The Brands They Are A-Changin’

Monday’s Wall Street Journal story on the SuperBowl ads reported the “largest number of newbies since the dot com boom in 2000″ had run TV ads during the game. More new brands dipped their toes into the world of big game TV advertising; new brands, big markets, National TV advertising. This is an important turning point in something we’ve seen a lot of lately: the emergence of consumer brands that leap from the digital to the real world.

Just last week, I had to run last-minute to the store for some razors. I’ve been a loyal Gillette customer for many years, but as I strolled down the shaving aisles of CVS, something different happened. I began questioning the wisdom of buying the same old product at the same old price. Was my favorite razor really the right choice? Was it the best I could find in this category? Was it a good deal? Was it innovative? The copious online marketing from Harry’s and Dollar Shave Club was working. Suddenly the razor that I had trusted for the last 30 years felt lacking. It felt old, out of date, unconnected and expensive. It felt like an anachronism.

Thirty years of real-world brand loyalty started crumbling because of the power of a relatively new digital brand. This is a very big deal.

Those of us who spend lots of time around consumer Internet companies are well versed thinking about online “brands.” We usually spend our time discussing brands in the form of unit-level economics: CAC, LTV, churn. Most of these discussions tend toward certainty and science—lots of spreadsheets that attempt to figure out if what you’re doing is economically attractive to customers. These equations lead us to believe that a digital brand is quantifiable and measurable. We like numbers and we like predictability, but it is also a bit of a mirage, and it’s short-sighted: a positive LTV/CAC equation does not a brand make, but it’s sort of all we’ve had. Until now.

Brands, real brands, are more powerful than the sum of a unit-level economic analysis. Real brands are enduring and societal, and they cause people to change their behavior, tell all of their friends, live in a new way, and have a different sense of self and identity. Real brands have long-term runs—loyalty across decades and generations—and they create enormous economic value. Real brands are emotional; they mean more than a promo discount or link. They transcend situation and place, and their meaning is communicated across every channel.

Thanks to their constant engagement on social web, new brands push the old brands into the background, attract newer customers and are more relevant today than the traditional brands. Many start small and digital, but a few quickly make the jump into the physical market. These appear alongside some of the biggest brands in a category. These are brands that leap from online into the real world, into our real lives—brands that leap from the digital to the real.

Consider the defining brands of the consumer packaged goods industry: P&G, J&J, Clorox and SC Johnson. These are products that consumers literally touched every day to make their lives better; products that were always physically within reach, in their homes and in their kitchens. These brands communicated important societal values: families that used Tide or Clorox felt healthy, clean and secure. No More Tears Shampoo made mothers feel safe and caring, every day. These foundational consumer brands created billions in market value every year, for decades. Brands like Proctor & Gamble, Ford Motor Company, Chevrolet, United Airlines and General Electric were daily, ubiquitous and durable.

The P&G’s, Ford Motor Companies and United Airlines of yesterday are being created today, and their names sound more like Dollar Shave Club, Madison Reed and Harry’s.

(photo courtesy of Harry’s)

Massive changes in mobile, ubiquitous broadband, beautiful responsive UI/UX innovation, wearables and the social web have combined for the first time in a way that is opening a golden age of consumer brands from the technology ecosystem. I’m talking beyond the digital-only powerhouses of Facebook, Apple and Google. I’m referring more to the brands that, like Apple, can make the leap from digital to physical; from web to everyday—Uber, AirBnB, Warby Parker, Honest, Julep, Bevel. These are companies that are forging powerful, deep relationships with customers and transcending the limits of digital-only distinction. These are leaping brands. This is a new momentous shift, and it’s huge for the consumer markets.

Why now?

Behavior: Our mobile behavior is now a fully engrained daily, hourly habit. It’s also reflexive: swiping your screen is more natural than reaching under the sink to grab Windex and easier than paying for dinner with your Amex. The swipe makes it instant for a consumer to touch a brand anywhere and at any time.

Direct connection: For the first time in history, brands enjoy a direct, always on, full-color connection with 100% of their customers. 100%. Registration for an app, product, service or device is often essential for the function of the product. The value of so many digital-physical products is through the data and software of the connection. Uber needs to know where you are to send you a car, Nest needs to know you arrived at home to turn up the heat. The app, or device, is an important endpoint, but the value is in connection—the data, the software, the network. It means direct, immediate connection to your customers, free of any intermediary, at scale. Oh, and this connection is 24/7 to the palm of their hand, literally 12” from real customer eyeballs.

Meaning: The special part about the mega-brands of old was the elegant mix of daily contact (Tide in your laundry room), efficacy (unquestioned faith in a Black+Decker tool) and values (pride of being a United Airlines frequent flyer—yes, once people were proud of this). Today’s emerging mega-brands are no different. They are emotional: we feel cool, powerful and beautiful using Apple, we feel smart and safe using Nest, up-to-date and informed via Twitter, and connected deeply and viscerally to friends and loved ones via Instagram. We feel healthy when we ride with Peloton or buy products from the Honest Company—deep, direct, emotional connection.

(photo courtesy of Madison Reed)

What does this mean for Silicon Valley?: In the recent past, Silicon Valley has marched to the beat of Moore’s Law. Planned obsolescence is the way of the world. Apollo Computer gave way to Sun Microsystems, which gave way to Google. It is our cycle of life. However, as Silicon Valley’s progeny becomes part of consumers’ daily lives, we need to start thinking of these opportunities as 100-year brands.

This matters because the reality of mega-brands is that they transcend unit-level economic equations and create monster economic value over long periods of time. Real brands endure. This means that it just might be the case that we are underestimating the duration of the startups we are funding today. We all know good things take time, but are we really thinking about building companies that last 20, 30, even 40 years? As an ecosystem, I’m pretty sure we don’t think that way today, but we need to start doing so.

As a Founder or investor, this means the markets that we are facing are fundamentally larger than anything we have ever seen before. It means we should be thinking bigger and striving to create the kind of customer engagement that transcends the first acquisition interaction. Instead of solely CAC/LTV, perhaps we need to create the cult of the Net Promoter Score, because NPS is the sum of all interactions across all channels. We also need to consider the role of TV, print, radio and traditional retail (stores) in our marketing plans. These “older” media means may be increasingly ROI-positive for brands capable of leaping from digital to mainstream.

I believe this is the dawn of a renaissance moment in consumer brand innovation, and out of this era will emerge enormous brands that endure for the next 30+ years. Maybe those “newbies” see something that others don’t. Yet.