that's vertically integrated. A lot of what Courier's audience basically is, are brands that own the entire everything supply, production, distribution, and then their own stores. They do their own marketing, they're not owned by big companies, they don't outsource the distribution, you know exactly where things are produced. These are vertically integrated, they're very founder led, and they're often externally funded, or self funded. They're smaller scale. That's an entirely new economic sector. 

Finally, we are talking about the business model. So that is where things become the most interesting, at least for me, and there are certain rules, for example, create fans before customers, that's what I just described with Tracksmith. Awareness comes before accessibility, so you're aware of things, you may not be able to afford them, but you know what they mean. It's similar to old school luxury. 

DANNY: I was going to ask if this approach that you're describing, does it sit more as a marketing/branding function? Or is it a core business model? The example of RAFA that you brought up, is it that a company is just going to make gear for people who love cycling, splash it with millions and millions of dollars of branding and cool Instagram stuff to make you feel like you're part of a community, but actually the business model itself stays the same?

ANA: It's not just marketing, it's a business model, and I'll explain why. In this model, you make the brand part of your balance sheet.. Usually, what we see with a lot of startups is that they're obsessed with the product, 'we have the best product it's made in Italy. We need a logo, we need the right colour palette'. That's not branding for one, and that's not business either. That's about the distribution of your product, and that becomes a problem once someone else comes and offers a very similar product.Then you're in the same boat as traditional companies, where you have to change your distribution, change your price, or offer some tweaks to make your product different. 

If you make a brand part of your balance sheet, that means you spend money on the brand, but then that brand brings you money; if you go back to thinking about events in stores and the ways to monetise on that, then marketing actions are not just about cost or overhead, but about how to bring money in. You also have your KPIs that are business and brand and the same time: your content production, your community growth or management, your events, or whatever else becomes part of your business plan.

DANNY: Super interesting, and you reckon that is quite a new phenomenon. A brand in the mid 1980s, mid 1990s would never have been thinking about that. Branding for them was just their logo, their colours, their visuals essentially. 

ANA: You don't need to go to the 1990s. It's many new brands too. Look around. They all treat branding as something that is an afterthought. And even if they don't think of it as an afterthought, they treat it as PR. Walking in a subway in New York before the pandemic, all those ads look the same, because the same agency has done it or the same three agencies have done it. They all follow the same playbook. 

Having a tone of voice that's quirky and fun, that's not what the brand is. I'm talking about strategic growth here. That means if you have a very clear brand DNA and a point of view, and you define the brand's relationship to the world, then when you grow, it’s about how to grow.  Do you want to grow through brand extensions? And what does that mean? Or do you want to grow through line extensions, product line extensions? And what does that mean? Do you want to have sub brands to reach more people, yet still hold onto the same values. These are all strategic decisions. And unless you know as a brand, what your architecture is, what your positioning is, what your identity is, you can't make those decisions. 

DANNY: As an example, say I'm a DTC house plant brand, in order to grow I can either set up a physical shop or I can offer plantcare online courses. I can do all of those things. Is that just an extension of my product line? Or is that a different path that you're describing?

ANA: That is the entire offering. So you say, 'hey, I have a plant line. I am all about succulents, or I'm all about field flowers'. But then you notice that people are gardening so much more, so you start offering garden plants. But what you're offering needs to be recognisable as the part of the same brand. You grow through product extension, and through audiences extension with the same promise or value proposition you began with. Or, say you're a coffee shop, or a coffee provider, you not only provide coffee beans, but you also educate people about the difference between coffee beans. Then, you become a go-to resource for coffee beans all around. In that case, no one can really replicate your knowledge, your relationship with your providers, the community between producers, suppliers, everyone who touches the product that you have. That way you have a much higher competitive barrier. 

DANNY: Is phenomenon something that is limited to the small DTC market? If you stop the average person on the street, they'll have no idea what Warby Parker is, even though that's a really old example. Most people are not part of this high earning millennial clique. Would you agree with that?

ANA: There are some examples of brands like Patagonia, Nike, Uniqlo, Ikea. Those are big brands. IKEA has an unbelievably clear culture. It's deeply rooted in the Swedish set of values of being humble, no-fuss, quirky. Even the Ikea name, it's linked to its founder, his farm and the village the farm was in. That's why they can do all the fun things they're doing, because they're always unmistakably Ikea. I don't think this is limited to DTC, but it's rare to see outside of that world. There are maybe ten examples of big companies that have managed to figure out how they're going to use their brand for growth.

DANNY: How do you think the last four or five months have impacted all of this? Has Covid, Black Lives Matter thrown everything for a tailspin? Everything's upside down right now. Has that impacted the aspiration economy you wrote about in your book?

ANA: The aspirational Coronavirus killed the aspirational economy. We were seeing the kernels of new aspirations emerging during Covid. All of a sudden, we became very aware of our own fragility, our own humanity, our own needs to depend on each other. Our needs to band together in order to survive. Those are the things we haven't thought about before. 

Before, it was about meditating five hours a day in order to self-actualise, buying more organically, buying from brands that stand for something. That's all dialled up, because now we want to know what they did during the pandemic. Did all they offer was an earnest violin music ad, or did they actually do something for the immediate community? Did they shift their operation to create face masks, or hand sanitiser? Did they donate an unbelievable amount of money to certain things? Did they make their service available to a larger number of people? I think our expectations from brands are now different, and we have way less tolerance for bullshit. One thing that separates winners and losers is our radar for bullshit. We are ready to cancel. The good thing about that is that we hold everyone who has a commercial role to a higher standard. The bad thing is that, and as we've seen, cancel culture, can and is, weaponised. 

DANNY: As you mentioned everything is quite fragile. What about going forward? If I'm around right now listening to this, given all the mayhem, and given the tailspin that Covid has thrown, what would you suggest to a brand or a brand owner? How could they approach their own business model, freshen it up and prepare it for the next coming tumultuous years?

ANA: Pre-Covid, our economy, our society, our lives, are driven by this pressure for efficiency. We are all about optimisation, maximisation, we want to  maximise our productivity, maximise our leisure time, maximise our lifestyle. Everything is about how to live a more efficient life, and companies operate according to the same efficiency principles. You don't want to have a lot of money sitting on your balance sheet, you don't want to have a lot of kind of slack and buffer. The capacity is at 100% and that has proven to be unbelievably fragile. 

My advice to business owners is to allow for slack, to allow for less efficiency, because if you have less efficiency, then you have more room to be nimble and to pivot and to survive at the end of the day; to have less expectations and to adjust for unpredictable situations. That is great advice, not to chase efficiency, but to be a little bit inefficient.

DANNY: Can you put that into practice? If I have three people on staff, and that's exactly the amount of people I require to get the job done, but then somebody drops dead, I'd really be screwed. Is that what you mean by efficient? Or is the idea to bring in six people instead of three people? 

ANA: That's one way to do it. The other is not to hire really specialised people, but to hire more generalist people. Then, if someone drops dead (God forbid), those other two know exactly what is happening already. What's more, when you conduct a hand-over, everyone knows what everyone else is doing. That seems inefficient when you think about it, because if everyone is sitting together that creates a lot of noise, but it's also good so that whenever someone is sick or can't come in, you know what their job is, and you can jump in. Don't hire a specialist. Ask the question, is this person motivated? Can this person help this other person do their job better, so we're all working towards the same North Star and towards the same vision? Don't worry, how are they going to do it. Don't worry if they're a copywriter, an art director. If they can help another person on your team do the job better, and add value to the company overall, hire them. That is the best example.

DANNY: That's because nobody knows what's going to come next. A comet could fall out of the sky, and it's the generalist who would be best at adapting to those types of crazy situations, right?

ANA: It's just because you don't know if all of a sudden when a nuclear war might strike. 

DANNY: We're thinking up all of these dramatic scenarios of people dropping dead, and nuclear bombs, but what you're really saying is that it's a tough road ahead. You can't predict what's going to happen, and if you have somebody who only knows how to do X, they're not going to be well adapted to bouncing back.

ANA: Exactly. I was talking to people here from small businesses. There was a brewery, for example, in Boston. All of a sudden, they had to close and shut the brewery down. They pivoted to pick up and delivery, but they didn't have to fire or furlough a lot of people on their team because they didn't have specialists. They also didn't have holes in their team, because everyone was able to jump in and do what needed to be done. If someone was a barista, all of a sudden, they pivoted to doing something else. But because this brewery always operated holistically, and not in a specialised way, they did not suffer that much as if you had someone who just did one job. Imagine if that one person couldn't come to work, the entire operation would just stop.

DANNY: Yeah, it reminds me of an interview with Amy Errett, the founder of Madison Reed, the hair colouring company who did really well during Covid, because a lot of people were dyeing their hair at home. She managed to take a lot of her staff from the actual brick and mortar salons and move them to customer service roles, and it was a quick transition.

ANA: I know that Kiehl's has been doing that, and some other beauty companies. They were able to save some jobs by shifting them. The lack of specialisation is one example, and then that holistic approach is another if you are a small business. Another thing is to develop or invent a currency, so there is an exchange, whereby you're still creating value for the community. I'll give an example: a bookstore here in Florida, and were motivated to put forward the narratives of African-American authors that are not about struggle, or just racial stereotypes. The owner had a physical store, and when Covid happened she quickly pivoted online to video story-tellings. She also asked customers to send her book reports from school, in return for a free book. She created a real connection with the community, and inspired kids to do well in school by giving them free access to literature. That was a loan, but it was also doing good. That was a different sort of currency, it was a trust currency. 

DANNY: Any other practical tips you'd give to a brand owner or a company listening right now? You're a brand strategy expert, you dip your toes into tons of different things, and you talk to tons of different people every day. 

ANA: Brand your business knowing that tomorrow you may have to pivot. I spoke with a person who  runs a milk dairy farm, and they had to pivot to a door-to-door delivery service that they hadn't used for thirty-years. But because they treat their employees as a family, it's a family-owned business, everyone was able to reshuffle and become a driver, or move to both the packaging and the operational side. That is the holistic approach, to reshift delivery, because although they are not getting orders from stores anymore, people still need milk. 

I think that it's good practice to think about what happens if your distribution suddenly disappears, if stores shut down, or if sales go down. Scenario planning has become more important than ever. So I would encourage small business owners to really say 'if I have to furlough 10% of my team, what happens? 20% what happens? 50% what happens? No one has been thinking like that. Everyone's been thinking in terms of growth, growth, growth. Now growth means different things.

DANNY: And that's it this week. Make sure to check out our latest print edition, the Design Issue, all about how to make it work as a creative entrepreneur, and check out our new fresh fund, a grand scheme for black business founders to start or supercharge a company. You can find out details of both on our site couriermedia.co. I'm Daniel Giacopelli. The Courier Weekly is back again next week. We'll see you then.