Disruptive product ideas transform into high-value global brands
Sustaining scale over time
depends on brand building
Sector Managing Director
Kantar Millward Brown
Unicorns are privately owned business valued at $1 billion or more. The billion-dollar tech startup, the stuff of which myths were made, may now be more of a reality. A quick look at the BrandZÔ Top 100 Most Valuable Global Brands ranking tells the story of how Google, Facebook, Amazon, Tencent, and Alibaba built successful brands and floated them for billions of dollars in a period of two years or less.
The billion-dollar tech startups are here to stay. Snap went public this year valued at $3 billion, and any one of Uber, Xiaomi, Airbnb or Pinterest could be next. So how are these unicorn brands born—how does one go from an embryonic idea to floating for billions of dollars to creating a valuable brand?
The most successful unicorns rarely begin life as money-making machines. They often start as a brilliant technology solution to an unmet consumer need, or they purposefully or inadvertently tap into a changing consumer trend. Take BlaBlaCar as an example. Valued at $1.6 billion, BlaBlaCar is the world’s largest long-distance carpooling community. It was founded on the understanding that millennials value access more than ownership, and it uses technology to connect drivers willing to take on passengers to share the cost of the journey.
Contrast BlaBlaCar to ChaCha, which was a free mobile answer service for people on the go. It was a human-based search engine formed just before the smartphone era, when internet search engines could match keywords but were not so good at answering questions. Advancements in technology destroyed the consumer need the service was meeting, and as a result, ChaCha failed. So, the first step on the road to being a global and financially viable brand is to ensure consumers think your brilliant solution for meeting an unmet need is different. This creates potential for value share growth.
Once a unique idea is proven to work, an emerging brand with the right funding and commercial strategy may begin to go through a period of rapid growth and scaling. This is the point where building salience is key, a tough task when you need to do so against competitors with bigger budgets. An interesting example here is Instagram. In a two-year period from 2013 to 2015, Instagram significantly increased its level of spontaneous awareness in both the UK and US. However, in both markets, its Salience Index, which describes the intensity of awareness relative to competitors, was largely unchanged. This demonstrates that competitors were also increasing their awareness levels. An emerging brand can and should maximize marketing budgets by running effective advertising so that it builds salience efficiently. A good example is Bukalapak, an e-commerce brand in Indonesia that managed to close the Google search gap on its more established competitor Lazada in this way.
The Ehrenberg Bass “laws of growth” suggest that success from this point forward is now purely dependent on continuing to drive physical availability (distribution) and mental availability (Salience). This may be true to a point, but it is not the entire truth. First, overemphasizing Salience ignores the contribution that high margins make to brand growth. BrandZÔ data shows that the ability to command a premium price is driven not by Salience but by Meaningful Difference. This can be an important route to growth for an emerging brand. In the music-streaming business, margins are very thin, requiring a business to have high volume to be viable. This is a race that few can win, and the success of brands like Spotify is at the expense of competitors such as Rdio.
Second, although Salience is the biggest driver of growth in categories with short-term purchase cycles, BrandZÔ data shows that being Meaningful is a bigger driver of volume growth in categories with longer term purchase cycles. Being meaningful is about meeting consumer needs, either functionally or emotionally. In this respect, product or service experience plays a crucial role. If done well, experience drives conversion, turning salience into sales. Amazon Prime is a fantastic example of the importance of experience. Sixty-three percent of Amazon Prime members convert on the site in the same session—five times the rate of non-Prime members.
Importance of brand
Inevitably, an emerging brand reaches a stage where growth stalls, when technology moves on or is copied as larger competitors with more resources figure out how they can respond to meeting the same consumer need. It could also be that increasing scale brings new challenges that a business struggles to manage. It’s at this stage that building a brand becomes even more important. An emerging business must make a transition from being product and Salience focused to building a meaningful, consumer-driven brand that appeals to more consumers. In addition, building a brand improves staff engagement, keeps a business focused and drives consistency. Aligning a business around serving a single-minded purpose, beyond making money, can be a nice way of shifting to a more consumer- and brand-centric business model. Of course, this has to be done credibly and would ideally link to the consumer need that drove the business to begin with. Airbnb’s online marketplace and hospitality service has built rapidly around the purpose of helping people belong and feel at home anywhere. The challenge as Airbnb expands into “experiences” and “places” is to not lose sight of this purpose.
The final challenge as a brand grows is to build understanding of different consumer and market contexts so that a brand can subtly flex itself to local needs that are critical growth barriers or facilitators. It may require a fundamentally different business model, a tailored product offering, or more nuanced advertising. For example, e-commerce retailers in India have to adapt to cash-on-delivery payment models driven by the financial infrastructure in the country. A non-tech example is the failure of Subway in Indonesia, where the brand didn’t recognize that any meal without rice is considered a snack. Subway was unable to translate its bread-based product proposition, eventually closing. KFC did recognize the expectations of Indonesian consumers and offers rice on its menu to this day.
Which unicorn businesses can navigate these challenges and enter the BrandZÔ Global Top 100 Most Valuable Global Brands list in the next five to ten years by building a brand worth billions? Check the list out here and decide: https://techcrunch.com/unicorn-leaderboard.
Brand-building Action Points
1. Build awareness smartly by maximizing advertising ROI.
2. Balance Salience along with Meaningful Difference, especially to sustain long-term margins.
3. Build meaning and drive conversion with great product and service experiences.
4. Do not wait too long to adopt a consumer-centric, brand-building model.
5. Understand the consumer and market context, and adapt to local needs.