We need to have a great brand– Every startup
Tell me if this sounds familiar. It always begins with a workshop. We all gather in a room and talk about the mission of the company. We talk about who we want to be when we grow up as a company. We discuss how we want our customers to feel when they interact with us, we talk about how we want to feel. There are brainstorming exercises, discussions with word-clouds, and visceral debates on logo design. What is our brand identity? what is our company identity? – deep deep discussions. This culminates with a big fat book with detailed instructions on how the logo should look, what type of font you should use, what type of words to use, and the approved color palette.
Does the customer care?
This experience with the process is very common, this feeling of discomfort with the process and the outcome is common. I believe that humans are not inherently stupid, so this process must have an origin that made sense – but I can’t shake off the feeling that this seems….wasteful?
This book on luxury brands helped me form a conceptual model for how to think about brand. I highly recommend the book!
There is the usual conflation between strategy and tactics. The brand guidelines book is just a tactic. Deciding the company logo and color scheme is just a tactic. The core question is – why are we doing this? What’s the point of all this brand work?
A good way to think about it is to break down brand into its constituent elements. What is your aim when you say I want a brand? I classify the constituent elements as
- Awareness and reach – this is the big play. When you say you want a brand, what you mean is that you want people to know about your product. You simultaneously want the largest number of people to remember your product (reach) and also remember it as their first choice (recall).
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Signaling: Also sometimes conflated with differentiation. Signaling is about exploiting the natural tendency of humans to bucket themselves into groups. Signaling is primarily based on emotion – not rational product differentiation.
I love signaling as a topic. Once you understand why it exists and how it is displayed – you can’t escape it. Everything with humans is signaling and signaling is all that humans do! Class structures ? Signalling, Education ? Signalling, Political structures ? Signalling. Woke’ness?Signalling.
Signaling is everywhere!
Why signal? Humans, individually are status-seeking animals. We are also social animals. This leads to humans coalescing naturally into groups and once grouped. we like to compare ourselves to another group. Henri Tajfel and John Turner have researched and written a lot about this phenomenon. The reason to join a group is to show how aligned you are with that identity but also equally importantly how different (and better) you are from the other group. You buy into the Apple ecosystem because you want to identify with the characteristics of the group of people who are already in that group (cool high-status people). You also want to be explicitly not associated with the Android group because you don’t want to associate with some of the defining characteristics of that group (uncool lower status people).
What good is signaling if other people cannot see the signal? Hence the most important packaging decision in direct to consumer products is aesthetics and design. Is your product aesthetic and design good enough to show off? You can extract a ton of value by creating a premium consumer brand. Premium = Elite = Consumers want to be in that group. Consumers are willing to pay more to gain access to a group and will brag about being part of said group.
Signaling is entirely different in a b2b context. In an organization, the main signaling factor is alignment with the right power group. It is not about high status, but high power. In an organization what you want to signal is good decision making. The best way to make good decisions is to not make any decisions that lead to failure. When you are deemed a failure, nobody wants to align with you, you will not have any power – power that gives you status. So for B2B businesses – the best way to take advantage of signaling is to portray that you cannot fail if you buy us. Nobody got fired for buying IBM.
With this context, let us dig deeper. Why do brand efforts in the SMB fintech space make me feel strange? From a product perspective, it is a correct assumption to make that SMB’s think more like consumers as most of the customer base is skewed towards the Small in SMB. The way they use products and want to use products is pretty close to how they use consumer products. The effort to bring consumerization everywhere is correct – this is what SMB’s expect.
But carrying that thinking over to the brand side seems wrong? SMB’s don’t think like consumers while making the buying decisions for their business. If they thought like consumers, they would brag about their invoicing software to their peers. They would want to be in the in-group of cool accounting software users, which doesn’t happen! SMB’s care about risk mitigation and price. They want to reduce the probability of making a mistake and just need the best functional tool for the job at a price that makes sense. Cost and value are the major drivers. Cost relative to value is the largest factor that drives the sale.
Most SMB focussed startups miss this and conflate the two. Since SMB’s think like consumers, let’s build a premium brand. This will lead to SMB’s willingness to pay a higher price for my product, because premium = elite and who doesn’t want to be elite? If I had a penny for every-time somebody mentioned We need to be like AMEX – a premium brand, I’d be a billionaire. AMEX, the premium brand, was built on the back of being an upscale consumer card in the Travel and Entertainment segment. T&E is a consumer-focused segment where the elite signaling strategy works. This hasn’t been replicated in the business segment for AMEX. I don’t see signs on SMB’s storefronts or websites saying We only accept AMEX. They aren’t bragging about their association with AMEX. Bloomberg had a great read on how the Costco-Amex partnership failed due to the mismatch of AMEX thinking they were a premium brand and Costco not caring about that at all. It was finally down to price.
I now hold the belief that trying to create a status signaling brand in SMB fin-tech is pointless. Trying to go the proverbial upmarket is pointless. High-status signaling brands work for luxury and pseudo luxury goods. SMB fintech products are not luxury goods, they are a commodity. The logo, color scheme, brand guidelines are not what a customer cares about. They care about getting value from your product, and how you can help them to increase revenue or reduce costs. The only attributes that matter are 10X better, 10X faster, and significantly cheaper. Your brand has to speak to all those attributes to have a shot at winning in the market.
Would love to hear counterexamples. Any successful examples of premium brands in the b2b space?
Great article Rohit. You make a great case for why brands matter less for many B2B products and services vs. B2C, as a signaling tool.
I have 2 additional points, referencing Daniel Kahneman’s “Thinking Fast and Slow”:
– brands make the highest contribution for products and services with “System 1” purchase decisions: fast, instinctive and emotional. This type of decision is typically for B2C buying (e.g. FMCG, luxury, leisure, where buyer and consumer is the same) vs in B2B. In B2B, the buyers and consumers are different and the buyers typically have a “System 2” buyer decision making: slower, more deliberative, and more logical (e.g. for many B2B commoditised services – like stationery, enterprise software, corporate loans, company insurance, accounting and legal services – the payors are typically the procurement/finance/IT teams )
– however B2B brands do have relevance for buyers when it comes to differentiated B2B products and services which can’t be commoditised and compared easily and require a mix of System 1 and System 2 thinking (e.g. B2B clients of McKinsey, Saatchi & Saatchi, Goldman Sachs, Berkshire Hathaway, Boeing, Lockheed Martin)