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The Hard Problems in Brand Building

We’re on a mission: to create brands in the retail sector that do more than just survive. I'm talking about brands that defy expectations, growing and advancing year-on-year. Brands that evolve into thriving communities, dynamic teams, and sustainable businesses. Brands that stand as unwavering pillars of support for their stakeholders.

The proximity of E-commerce/DTC entrepreneurship to software/digital did a great disservice to a generation of brand builders (us included) - convincing them 1) that they can depend on external fundraising to finance unprofitable growth, 2) that they should focus on revenue growth as their primary KPI, and 3) that they should be building a brand for a near-term exit.

We believe that generally speaking, when building a BRAND (which we’ll distinguish from a utility or simply a product), NONE of the above assumptions are true and, instead, lead to the fast death of your brand.

The nature of what makes a Brand is nearly diametrically opposed to those assumptions. Brands, in their essence, are a relationship. And, like all relationships, they are rooted in trust, they are rooted in values, and they are rooted in both parties being the better for the relationship. Except with a Brand (as opposed to a new friend, or new potential partner) it is abundantly clear that YOU ARE SELLING THEM SOMETHING, making this relationship that much harder to initiate, foster, and grow.

This. Takes. Time. It takes consistency. It takes thoughtfulness. It takes communication. It takes providing your customers with incredible experiences over an extended time period, such that your customers move from “trying you out” to really and truly trusting that their needs will be continually met when they engage with your Brand.

For the Mathletes in the room, an equation:

PLUS

= Brand

There are no shortcuts. Even for the fastest-growing brands in history, finding long-term, profitable, self-sustained growth, took resilience, extreme capital efficiency, and a focus on building a deep relationship with their customer base over time.

As we’ve thought about this topic, we’ve identified a few (non-exhaustive) Hard Problems that every brand that hopes to last needs to grapple with and build solutions for.

Finding the right solutions to these Hard Problems is the basis of a lot of what it takes to drive toward long-term profitable brand building. We’ll flesh these topics out much more in the future, but in the spirit of “tell them what you’re gonna tell them” (presenting 101), we wanted to present them here, first, and do a deeper dive into many of the topics/subtopics in the weeks to come.

Hard problems to solve in your business:

• Building incredible products that fit in with/define your brand, and that do a customer “job”, systematically. Hint - if the only reason you’re able to sell a new product is because of your brand equity, you’re off track. A new product should be able to sell on its own AND it should be net additive to what your brand means/stands for. For example - if you’re simply replicating a product a competitor sells and slapping your brand on it, it’s low likelihood that will be an additive product to your brand. This is because the main reason you expect to sell it is not that the product itself is differentiated, but instead that your brand equity enables you to sell that product to an audience that has put its trust in you. A good barometer for success here is if your new product can 1) acquire lots of new customers, 2) reactivate old customers, and 3) drive better/comparable LTV to existing products, you’ve met the bar for a minimum-viable new product. Finally - for most brands, you can’t just do this once. You have to deliver again, and again, to ensure you stay on top of your category and continue to deliver on the trust your customers have put in you.

• Creating a resonant and impactful brand that connects deeply with a target audience. Your brand should have a clear voice, a clear style, and a clear aesthetic. Your brand should have clear values and beliefs. You should challenge yourself with creating YOUR OWN content that resonates with customers AND fits with your brand. Finally, you should deeply understand what metrics you can use on a day-to-day and week-to-week basis to understand how healthy your brand is at any given moment AND how to invest to improve these metrics.

• ACTUALLY focusing on the customer - AND the next customer. Many brands pay lip service to their focus on the customer. You’ll hear platitudes and speeches on how much we care about our customers. But then you’ll go right back into building your business in absolute isolation from your customer. To actually focus on your customer you need to understand them. You need to TALK TO THEM. Both in person, digitally through surveys & user data, and any other way you can. Involve them in your product development process. Experiment with them. Involve them in your content development. If you’ve got a great brand, your community is absolutely dying to help you. And it’s not enough to focus on your current customer base - you also have to focus on the next customer base - those customers who haven’t yet bought from you. If you’re planning to grow, you’ll have to deeply understand them as well in order to deliver differentiated experiences. Again, you must structurally engage with this community to build the right solutions for them as well.

• Growing your business without over-promoting, over-emailing, or overspending. DTC Ecomm is a unique beast. You absolutely can promote your way to large growth numbers. You can spend your way to growth. You can over-email your way to growth. Over the short term. But to drive long-term growth and brand value, your brand should be strong enough that you don’t need to overspend, over-email, or run massive promotions to generate growth. You should instead think of these as tools to accomplish your larger goal which is long-term profitable growth. For example, promotions are fantastic tools brands can use to drive a broader brand narrative, more effectively manage their inventory, or smooth out rough spots/major missed hypotheses. Note: there’s a right way and wrong way to run promotions, which we’ll delve into in a future post.

• Developing a thorough understanding of your business and what makes it tick. Brands should have a full-company data culture that constantly asks questions and knows how to answer them. They should also really understand the metrics that truly matter at the highest level (hint: it’s not revenue). Teams/business units should deeply understand their key business drivers and be able to pull them with a few clicks. Teams should understand what they don’t currently have the right toolkit to analyze and have the plan to fill those gaps of clarity. Teams should also understand how to experiment in their domain and read the results of experiments from a variety of perspectives.

• Nurturing a relentless focus on capital efficiency. Profits and Contribution Margin are the lifeblood of any brand at the end of the day. Revenue is a red herring metric in DTC. I repeat - Revenue is a red herring metric. It’s a lagging indicator of “something” - but that something could be how great you are at over-emailing your list, over-promoting, or over-spending. Revenue is often used as a stand-in for new customer acquisition - this is wrong - new customer acquisition is new customer acquisition. And new customer acquisition is extremely important. But your customers’ Contribution Margin Lifetime Value is at least as important as new customer acquisition, if not more so. After all, if you are great at acquiring customers but they don’t come back for more, you’ve got a shelf life on your business - as long as it takes to burn through your early adopters. Then you’re SOL. Three additional notes that require their own bullets:

  • How much you pay for your customers is important. To be excellent at understanding this - you must AVOID BLENDED NUMBERS AT ALL COSTS. Every customer has a different price and - typically - the more you spend, the higher that price gets (because you’ve already bought the easy-to-acquire customers). You MUST know when to stop. And similarly, you MUST know when to put fuel on the fire. This changes on a daily/weekly/monthly basis and if you’re not tracking your acquisition that dynamically, you’re missing a major opportunity.

  • How much you spend on staff/headcount is IMPORTANT. Headcount is a massive cost driver for any brand, and many brands get caught up in the culture of “the bigger my employee count, the bigger my business”. This is extremely dangerous. You should wait until the absolute last minute to hire and fight like hell to make it work without it. Furthermore, when hiring, focus on the HARD problems with your headcount budget - not the easy problems.

  • How much you spend on your product is IMPORTANT. It is extremely difficult to overcome a low gross margin number. In my time at Chubbies we saw our margin move by about twenty percent. Twenty. Percent. We could have spent years eyeballing our marketing stack and never found anything even remotely as impactful as this movement. Your suppliers are selling your product to others for less than they’re selling it to you. Negotiate with them. If they don’t move, find new suppliers. Al Pacino in Any Given Sunday said it best - "The inches we need are everywhere around us. They’re in every break of the game, every minute, every second. On this team, we fight for that inch. On this team, we tear ourselves and everyone else around us to pieces for that inch. We claw with our fingernails for that inch, because we know when we add up all those inches that’s gonna make the [frikkin] difference between winning and losing! Between livin' and dyin'!” Gross margin is a game of inches. Go out and get them.

• Structurally building a culture of experimentation, from the topmost exec all the way down to the ICs. The most important brands know that operating off of “gut” only gets you so far. Your gut should get you to tests that either validate or invalidate your assumptions. The most effective way we’ve seen this done is to maniacally focus on, and reward, inputs over outputs. Leaders should praise bold experimentation + new ideas, and understand that all of our work as brand builders is probabilistic. We don’t know what will work. We’ll have strong hunches. We’ll feel that some initiatives have higher probabilities of success than others. But at the end of the day, we don’t work in a deterministic world. We’ll be wrong even when we’ve gotten everything right on the way in. We’ll be right when we utterly failed in our preparation. The only way to operate in this world is to focus relentlessly on inputs and make that the currency of your culture.

Solving these isn't a walk in the park. It requires deep thought, continuous attention, and a relentless learning curve. Imagine a 100,000-piece puzzle that keeps changing and reshaping itself. That's the challenge we're up against. But the reward? A timeless brand that stands tall and proud.

Now, when faced with these daunting problems, there are some common missteps brands will make in attempting to find quick/easy solutions to these Hard problems. Given that we’ve made most of these mistakes ourselves, we wanted to also lay these out in this post to ensure you don’t follow in our footsteps.

Quick Fixes and Missteps:

• Spend more $$ on marketing dammit! If your recipe for growth is to simply throw more marketing $$ at the problem without deeply understanding the above hard problems around capital efficiency in new customer acquisition, you’re on the wrong track. Marketing spend is great at amplifying success, but it isn’t a problem to solve in and of itself. If only we were so lucky.

• Launch a new marketing channel dammit! Similar to the above solution - simply launching a new channel for which we don’t have clear metrics/measurement, and don’t understand how it fits into our marketing ecosystem is a fool’s errand, but is frequently confused with an essential growth tactic. Don’t get me wrong - a marketing org should constantly be experimenting with new channels to find new venues for growth - but should do so in a systematic way, with great inputs, great measurement, and a deep understanding of the channels they’re currently using. Challenging your marketing team to increase their pace of experimentation is totally fair game, but saying to your team “Launch Podcast ads! Launch Connected TV! Launch Tiktok!” is not a recipe for success and confuses what should be a tool in a marketing efficiency toolkit (channel mix) with a major problem to be solved.

• Launch a new product dammit! The misconception here is assuming that the role of your product org is to launch A product, not THE product. Typically brands that are launching A product don’t vet it with the market of both customers and non-customers alike. Brands that are launching A product don’t seek to understand from customers, non-customers and employees how this new product fits with their broader brand ethos. Brands that are launching A product don’t vet the new product with their own merchandising history, asking the questions like: how have similar products performed? How have brand new products performed and what did customers/non-customers/team say about those products before we launched? How similar is this product to those products we’ve launched in the past? How does that change how we think about this product? Brands that are launching A product don’t experiment with their initial launch. They don’t test their assumptions. They don’t give themselves room to be wrong. To fail. Instead, brands that launch A product typically are driven by some exec leader saying “I think this will be great!” and pursue a lengthy, arduous waterfall product process that results in a 0 or a 1 by sheer randomness.

• Hire an agency for a HARD problem. Hard problems must be solved by the brand. Absolutely must. You can’t look to an agency to be the entirety of your solution. It’s totally fine for them to be a component, but to ask an agency to, for example, build your brand voice and your content strategy is going to miss the mark. Once you’ve got a great voice, and understand your content - awesome, then fire away. But until then, these problems cannot be outsourced. These are the lifeblood of your brand. They’re hard, but that’s why we do it.

• Spending massive $$ on marketing to “fill the top of the funnel” in an immeasurable way. This attitude reflects a misunderstanding of the key business drivers of your brand. When a brand doesn’t really understand its customer acquisition dynamics, how to allocate capital to that activity, nor how to think about profitability in the context of growth - you’ll tend to get locked into a “risk-off” approach to optimizing marketing spend. These brands conflate “success” with revenue growth, so cutting marketing spending simply isn’t an option as that would be intuitively contrary to revenue growth. Thus the two options for these businesses are to keep spend flat OR increase spend. The expected value of this decision is that spending will increase over time. Since we need a way to justify this behavior, we point to “filling the top of the funnel” and all of a sudden a huge portion of your marketing activity is untrackable and unaccountable.

• Talk ABOUT the customer and not WITH the customer. No brand has ever said they weren’t customer-centric. No brand has ever said “It’s not about the customer, it’s about ME!” Every brand says they are customer-centric. But there’s a huge difference between talking ABOUT your customer and talking WITH your customer. When you talk ABOUT your customer, you use your gut to tell you what they’d like. You use your gut to feel out the perfect “brand” and “content” to put in front of them. You build your product and content in isolation from your customers, expecting to mesmerize them with your genius and intuitive understanding of them. When you talk WITH your customer you open up a dialogue with them that will, more often than not, conflict with or add deep nuance to what your gut was telling you.

   

• Reward and celebrate OUTPUTS without understanding INPUTS. We live in a results-oriented society - that’s a hard truth. Due to this, many business leaders opt to have a cut-and-dry culture of rewarding results without any acknowledgment of the inputs required to get there. Did you hit this KPI I set for you and your team, or did you not? Oftentimes we build up a vision of the most excellent leaders in history as exemplars of this sort of behavior - as being unyielding in their drive for results no matter what the team did to accomplish their goal. Banging their hands on the table and shouting - “We need to HIT our KPI!!!”. But the reality couldn’t be further from the truth. The best leaders give their teams motivation to work on extremely hard problems. They give them the courage to take asymmetric risks (low downside, huge upside). They celebrate these risk-takers, and they are UNYIELDING - yes - but they are unyielding in their demand for absolutely excellent inputs, as opposed to unyielding in their relentless demand for outputs. A leader who is unyielding in their pursuit of outputs, regardless of the inputs, will always eschew failure, leading to low levels of innovation. A leader who is unyielding in their pursuit of excellent inputs will view failure as an incredible learning opportunity and the organization will get better as a result.

Each of these bullets is a massive topic in and of itself, so we are going to take our time fleshing these out for the next many weeks. However, if you see anything we missed either on the Hard Problems or Easy Problems/Solutions side of things, please please reach out! What did we omit? What nuance is lacking? Where are we wrong? Where are we right? Please let us know!

Now let’s build some lasting brands, shall we?

Bodaciously yours,

Tom & Preston

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