Big brands must not play the startup game

The answer to modern big brand market challenges is not a default to startup mode. Doing so is the tapeworm diet of marketing and will do little else than eat you up from inside.

Big brands can often find it hard to change course

Quotes, much like sales, are often wrongly attributed online.

Marcus Aurelius never said that “the secret of all victory lies in the organisation of the non-obvious”. Oswald Spengler argued that it did in The Decline of the West. Similarly, Voltaire did not utter the words “I disapprove of what you say, but I will defend to the death your right to say it”. Evelyn Beatrice Hall wrote it.

Few people, of course, have suffered as many bon mots falsely connected to their name as Winston Churchill. For example, contrary to popular belief, he wasn’t the first to point out that those who fail to learn from history are condemned to repeat it (writer and philosopher George Santayana was). However, he almost seems to have been the last.

In marketing, looking at the past is, if not considered an industry faux pas, at the very least practically unheard of. We are much more concerned with what shiny new toys the future might bring than the teachings of yesteryear. Just as Santayana (and Churchill) foresaw, we are thus doomed to repeat mistakes that have already been made.

The way big brands currently are approaching strategy is similar to how Victorians approached dieting. In 19th century England, to be thin suddenly became fashionable. The poor, as one would guess, already were. Naturally, the upper classes tried to deduce what could be the cause of it.

Though one would imagine it may have correlated with the downtrodden simply not being able to afford food, the thought apparently did not enter the collective mind of the elite. Instead, they came to the conclusion that the cause of the slim figures of the destitute had to be that they were ridden with diseases and parasites. And so, the tapeworm diet pill was created.

Brand category incumbents are repeating the mistake. In keynote presentation after keynote presentation, and column inch after column inch, they are falling over themselves to announce they have become “officially agile” or are “acting like a startup”. Much like how the Victorians failed to grasp why the poor were thin, brands are failing to see why startups act like they do.

Accounting for the best course of action

If you work in strategy, regardless of what kind, it is imperative to understand and account for the key contextual factors that dictate the best course of action. Small brands do direct-to-consumer (DTC) sales and ecommerce not because they necessarily want to – though they may – but because they practically have to.

Few, if any, startups will be able to obtain distribution in traditional channels, and even if they did, they would not have the scale necessary to provide adequate supply. Nor can they afford TV advertising, so their media investments inevitably have to go elsewhere.

As the companies grow and mature, the key contextual factors change. In order to maintain reach – be it through product, distribution, media or otherwise – the approaches do too. Nielsen data, tracking 120 DTC companies, showed that the group’s TV ad spend increased to more than $2bn in 2018, up from $1.1bn in 2016.

Seventy of the brands were buying TV ads for the first time.

The effort required to continuously change course is much larger for an aircraft carrier than a dinghy.

Similarly, key contextual factors explain why small brands have to continuously change the game to improve the odds of winning. In game theoretic terms, this is called the ‘Colonel Blotto game’, which is a zero-sum game with multiple mixed-strategy equilibria.

To take a very basic example, imagine two armies, both 100 strong. Individually, each soldier is evenly matched. If an equal number of soldiers is placed on the battlefield, the outcome will be a tie.

Now imagine that there are three battlefields in which you have to place your soldiers. You have no insight into how your opponent will play. What will you do?

Practical strategy, marketing or otherwise, is competitive and works in a very similar fashion.

Of course, in practice, the two opponents are very rarely evenly matched – there is resource asymmetry. This changes the expected outcomes.

In a three-battlefield game, a player with 25% more resources has a 60% expected win ratio and a player with twice the resources has a 78% expected win ratio. In other words, there is still randomness, but decisively less of it. The bigger the brand, the more likely it is to win.

How a weaker player can win

To improve the odds, the weaker player has to add dimensions to the game. The more dimensions a game has, the less certain the outcome, as the weaker player will force the stronger player into allocating resources more thinly, weakening its relative advantage.

This is where we find the strategic argument for agile. Indeed, agile can, and sometimes should, actually be considered in strategy. If David wants to beat Goliath, he has to change the game.

Importantly, however, the decision to refuse to engage where the strong player has a power advantage is a strategic one. It thus inherently requires a strategic process and must factor in complexity, randomness and other similar market traits. Consequently, agile is not an excuse not to do strategy. In fact, agile requires one.

The evolution of direct-to-consumer brands and their marketing

Large companies can deploy defensive-cover strategies to deal with the added dimensions, but that is not the same thing as taking a ‘hedonic’ route and covering everything. Resources, even for category leaders, are not endless.

Nor is ‘pivoting to agile’, as is currently oft-argued for, a very clever solution. Much like how the Victorians saw the poor, the brands fail to recognise key contextual factors. The effort required to continuously change course is much larger for an aircraft carrier than a dinghy.

Instead, large companies should aim to be as anti-fragile as possible, acknowledge their weaknesses and play to their strengths to the extent possible. All of which should be considered in the strategic process.

So no, the answer to modern big brand market challenges is not a default to startup mode. Doing so is the tapeworm diet of marketing and will do little else than eat you up from inside.

You can quote me on that.

JP Hanson is the chief executive of international strategic consultancy Rouser and a marketing keynote speaker.

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