4 Reasons Why Brand Purpose is the New Black
4 Expected and Unexpected Reasons Why Purposeful Brands Are More Successful
Is brand purpose the new black? Is it the hottest new thing in business? Is brand purpose to business what black is to the fashion industry? A quality that will never go out of style anymore? A recent B2B study, we conducted among 100+ CEO’s and CMO’s worldwide, suggested to me that the answer to all these questions is: Yes! And for all the right reasons.
In a recently published E-book, I shared the conclusions we drew from the aforementioned research study – in more detail than I will in this article. The overarching conclusion was that purposeful brands vastly outperform transaction-based brands (i.e. brands that are only in business ‘to sell more stuff’). Our research further revealed four expected and unexpected reasons that explain why purposeful brands are more successful. In this article, I want to share the highlights of our findings with you:
Brand Purpose Is The New Black
So. Is brand purpose the new black? In a speech during the 2011 Conscious Capitalism Conference at the Bentley University, Phil Kotler predicted that it will be. He said: “In the future there will only be good companies because a bad company can’t survive very long.” I found two statistics in our research that suggest that brand purpose already is ‘the new black’:
Almost 3 in 4 brands recognise the relevance of purpose to their business growth
Among the 100+ CEOs and CMOs we surveyed, there is a widely shared believe that purpose is relevant to business growth. Thirty percent see a slight relevance to their business growth. 44% think that purpose is highly relevant to their business growth.
Almost 8 in 10 brands are either purposeful or are moving away from being transaction-based
Of the CEOs and CMOs surveyed, the vast majority have indicated that purpose is too important to ignore. One in four consider their brands purposeful. And over 50% indicated that they have plans to make their brand purpose-driven in the future or that they are already in the process of making their brand purposeful.
We can conclude from these statistics that purpose is very much on the corporate agenda. If I’d have to guess, not only because purposeful business – focusing on win-win propositions – is ethically the right thing to do. Study after study, ours included, shows that purposeful brands are more successful.
Purposeful Brands Are More Successful
In line with many other studies on this topic, our research results revealed that purposeful brands outperform transaction-based brands in terms of business performance, sales growth and net-profit growth.
Compared to transaction-based brands, purpose-driven brands are generally more satisfied about their key business performances. They reported on average 31% higher satisfaction scores for eight key business performance drivers.
They are significantly more satisfied about their customer engagement (+60%), employee satisfaction (+50%), employee engagement (+38%), and customer satisfaction (+31%) scores. In short, purposeful brands have a deeper connection with their customers and employees.
The chart below shows the results for all eight business performance drivers.
Our findings also showed that purpose-driven brands were 1.2x (+16%) more likely to report high-growth (>10%) in sales volume over the past three years, and 2.5x (+148%) more likely to report high-growth over the next three years. Whereas purpose-driven brands showed moderately higher growth in sales volume over the past three years, they were significantly more optimistic about their prospects than their transaction-based counter parts.
In terms of net-profit, purposeful brands were twice (+100%) more likely to report high-growth over the past three years, and they were 2.2x (+117%) more likely to report high-growth over the next three years. With regards to profits, purpose-driven brands are doing significantly better than transaction-based brands, both in past results and in projected growth.
Based on the input from CEO’s and CMO’s, we found four reasons, expected and unexpected, that helped us explain why purposeful brands are more successful:
Reason 1: Purposeful Brands Are inclusive Stakeholder Managers
When comparing stakeholder priorities of purposeful brands to those of transaction-based brands, we noticed the following:
- When you’re a stakeholder of a purposeful brand, you will find yourself well within its ‘circle of trust’. However, society and employees find themselves outside the company’s ‘circle of trust’ when their brand is transaction-based.
- Companies with purposeful brands and those with transaction-based brands both put the customer first in terms of importance. It is noteworthy to see, however, that companies with purposeful brands are squarely putting customer interests above shareholder interests.
- Companies of purposeful and transaction-based brands both value the importance of their employees equally high. However, purpose-driven brands allow their employees significantly more influence in company decision-making
- Companies of purposeful brands give significantly more importance to fulfilling society’s interests.
Reason 2: Purposeful Brands Deliver A Wide Palette of Values
Before discussing this second reason, I should explain our Brand Value Palette™ first. This pale
tte organises all brand value elements that a company can deliver. We organise them by extrinsic and intrinsic values as well as by customer and community value. They break down into the following three categories of value:
- Extrinsic Customer Values: These create material value for your customer.
- Intrinsic Customer Values: These improve the well-being of your customer.
- Intrinsic Community Values: These help make the world a better place.
We used our Brand Value Palette™ to determine what categories of brand value the surveyed companies were delivering to their customers and communities. The chart below provides a consolidated overview of their responses. It clearly shows that purposeful brands are more balanced in terms of delivering extrinsic and intrinsic values. In contrast, transaction-based brands focus predominantly on delivering extrinsic customer value.
These results strongly suggest that delivering a combination of extrinsic and intrinsic brand values is imperative for establishing a deeper connection with stakeholders. It explains why purposeful brands do so much better in the areas of customer & employee engagement and in customer & employees satisfaction. Clearly, delivering only extrinsic brand values is insufficient to achieve this.
Reason 3: Purposeful Brands ‘Talk the Talk’
During our CEO and CMO survey, we asked them which of their delivered values were also key messaging points (in PR, marketing campaigns and sales collateral) that help position their company’s brand. We found that, on average,
only 47% of all the value a company delivers to customers and communities is covered in its brand communications.
Being able to fill this sizeable awareness gap (53%) presents a tremendous brand purpose opportunity to these companies. Unlocking that potential, giving their brands more depth, enables them to connect more deeply with their customers and employees. Compared to transaction-based brands, we saw purposeful brands having a sizeable brand potential advantage.
The chart above suggests that purposeful brands make the difference in being more extrovert about the intrinsic values they deliver. Most noticeable is their awareness gap of 26% for intrinsic customer value. This gap is less than half the size compared to that of transaction-based brands (53%).
We concluded from this that purpose-driven brands don’t do well only by doing good. They need to be seen to do good as well. Making their stakeholders aware of the intrinsic values they deliver has a positive effect on their business performance. The research results also suggest that both brands – purposeful and transaction-based – would greatly benefit from further closing their sizeable awareness gap for intrinsic community values.
Reason 4: Purposeful Brands ‘Walk the Walk’
Society has seemingly embarked on an era of fact-free information. Nowhere in business has this become more evident than in the observation of companies making wonderful sounding brand promises while (wittingly or unwittingly) putting their business practices in opposition. Making promises is easy. Being able to deliver on them is a whole different ball game. That requires a strong brand commitment – today maybe more so than ever before.
In our survey, we wanted to measure if the level of a company’s commitment has an effect on their business performance. To measure their level of brand commitment, we did as follows: We identified ten operational values that we considered crucial for any company that is committed to delivering satisfactorily on its promises. These are:
- Responsible sourcing: assuring that suppliers deliver honest products that are produced responsibly
- Good employership: improving the wellbeing of employees
- Going green: environmentally responsible operations
- Clear contracts: drafting short and understandable legal documents
- Accessibility: making it easy for stakeholders to reach the company and its representatives
- Honest promotion: no misleading or manipulative marketing & PR
- Transparent pricing: no hidden costs
- Responsiveness: following-up promptly on customer requests
- Responsible usage guidance: proactively promoting responsible usage of the company’s products or services
- Accountable: taking wholehearted responsibility for your company’s actions when they are successful, but also when they cause problems
We asked CEOs and CMOs to indicate which of these values their companies considered to be Key Operational Success Factors (KOSF). And, for each of their KOSFs, we also asked them to indicate how these were managed within their companies. We categorised their answers in one of three levels of commitment:
- Loose commitment: This applies to a KOSF for which only a qualitative goal is set.
- Measurable commitment: This applies to a KOSF for which a quantitative goal is set by means of a key performance indicator (KPI).
- Strong commitment: This applies to a KOSF with a quantitative goal (KPI) that is bonusable upon achieving or exceeding it.
This enabled us to measure their level of brand commitment (i.e. their drive to deliver on their promises). It also gave us insights into the width or scope of their brand commitment. The results were as follows:
From these results, we concluded that purposeful brands are significantly more committed to operational excellence, enabling them to deliver more effectively on their promises. They have a wider brand commitment scope of 57%, compared to 36% for transaction-based brands. Also, their aggregate commitment level (30%) is almost double that of transaction-based brands (18%). The results suggest that high brand commitment has a positive effect on the company’s business performance.
So here they are, four reasons why purposeful brands are more successful than transaction-based brands:
- Because purposeful brands are inclusive stakeholder managers
- Because purposeful brands deliver a wide palette of values
- Because purposeful brands ‘talk the talk’
- Because purposeful brands ‘walk the walk’
Four reasons why brand purpose is the new black. How well is your brand doing in these four areas?
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For a more detailed overview of the research results that led us to these conclusions, you can download our E-book for free. For more content on other related topics, visit us on www.brandpurpose.nl.