The Growth Dilemma | Annie Wilson

Are Brands Trying Too Hard to Satisfy Everyone?

Dan Loney: There has been an increasing importance on brand. Companies are thinking about it more and more, and part of that focus comes from a wide range of needs by consumers. That means that different people are wanting different things from their brands. How do you ensure the necessary level of growth as a company with so many chefs in the kitchen?

It’s a pleasure to be joined right now by Annie Wilson, a senior lecturer in marketing here at the Wharton School. She is the co-author of a new book about this topic, The Growth Dilemma: Managing Your Brand When Different Customers Want Different Things. Her co-author is Ryan Hamilton.

Annie, I’ve sensed this change and felt more of a greater focus on brand, but you take it from a unique perspective of how companies are trying to assess this because of what the consumers want. Give us more.

Annie Wilson: Yes, absolutely. I think the conversation between: Should we focus on brand or sales or performance marketing, as it’s sometimes called? This has been a long conversation in marketing and in business in general, but I think recently we’ve seen this greater imperative to focus on brands because of how big brands are struggling as a result of taking their focus off of brand for a while. We see this with Nike. We see this with Starbucks. Kohl’s might be another recent example.

The approach we’re taking is also focusing on brand at the segment level. Not just thinking of your brand as this monolithic thing that all consumers are going to want the same thing from it and think of it in the same way, but that actually different segments might care about different things from the brand, and that might be one of the drivers of fragmentation or brand dilution.

Loney: What are these specific segments? You have four of them in the book.

Wilson: The segments are different for every brand, but we talk about four different relationships between segments. Segments can relate to each other by what we refer to as “separate communities.” They want different things from the brand, but they’re fine with the other community also using the brand. If you think about Timberlands, for example, you have hip-hop fans and workers. They both know that each other uses Timberlands, and they’re totally fine coexisting in the Timbs space.

You could have an example like at Wharton. You have students who go to Wharton, and then students who go to the college in various majors. They know about each other; they don’t care about each other. They coexist, even though they want different things from the university.

We then have connected communities. This is when segments rely on each other to create value, but they don’t really care about who each other are. Think about if you’re on LinkedIn. There are different people on LinkedIn that you’re not connected to, who you don’t necessarily care about. They use it for different purposes. But the fact that more people are on it is still better for you, so you’re connected in this interdependent way.

You then have leader/followers, which is one segment uses the brand, which attracts another segment to it. The fact that this cooler, smarter, more athletic, professional, wealthier segment uses the brand makes everybody else who wants to be like them use it. This happens a lot in luxury and in sports, too.

Then you have incompatible segments, which is the fact that one segment’s using the brand doesn’t work with another one. They either want to use it in a different way, they think of the brand differently, there’s something that they cannot coexist within the brand ecosystem. And that’s where that growth dilemma happens, when there’s that incompatibility.

Loney: For the companies that are dealing with this, I don’t think this is a new concept. But there is a great deal more focus on these components, correct?

Wilson: It’s not a new concept, but as the pressures to grow and grow quickly are increasing, the problem is presenting itself sooner in the corporate history. Because consumers come and go between brands a lot faster than ever before, and there is more and more competition, there are lower barriers to entry across virtually all industries. It makes the problems more consequential for brands.

Loney: You mentioned about Timberland, where you can have a product where two totally different segments will use the product, and they’ll get along, and there’s really not competition. Are there are instances where there is competition within the brand, and maybe the two sides don’t like it?

Wilson: Yes, absolutely, and that can be for different reasons. One of the most famous examples is with Starbucks, with the third-placers and the on-the-gos or the commuters. If I use Starbucks because I want coffee quickly, and I want to place my mobile order and get in and out, that doesn’t create a nice environment for the third-placers. So, they have to find a way for them to coexist.

Another example, sort of like Timbs, could be Supreme. If skaters want to use Supreme to signal their skater identity, and then all of a sudden a bunch of wannabe hypebeasts and fashion followers use it, that erodes the brand for the skater community. It actually takes something away from them for them to use it.

How Can a Company Prioritize Growth?

Loney: How does a company balance all of these things when growth is the most important thing that the company, the board of directors, and the investors are looking for?

Wilson: That’s the big challenge, and I think you see these big companies now that are struggling with this. In all likelihood, it’s going to take some stepping back to move forward. What I’ve observed is the companies that handle the growth dilemma very well are those that are not under this intense pressure to grow quickly. Berkshire Hathaway companies, for example, do a great job of growing within a latitude of acceptance, slowly over time to attract different types of customers.

For those who do want to grow more quickly, it’s about being more selective about the segments you grow to, knowing your brand, understanding what customers value, and whether those values are compatible with each other or not. And being smart and knowing when to attract a customer and when to let them go, in terms of segments, or orchestrating them in creative ways.

With Timberlands, they keep the different groups separate from each other. They have different social media handles, different marketing, different product lines.

You see that with Starbucks and the drive-throughs, and then the Roastery or Reserve coffee shops are designed for the third-placers. You’re sort of separating them, or you create hierarchy. You say, “This segment is wealthier and higher status, so they’re going to have access to certain products that this segment doesn’t.” That keeps everybody happy when those segments come in.

Loney: It sounds like the recognition of a lot of these dynamics is one of the important keys to find that growth longer term.

Wilson: Absolutely, and I think the problem has many origins. One of the common origins is just not engaging in proper segmentation as a brand, or not using value-based segmentation. Thinking, “OK, we’re going to target Gen Z,” and then not foreseeing how they might conflict with another segment because that’s not a useful way to think about the segment. It’s really about whether the values or what they want from the brand are compatible or not.

Loney: You mentioned the leader/follower, which caught my attention. Is that what we’re seeing with the influencer community?

Wilson: It’s interesting because influencers can be a leader segment or not. If someone is clearly paid to endorse or use a product, or they’re really representing just themselves, they usually don’t represent a full leader segment. But when it feels like a segment of celebrities or athletes or wealthy people use a brand — Beats headphones is a good example. Yes, some of the athletes are paid to use Beats, but it also is a whole segment of professional athletes who loves Beats, which makes people like me, who want to feel like Tom Brady before I go in to teach, want to use Beats headphones. It does have to feel like a true segment. It can’t just be, “Oh, Tom Brady was paid to tell me he likes these.”

Loney: How does a company deal with incompatible segments? I would think that would be the largest challenge for them.

Wilson: Yes, an ounce of prevention is worth a pound of cure. That’s true in marketing, too. I think you have to find ways to separate them, to create that hierarchy, or potentially fire a customer segment, which can feel scary. But sometimes the best thing to do is say, “We have to choose the segment we’re for and the segment we’re not for. A big mistake I see brands make over and over again is they find themselves in conflict, so they try to just serve both.

You saw this with Bud Light a couple of years ago. You see this with Target right now, where they got themselves into a political conflict between segments, and they responded with a curt, sort of, “Well, we don’t know which side we’re going to pick.” So then both segments said, “OK, well, you’re not for us.” And they’re leaving in droves. Usually, you have to pick one.

The New Norm in Marketing

Loney: This is a new norm for a lot of companies as we move forward. This is not something that is moment-in-time. Companies are going to have to continue to work with it in order to find that growth.

Wilson: Absolutely, and that’s driven by a few things. First is the information channels we use are more porous than ever. You can’t put something in a special interest magazine and assume no other segment will see it. If you put it on social media, it could surface in anyone’s algorithm, and then in can be re-posted and shared and made into a bigger deal much more easily. We use brands and products more as identity signals than ever before, whether it is to reflect my skater identity or my cool athlete identity or my political affiliation. So that’s going to increase the risk of incompatibilities. And, as I said, the barriers to entry are pretty low across a lot of industries now, which means one brand’s conflict could be another brand’s opportunity. “I see you’re ignoring a segment, or you’ve done something that’s bothering one. Well, I’m going to then pick them off because I can actually serve them better and more clearly.”

Loney: Does artificial intelligence start to come into the conversation here?

Wilson: I think AI could be a useful way of testing whether there’s a likelihood of conflict. First, it’s a great way to measure and test the values different segments get from your brand. Which segments exist, what values do they care about, how are they talking about you on social media? You could pick up on conflicts sooner, do scenario planning with it, create separate messaging with it for different segments. I think it could be a really useful tool for preventing and managing conflict if it does occur, for sure.

Loney: What do you hope will come forward from this book?

Wilson: Our hope is that brand managers will focus more specifically on managing brands at the segment level, rather than across the whole customer ecosystem, or thinking about the brand and the customer relationship. But also recognizing that customer groups relate to each other in unique ways. And those dynamics between customers are essential to pay attention to. It has been a pretty overlooked gap in a lot of marketing research, and it’s something we’re hoping to draw more attention to — and to offer the tools to do it.