Over the last five years, brand purpose, the idea that brands which have a purpose beyond profit outperform those who don’t, has become one of the most widely promoted ideas in advertising.
The most quoted evidence supporting brand purpose comes from Grow, a book written by Jim Stengel, ex-CMO of P&G. Stengel came up with this finding after selecting the 50 brands with the highest loyalty or bonding scores from Millward Brown’s 50,000-strong database.
These star performers were termed the Stengel 50. Stengel then searched for a link between the brands. This was found to be a brand ideal – a shared intent by everyone in the business to improve people’s lives.
Next, he looked at the chosen brands’ stock value growth between 2000 and 2011. Since the Stengel 50 had grown by 382 percent compared with a 8 percent loss for the S&P 500 benchmark, he declared that ideals were driving business success. Ideals supposedly didn’t just drive growth, they led to stratospheric success.
The book has had a tremendous impact.
Despite the illustriousness of these supporters before you search for your brand’s purpose you should scrutinise Stengel’s findings against four tests:
1) Is the data accurate?
A basic requirement is that the data being analysed is accurate. Stengel’s central piece of data is that his 50 stocks rose by 382 percent.
But that’s not quite the case. Twenty four of the companies in question don’t have share price. They are either privately held (like Emirates and Wegmans) or they are parts of larger publicly traded companies, (like Stonyfield Farm, Innocent or Pampers). In Stonyfield Farm’s case its 2014 revenues were less than 2 percent of Danone’s. Can you claim that Danone’s share price rose because 2 percent of its holdings have a brand ideal?
The gravest flaw though is how Stengel selected the fifty brands. He picked the best performers in Millward Brown’s 50,000-strong database. That’s the top 0.1 percent of brands. It’s not surprising that those brands performed well in terms of share price. If they hadn’t performed well in the past they wouldn’t be in Millward Brown’s top 0.1% of brands.
Stengel’s finding, if you re-state it at its most basic, is that brands that feature in the top 0.1 percent of companies have performed well in the stock-market. That’s circular logic.
2) Does the theory predict the future as well as the past?
The true test of a theory is if it accurately predicts the future. With that in mind I examined the share price performance of 26 of Stengel’s companies over the five years up to March 2017.
A mere nine of the 26 companies studied outperformed the S&P 500 benchmark. By chance alone you’d expect half, or 13, of the stocks to exceed that benchmark. This suggests that ideals weren’t the panacea Stengel suggested.
3) Are the brands linked by an ideal?
For the theory to be valid the brands in question must be linked by an ideal. Unfortunately, even this doesn’t seem to be true.
First, the claim that all 50 of the brands exhibit an ideal is suspicious. The reason Stengel claims such widespread uptake of ideals becomes apparent when you examine his definitions. He stretches the term ideal to such an extent that it’s meaningless.
Have a look at his definition for three of the brands:
• Moët & Chandon "exists to transform occasions into celebrations".
• Mercedes-Benz "exists to epitomise a life of achievement".
• BlackBerry "exists to connect people with one another and the content that is most important in their lives, anytime, anywhere".
Notice a problem? These ideals are just category descriptors. They could apply to any champagne, luxury brand or handset provider.
If the term ideal can cover anything, then it’s meaningless.
4) Do brands with ideals out-perform those that don’t?
To prove that ideals enable success you must compare successful brands with unsuccessful ones. You must demonstrate that successful companies are more likely to have taken ideals to their heart. You can’t make sweeping claims by looking at a single group in isolation. Otherwise you might attribute success to an inconsequential factor common to all brands.
Unfortunately, Stengel makes no attempt to determine whether brands outside the top 50 have an absence of ideals. This alone means his case is unproven.
How does Stengel’s theory fare against our tests?
Stengel claims to have found the secret to business growth. If true, he would have fundamentally changed how brands should advertise. But such a sweeping assertion requires robust evidence. As Carl Sagan, the American astronomer argued: "Extraordinary claims require extraordinary evidence".
Stengel provides neither ordinary nor extraordinary evidence. His work has failed all four of the required tests.
Richard Shotton is the head of behavior science at Manning Gottlieb. He is also the author of The Choice Factory, a book about applying behavioral science to advertising.