The network effect, which describes how services and technologies become more valuable as more people use them, has driven the success of many internet companies. But it is not confined to the tech sector. One group of high-growth consumer brands, in particular, has been harnessing the power of the “brand network effect,” by leveraging technology to build large, passionate online communities around their products. And as these communities grow, their branding becomes exponentially more powerful.
The advertising guru David Jones dubbed this mixing of branding and technology as “brandtech.” And one prominent brandtech company is Tesla, which has become one of the most valuable high-end car brands in recent years. The company is worth around $30 billion (compared to GM’s $57 billion and Ford Motor Co.’s $59 billion). And a large part of its success is tied to how it leverages technology in its products—and in its marketing. For example, Tesla did away with car dealers and moved customer interactions to an engaging web platform that contains all the information a prospective buyer would need, like car performance data and market comparisons. It makes the process of buying a car and customizing it simple. It also engages and builds its large user community by pushing out shareable content, letting people share their own experiences, and live-streaming new product announcements and local events. All of this has, in effect, turned Tesla drivers into Tesla marketers.
Having studied other extraordinary growth cases and worked closely with Fortune 500 brands for a number of years, I’ve observed two approaches that help brandtech companies grow massive communities of engaged customers, fast.
They leverage technology in innovative ways.
Brandtech companies use technology to create emotional product experiences that customers then want to share with others. Whether it’s a social fitness app (like sports apparel company Under Armour’sdashboard) or an immersive experience (consider how Tesla feels more like an intelligent driving partner than a traditional car), a software layer distinguishes the product by incorporating into people’s daily lives.
The speaker brand Sonos is another good example. The driver of brand value for high-end speaker systems used to be design, sound quality, and big retail events. Sonos went beyond this by building an app that connects its speakers to services like Spotify and Pandora, and recommends personalized music for customers using its own algorithm. Users communicate with Sonos every time they listen to music in their homes. Through this interface, users can follow other stations, create playlists, and see other users’ behavior. And the brand becomes more valuable for each individual user as more join. The company doubled its revenue last year (2013-2014) to more than $1 billion and its systems are installed in more than 1 million homes in the U.S. alone.
In a world dominated by smart phones, nothing is more important than a consumer-facing software layer that connects users and become increasingly more valuable. Companies that don’t have the internal capabilities to build this themselves should consider acquisitions. This past year, Under Armour has invested more than $500M in two fitness community apps, and it has grown its community to include120 million people.
They meet consumers where they are.
Whereas brands have traditionally used a one-message-fits-all approach, disruptive brandtech companies do the opposite: they engage consumers using content that is distributed, consumed, and shared on a variety of digital platforms. They have mastered the use of social media for community building.
Red Bull is one example. It built up its YouTube presence by creating a number of dedicated channels to showcase extreme stunts and music events. It now has more than 4 million YouTube subscribers (Coca-Cola, on the other hand, has 500,000). It broadcasted the daredevil Felix Baumgartner’s space jump on Youtube to more than 8 million people live. Shareability is one of the main criteria for all of YouTube’s content postings.
Under Armour’s Facebook-driven marketing campaign for women’s wear (“I will what I want”) was a similar story. It turned into a social media sensation and got 5 billion impressions and $35M in so called “free earned media”, which is an indication of how many people have shared the content on social platforms.
Instead of operating with a campaign mindset, brandtech companies are constantly pushing out contentto users, so that they resemble 24/7 media companies more than traditional consumer brands. Rather than turning to expensive traditional outlets like TV, they rely heavily on their own channels, both digitally and physically. For example, by foregoing car dealerships and setting up high tech showrooms next to well-known retail stores, Tesla is able to communicate directly with and engage an audience that might not otherwise would have considered visiting a car dealer.
The brandtech approach is fundamentally different from how brands have traditionally built communities around their products, and incumbents have a lot to learn. If established firms want to catch up and achieve the same scale and community engagement, they will need to focus on harnessing a similar brand network effect. And they can do this by creating an innovative software layer around their products and a bold strategy for engaging audiences through original content that’s shared on the right channels.
By Rasmus Bech Hansen
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