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.

Frederik van Lierde - Oct 29, 2020

Articles

Summary

Critical Evaluation of Data: It's essential to scrutinize the underlying data supporting popular business theories, such as the effectiveness of brand purpose. The investigation into Jim Stengel’s claims about purpose-driven brands reveals that while some companies show impressive stock growth, the overall evidence may be biased by selective data sampling and lack of a control group. This calls for a balanced examination of both successful and underperforming companies to genuinely understand the impact of brand purpose.
Predictive Value of Brand Purpose: The examination of past and future performance of brands with a purpose suggests that while a strong mission can enhance customer loyalty and brand differentiation, it does not guarantee superior financial performance over time. Factors influencing a company’s success are multifaceted, and brand purpose alone may not suffice to predict long-term market success.
Authentic Integration of Brand Ideals: Embracing brand ideals that resonate with societal values is commendable, yet it is imperative that these ideals are adopted genuinely and integrated into the core operations of the company. Businesses should avoid jumping on trends without thorough research and understanding. Maintaining authenticity in brand messaging and actions leads to more sustainable and impactful business practices, fostering long-term loyalty and trust among consumers.

What is Brand Purpose?
Where does the idea of Brand Purpose come from?
#1 Is the data correct?
#2 Does the theory predict the future as the past?
#3 The Validity of Brand Purpose Theory: Are the Linked Brands Meaningful?
Brands with a Purpose: Do They Really Outperform Those Without? A Look at the Evidence
Why It's Important To Research Before Jumping on Marketing Trends: A Lesson on Brand Ideals

What is Brand Purpose?

Brand purpose refers to a company’s reason for existing beyond just making a profit. It’s the driving force that shapes a brand’s vision and mission, guiding every decision, from product development to marketing strategies. A clear and impactful purpose not only motivates those within the company but also resonates with consumers, creating a deeper connection between the brand and its audience.

This purpose-driven approach helps brands stand out in a crowded market by aligning their operations with values that matter to their customers, ultimately creating a meaningful brand identity.

A well-defined brand purpose is a source of inspiration for all of the company’s activities. It influences how the brand interacts with the world and dictates its long-term goals, ensuring that every aspect of the business aligns with its overarching ethos. For instance, a brand like Tom’s Shoes doesn’t just sell footwear; it promises that with every purchase, it will help someone in need.

This commitment to social good isn’t just a marketing tactic; it's woven into the fabric of the company's business model, proving that when a brand's purpose is genuinely integrated into its business practices, it can lead to both increased relevance and loyalty among consumers.

Where does the idea of Brand Purpose come from?

The concept of brand purpose has become a significant focus in the business world, tracing back to influential works like Jim Stengel's book *Grow*.

Stengel, a former CMO of Procter & Gamble, explored the idea that companies with a core purpose beyond profit tend to outperform their less purpose-driven counterparts. He supported his theory by analyzing 50 brands known for their loyalty, as indexed by Millward Brown's extensive research database.

According to his findings, these purpose-oriented brands experienced a remarkable increase in stock value, growing by 393% from 2000 to 2011, in stark contrast to a 7% decline in the S&P 500 over the same period.

Stengel’s research suggested that brand purpose could be a significant predictor of financial performance, positioning companies like Patagonia as exemplars of this theory. The appeal of purpose-driven business models has resonated throughout the industry, gaining traction among thought leaders and marketers alike.

The notion that a brand’s commitment to societal or environmental issues could drive success has inspired a wave of companies to reevaluate and often revamp their core missions to align with broader, more meaningful goals.

However, while Stengel's findings have sparked widespread acceptance and interest in brand purpose, they also raise critical questions about the validity and applicability of his data. It is essential to scrutinize whether these success metrics accurately predict future outcomes and if the associated brands genuinely embody a purpose that significantly impacts their business strategy and market performance.

As the focus of my article is to delve deeper into these queries, a thorough examination of the evidence and its implications is necessary to determine if brand purpose genuinely correlates with enhanced business success or if it simply serves as an attractive but superficial marketing strategy.

#1 Is the data correct?

The cornerstone of Jim Stengel's argument in his book *Grow* is the 393% growth reported for the 50 brands he selected. However, the selection includes companies like Emirates, which, as a privately held entity, does not have publicly traded shares, complicating the assessment of its true market growth.

Moreover, brands like Pampers and Innocent are subsidiaries of larger entities like Procter & Gamble and Coca-Cola, respectively. This affiliation means their individual performance metrics are entwined with and possibly overshadowed by their parent companies’ broader financial activities.

Additionally, Stengel's research method involved cherry-picking the top 0.1% of brands from a vast database, focusing solely on those that have already demonstrated exceptional performance. This approach introduces a significant selection bias, as it excludes a broader analysis of companies that may meet the criteria for having a purpose beyond profit but do not show the same level of market success.

For instance, Stonyfield Farm, which operates under Danone, contributed less than 2% to Danone's total 2014 revenue, highlighting how smaller divisions of big companies might skew the perception of success attributed to brand purpose.

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

In evaluating whether brand purpose can forecast future performance as it seemingly did in the past, Richard Shotton, a noted consultant and speaker, reviewed the trajectory of 26 publicly traded companies from Stengel’s list. His focus was on their performance over five years following the publication of Grow.

The outcome of this examination was telling; only 9 of the 26 companies managed to exceed the growth of the S&P 500 index during this period. This result falls significantly short of the statistical expectation where at least half, or 13 out of 26, should have outperformed the market if Stengel’s theory held consistently over time.

This underperformance raises critical questions about the predictive power of having a brand purpose. The discrepancy between the expected and actual outcomes suggests that while a strong brand purpose might correlate with exceptional performance in certain historical contexts, it does not necessarily guarantee superior market performance in the future.

Such findings prompt a reevaluation of the reliability and generalizability of brand purpose as a predictive measure of long-term success in the fluctuating dynamics of the market.

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

The core of brand purpose theory is that brands should operate with a mission that transcends mere profit-making; however, the application of this theory can sometimes stretch the definition to the point of dilution. For example, Jim Stengel includes brands like Moët & Chandon, Mercedes-Benz, and Blackberry in his analysis—companies that clearly differ significantly in their missions and market approaches.

Moët & Chandon focuses on turning events into celebrations, Mercedes-Benz champions a lifestyle of success, and Blackberry strives to connect people across distances. While these purposes indeed suggest a direction beyond financial gains, their broad and somewhat generic nature might strip them of the meaningful specificity required to truly gauge the impact of a purpose on brand success.

This broad categorization leads to a critical issue: when brand purposes are framed as general category descriptors, they could theoretically apply to any company within the same sector. This raises the question of whether these purposes are genuinely driving business success or merely serving as marketable taglines that resonate well with consumers.

The lack of specificity and differentiation in these purposes can make it challenging to ascertain if they are authentically embedded in the companies’ strategic operations and culture or if they are just superficial labels.

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 rigorously assess whether brands driven by a defined purpose actually surpass their less purpose-focused counterparts in performance, it’s critical to look beyond just the successful examples.

Analyzing both thriving and struggling brands provides a more comprehensive picture of the impact of brand purpose. For instance, a detailed study over five years focused on some of the poorest performers on the stock market, like Nokia, which saw its shares drop by an astonishing 95%. If a strong brand purpose truly dictates market success, then logically, even the struggling companies with clear, purpose-driven strategies should at least retain consumer recognition and possibly avoid such drastic downturns.

Yet, the study reveals that companies with clear ideals face as many challenges as those without, suggesting that having a noble purpose is not a panacea for business performance. This indicates that while a brand purpose can resonate deeply with consumers and potentially foster loyalty, it does not automatically safeguard against poor financial performance.

These findings highlight the complexity of the market and suggest that while purpose can play a significant role in a brand's identity and consumer engagement, it is but one of many factors that contribute to a company's overall success or failure.

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

Getting swept up in the latest marketing trends is a common occurrence, particularly when they align with deeply held values like diversity or fair compensation. However, it’s crucial to rigorously investigate these trends before fully integrating them into your business strategy.

This due diligence helps ensure that the ideals you endorse are backed by solid evidence and genuine intent, rather than just being a superficial nod to current popular sentiment. By grounding your actions in research, you prevent the dilution of your brand’s core values and ensure that your commitment to these ideals is both authentic and sustainable.

Moreover, while adopting certain brand ideals can indeed inspire your team and potentially boost your business’s success, it's vital to maintain clarity about why these ideals matter. Adopting trendy causes without a deep understanding of their implications or without a real commitment to them can lead to misaligned business objectives that might do more harm than good. Therefore, while it’s important to embrace and advocate for your beliefs, ensuring that they are integrated for the right reasons will make your efforts more meaningful and impactful.

Whether or not they directly contribute to your bottom line, steadfastly supporting your convictions will foster a more authentic and resonant brand identity.