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Debunking the Myth of Brand Purpose: Separating Fact from Fiction

Discover the truth behind the notion that brands with a purpose perform better than those without one. Join me as we explore whether this widely promoted idea holds up to the data. Author Frederik Van Lierde • Thursday, October 29, 2020 • Impressions: 2,368 Debunking the Myth of Brand Purpose: Separating Fact from Fiction

What is Brand Purpose?

Brand Purpose, or a brand with a purpose is a brand which have a purpose beyond profit. A Purpose should guide decisions, inspire behavior, shape goals, offer a clear sense of direction, and create meaning.

Where does the idea of Brand Purpose come from?

When we think of purpose-driven companies, who do you think of?
Ex. I think of brands like Patagonia

The evidence supporting brand purpose comes from the book Grow, written by Jim Stengel and ex-CMO of P&G.

Discovering the link between brand purpose and business success, Jim Stengel's book Grow has been influential in promoting the idea that purpose-driven companies outperform those without a clear purpose. Stengel analyzed 50 brands with high loyalty from Millward Brow's extensive database and found that all of them had a brand purpose beyond profit.

Moreover, these purpose-driven brands showed significant stock value growth, increasing by 393% from 2000 to 2011, compared to a 7% loss for the S&P 500 benchmark.

Stengel's findings were widely accepted by industry leaders and have contributed to the growing interest in brand purpose.

without examining the validity of the theory, as it is the main objective of my article
Let's explore the following questions:

  1. Is the data correct?
  2. Does the theory predict past and future?
  3. The Validity of Brand Purpose Theory: Are the Linked Brands Meaningful?

#1 Is the data correct?

The central piece of data in Stengel's book is the 393% growth of his 50 chosen stocks. However, some of the companies on the list, such as Emirates, are privately held and do not have a share price. Other companies like Pampers, which is part of P&G, or Innocent, which is part of Coca-Cola, are parts of much larger publicly-traded companies.

For instance, Stonyfield's Farm, a part of Danone, accounted for less than 2% of Danone's 2014 revenue. Furthermore, Stengel only selected the top 0.1% of the full database, which is the best performers, making it the gravest flaw in his list.

#2 Does the theory predict the future as the past?

Consultant author and conference speaker, Richard Shotton, conducted an analysis of 26 brands from the list with a share price. He studied their evolution over a period of five years after the success of the book.

The results of the analysis showed that only 9 out of the 26 companies studied outperformed the S&P 500 benchmark. This is below the statistical expectation of 13 out of 26.

#3 The Validity of Brand Purpose Theory: Are the Linked Brands Meaningful?

n the brand purpose theory, the brands in question must have a purpose that goes beyond profit. However, the validity of this theory has been questioned, and even Jim Stengel's definition of brand purpose seems to be stretched too far to the point of becoming meaningless. For instance, Stengel's definition of brand purpose includes Moët & Chandon, Mercedes-Benz, and Blackberry, which all have vastly different brand purposes.

  • Moët & Chandon aims to transform occasions into celebrations
  • Mercedes-Benz aims to epitomize a life of achievement
  • Blackberry aims to connect people, anytime, anywhere

The question remains whether the linked brands are truly meaningful and whether brand purpose is a driving factor for business success.

The issue becomes apparent - the brand purposes are simply category descriptors, making them applicable to any company within that category.

Brands with a Purpose: Do They Really Outperform Those Without? A Look at the Evidence?

To truly validate the theory, a comparison between successful and unsuccessful brands is necessary. Merely looking at one group in isolation won't suffice.

For instance, a five-year study was conducted, examining the worst stock performers, such as Nokia, whose shares plummeted by 95%. If purpose-driven ideals truly drive success, it is logical that consumers would recognize these brands.

However, the results indicate that ideals apply to underperforming brands as much as they do to successful ones.

Why It's Important To Research Before Jumping on Marketing Trends: A Lesson on Brand Ideals?

It's easy to get caught up in the latest marketing trend, especially when it involves ideals that we believe in, such as supporting LGBT or equal pay for equal work. However, it's important to do your research before investing time and money into theories that lack a valid foundation.

While brand ideals can make our teams great and, hopefully, contribute to our company's success, we need to avoid hollowing out the real reasons why we fight for these ideals by setting the wrong goals.

So, don't give up on your ideals, but make sure you're pursuing them for the right reasons. Whether or not they result in revenue, keep fighting for what you believe in.

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