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In this edition:

• Column: How To Grow Small Brands

• Inspiration: The Woodsman Whisky “Well Earned”

• Upcoming: BBBbites — Marketing your Business

Column: How To Grow Small Brands

Last week, the folks at Intuit MailChimp released an insightful report titled How to Grow Your Brand: Marketing Strategies for Mid-Market Companies.

It’s pretty thorough and some of the top minds in our field — such as Mark Ritson, Les Binet, Ty Heath, Peter Weinberg, Jon Lombardo, and Jamal Miller — wrote a chapter for it.

Though I’ve been working on small and mid-sized brands for the past couple years, for most of my career I’ve worked on big brands. I spent nearly seven years at PepsiCo and got to see first-hand how the big dogs play.

It’s a fascinating process that works year over year, but the gains are marginal given the sheer size of their brands already. For example, when we were tasked with growing a brand’s market share we were given millions of dollars in marketing budget to make it happen, only to see 0.2-1% share gains per year. Of course, some brands would see hockey stick growth, but that was due to a large array of factors such as a competitor losing shelf-space at Walmart, or a significant increase in marketing budget that drove short-term ROI down but that would eventually pay back in the form of higher profitability 2-3 years down the road, and sometimes external factors such as a global pandemic would grow sales double digits in the matter of months.

All of this to say — the business of growing big brands is slower and far more costly. Brands that already have a market penetration of 80%+, awareness levels that exceed 90%+, and distribution networks largely saturated have to fight for every incremental inch with tooth and nails while fending off new category incomers biting at their ankles.

But with every market share percentage point of growth, big brands are harvesting larger profits (due to economies of scale efficiencies) and driving higher loyalty (due to their market penetration). Therefore, being at the top of the mountain is a great place to be — the challenge becomes staying there.

New brands, on the other hand, have massive runways ahead of them. Every incremental awareness point, every new distribution contract signed, and the simple fact that they’re new news, all manifests in exciting big steps in their journey towards growth.

But, not all is rosy, and to grow small brands we first need to consider a few things.

The Realities of Being A Small Fish

To start off, small brands have a few things going against them:

• Fewer customers

• Lower loyalty rates

• Weaker pricing power

• Higher unit costs

• Lower marketing comms efficiency

Let’s unpack some of that.

Fewer Customers, Higher Costs, Lower Loyalty

A common strategy when launching a new brand is identifying underserved or overlooked segments in the market that are in need of innovation or a solution geared towards their specific needs.

This is a great strategy because most small businesses don’t have a lot of cash to spend in advertising, therefore they couldn’t hope to reach the total category with their communications given the immense cost of doing so (think buying a TV spot, most small brands cannot afford a reasonable broadcast buy without breaking their bank).

So, by focusing on a small segment they can be more targeted and present themselves as a “niche” option that solves their unique needs. Remember what Lululemon did in the 90s going after yoga practitioners while Nike and Adidas were focusing all their energies in basketball, soccer and football?

But with smaller segments, come less customers. And with less customers, come less revenues and in turn higher costs to produce your products.

This trickle down effect doesn’t only affect sales and costs to produce your product, it also impacts loyalty rates. It’s a well-studied fact by now that loyalty is a product of market penetration, and not the other way around — this is known as the Double Jeopardy Law.

Weaker Pricing Power, Less Efficient Comms

This leads us to our second major headwind for smaller brands: because they’re new and not yet well-known, new customers are far more sensitive to their price than their larger competitors with stronger brand equity levels (such as trust and credibility).

This becomes a catch-22 — small brands need to drive market penetration to grow, but they don’t yet have brand equity built in the minds of consumers. At the same time, they don’t have enough resources to overinvest in mass-marketing to drive said market penetration, leading their bottom-of-the-funnel initiatives to suffer from higher advertising inefficiencies.

That is because brands that are well-known have been building mental availability in the minds of consumers for years and therefore can charge a price premium for their products, such that when they do run sales activations, their marketing performs a lot better than lesser known brands.

It’s a tough conundrum that must be navigated strategically.

Going After Goliath

So, how does a David beat Goliath in such a lopsided game?

Well, let’s look at how he managed to do so in the story to uncover some lessons:

• He avoided direct engagement by playing a different game (speed and distance, as opposed to strength and close combat)

• He leveraged his unique strengths to circumvent dealing with Goliath’s size (he was an excellent slingshooter)

• He was bold and confident effectively surprising Goliath and catching him off-guard (David saw Goliath’s arrogance as a vulnerability)

• He used precision over power to cause localized damage (he slingshot a rock straight to Goliath’s forehead, one of his few exposed areas)

While we could unpack each of these insights further, the key lesson here is that small brands cannot beat big brands at their game.

Small brands need to be clear about what are their winning aspirations (i.e.: is it to overtake a market leader, or to become a sub-category leader in a particular space), where they’ll play (i.e.: should Lululemon have gone after basketball and soccer players too, or remained laser focused on yoga practitioners) and how they’ll win (i.e.: what core capabilities will the company choose to overinvest in to fuel long-term growth, while being clear about what they will say NO to).

These critical strategic choices are often overlooked by small brands. They feel like they need to go after every possible opportunity that comes their way since they “can’t be picky” at this stage of their growth journey.

However, even big brands can’t do everything well. They know what they’re good at, and they outsource all the other stuff they aren’t so good at.

Now, a small and up-and-coming company can’t afford to outsource too many things yet, but when thinking about which battles to fight they must play to their strengths and avoid any “hand to hand combat” where they suck at.

So, how might small brands slay giants? Here are some tips:

1. One can only use the “new news” card a few times in a brand’s lifetime. Play into that if you’re a new category entrant as consumers will be more open to trying you out if you position your messaging to their specific underserved needs.

2. Overinvest in marketing communications relative to your other smaller competitors. To do that simply look at your industry’s Advertising Budget-to-Revenues Ratio (also known as the A/S ratio) and make sure you’re spending more than the average. This is a very close cousin to the Excess Share of Voice (ESOV) metric that big brands use to ensure their competitors are not talking more and louder to category buyers than they are (ESOV studies have repeatedly shown that if you maintain a +5 ESOV, you'll gain about +0.3% share in B2C and +0.35 share in B2B per year).

3. If you have tiny budgets, start out by spending on those audiences and media that give you the highest short-term ROI. This way you can capture demand right away to pay for longer-term brand building initiatives as you grow and expand your pool of shoppers. But remember the 95-5 rule — at any given time only about 5% of shoppers are in-market to buy, so if you notice your short-term activities plateauing it could be a sign that you’ve started to saturate that target segment.

4. Ensure you’ve got the product and pricing right before investing into any marketing comms. If the product is bad, then all marketing comms will do is lead them to fail faster. And if the price doesn’t match the value proposition, nobody will buy your products. As you begin going for scale, then distribution becomes A LOT more important.

5. Keep going after market penetration. Brands don’t grow by retaining existing customers — your products and value proposition should be able to do that on their own if they’re good, but even then a natural category level of churn is still imminent —, brands grow by acquiring new customers. As you start stabilizing your operations and budgets, begin shifting that investment split away from 65% performance marketing and only 35% brand building, towards the more effective equilibrium of 40% performance and 60% brand. This will ensure that you’re gradually building mental availability in the minds of consumers such that when you do run sales activations your investments begin to yield far greater returns.

Patience Is A Virtue

In the Intuit MailChimp report, Les Binet says something that should remain top of mind for all small brand owners:

“Innovate, advertise, and reach as many potential customers as possible—this is great advice for smaller and medium-sized brands with big ambitions.”

Sounds quite simple, but small brands are new only once. The moment a small brand overlooks these critical first baby steps described in the section above, they begin slipping into a dark corner of the market called the under-invested brands.

Binet goes on to explain why this is such a dangerous place to be:

“Neglected little brands have all the disadvantages of being small, and none of the advantages that accrue from being new, niche, or premium. They tend to have low advertising efficiency, low margins, and low ROI. Escaping the small brand trap can take years.”

However, unless the start-up is well experienced and has a great brand advisor by their side, chances are that most small brands slip into this hole.

But fear not, the same principles still apply — it just might take a little more time to start seeing results since you’ll have less of a blank canvas to play with.

Become clear about your winning aspirations, devise a strategy to how you’ll get there, become laser focused on advancing yearly objectives, keep investing into brand, keep allocating money smartly into performance marketing, and avoid discounts at all costs.

These fundamental marketing principles remain the same. Consistency and patience is the name of the game.

Inspiration: The Woodsman Whisky “Well Earned”

Last week a new award series was created, named The Chutes, where “the work that works is the work that wins.”

In its inaugural award, The Woodsman Whisky won with this textbook advert.

• Distinctive brand assets (the beaver mascot) - check ✔

• Usage of humour - check ✔

• Distinct positioning (not your modern/elegant whisky, instead a treat that’s well-earned after a long day’s work) - check ✔

• Brand codification from start to finish - check ✔

• Clever usage of music - check ✔

It’s no surprise then that the brand saw:

• Double-digit volume growth in the first year

• A 142% boost in customers

• As well as earning the brand more space on the supermarket shelves.

While adverts won’t ever be successful by just following some sort of formulaic concoction of checkboxes, as account planners we know what drives attention, memorability, and brand associations.

The team at The Woodsman Whisky seems to know it too.

Upcoming: BBBbites — Marketing your Business

• October 25, 2024 @ 11:30 am - 01:30 pm MST

• The Hemingway Room, Work Nicer Coworking Calgary, 1204 20 Ave SE, Calgary, Alberta, Canada

Reserve your spot HERE.

The Better Business Bureau listened to your feedback and is excited to invite you to a BBBBites session where Pedro Porto Alegre, Strategy Director at WJ Agency (yours truly) will explore the topic "Marketing Your Business".

This session will provide valuable insights into effective marketing strategies, tools, and methods that can help elevate your business to the next level.

Why Attend?

• Expert Insights: Benefit from a candid conversation about how to think about effective marketing strategies to help your business.

• Latest Trends: Learn about the latest marketing trends, tools, and techniques that are shaping the industry today.

• Practical Strategies: Walk away with actionable marketing tactics that you can implement immediately to drive business success.

• Networking Opportunities: Connect with other business owners and build valuable relationships within the BBB community.

• Business Growth: Discover how effective marketing strategies can boost business performance, attract more customers, and improve your bottom line.

• Interactive Session: Engage in an interactive discussion where you can ask questions, share your experiences.

REGISTER HERE WHILE SPOTS ARE STILL AVAILABLE.

More of PPA:

• 🤝 Connect with Pedro on LinkedIn and/or X

• 💌 In case you missed it:

  • How To Set Up A Brand For Success

  • What Should You Include In Your Brand Plan

  • The Role of Brand Management

PPA 

Pedro Porto Alegre is a seasoned marketing professional with in-depth experience building brand and communications strategies for top-tier B2C and B2B organizations across Canada. His repertoire extends from crafting and executing integrated multi-media brand marketing campaigns to the commercialization of performance-driven innovations for multimillion-dollar and nascent brands alike.