Last week Chargifi was recognised as one of the 100 Distributive Brands of 2016 to look out for. We were in good company too; Deliveroo, Pact Coffee, Slack and ubeam were also named as part of the exclusive list.
We also featured as part of the lead article - 'From disruption to domination: The three lessons for long-term success' - which can be read here.
Making the transition from disruptor to viable long-term business is not easy but in order to stand the test of time brands must continually evolve and take risks while staying true to the values that made them a success in the first place.
By Jonathan Bacon on 27 May 2016
It is one thing to be a disruptive startup, but another thing entirely to turn that disruption into an established, global business. Today Marketing Week launches 100 Disruptive Brands in partnership with Salesforce, our list of the most innovative emerging brands that marketers need to know about.
Working with our sister brand Econsultancy, the companies were selected based on the originality of their business models, their ability to tap into new markets and their disruptive effect within existing industries.
The true measure of success, however, will be if they stand the test of time. Despite the burgeoning potential of these businesses, not all startups experience the longevity they crave; for every Facebook there is a Friends Reunited. So in order to emerge from the early stages of growth and develop into flourishing global brands, there are lessons to be learned from the world’s most successful disruptors.
To better understand the challenges that emerging brands face, Marketing Week spoke to three businesses that have successfully made the transition and achieved exponential, global growth (Uber, Google and BrewDog) and three startups from this year’s 100 Disruptive Brands that are plotting their own growth strategies (Chargifi, Pact Coffee and Landbay). Their insights reveal three key lessons for emerging brands to follow.
These are all the more important as research published last month by Barclays reveals that the vast majority of UK startups fail to achieve ‘scale-up’, defined as growth of more than 20% in turnover or headcount for three consecutive years. The companies that achieve this growth – referred to as ‘gazelles’ by Barclays’ report – account for only 2% to 4% of UK small businesses.
Various factors may hinder startups from taking the next step, such as a lack of investment, the inexperience of management or prohibitively high barriers to entering markets. Sherry Coutu, an entrepreneur and chair of the Scale-up Institute, which helps SMEs to grow, argues that both public and private sector organisations could do more to support startups and thereby reap the economic benefits they bring.
“We all have a role to play in addressing the challenges that scale-ups face, from attracting new employees with the right skills [and] getting the right finance at the right time, to building internal leadership capacity and processes that support scale,” she says.
1. Consolidate as you grow
Uber is one of the best examples of a startup disruptor that has grown rapidly into a household name. Founded in 2009 by Travis Kalanick and Garrett Camp, the ride-hailing app has a presence in more than 400 cities around the world and was valued at $62.5bn (£43.3bn) last December, reaching the milestone at a faster rate than Facebook. Its growth is rooted in the simplicity of its ‘sharing economy’ business model, which involves providing a technology platform for drivers to offer rides to paying customers, often at much cheaper prices than taxis hailed on the street.
Chargifi is managing its growth by using small-scale pilot schemes including some with the world’s biggest brands
Word-of-mouth among early adopters of the service enabled it to grow quickly and Uber has fuelled this viral effect by using discount promotion codes to encourage users to get their friends onto the app. Its rapid rise has not been without challenges, though, as Uber’s disruptive effect on established taxi operators has prompted protests and negative headlines about whether the company is breaching transport regulations in different countries.
Consumers continue to flock to the brand regardless, drawn to its convenience and low priced rides. The scale of Uber’s growth was revealed in leaked financial documents reported by tech website The Information, which show the business had gross bookings of $3.6bn (£2.5bn) in the first half of 2015, up from $2.9bn (£2bn) in the whole of 2014.
Rachael Pettit, marketing and business development lead at Uber UK and Ireland, notes that one of the company’s biggest challenges has been to keep pace with its growth by adding staff and opening new offices. The brand launched in the UK in summer 2012 with a luxury car service but quickly rolled out its standard service to more than 20 towns and cities. It has also diversified as it has grown by offering new services such as the carpooling option UberPool and UberWav, which enables disabled passengers to request wheelchair-accessible vehicles. In February, the business rebranded to reflect its size and scale (see Q&A, below).
“We pride ourselves on having a local team in every city and being a key part of how people get from A to B in cities across the UK,” says Pettit. “As we continue to grow, we have to work to make sure that we are still offering the best choice for both riders and drivers who partner with us. Obviously, this task is much more challenging when you have more than two million riders in London than when you only had a couple of hundred.”
At the other end of the scale, wireless charging firm Chargifi is managing its growth through the use of small-scale pilot schemes for its technology. Founded in 2013, the business provides technology that allows people to charge their phones in public places over wireless internet connections.
Co-founder and CEO Dan Bladen says the company is at present running confidential pilots “with some of the biggest brands in the world”, including a hotel operator, a coffee shop chain and several sports teams in their stadiums. In addition to providing the charging technology, Chargifi offers back-end software that allows these businesses to track their customers’ dwell time and footfall or create custom loyalty programmes.
“The technology is new – people haven’t heard of it before so [brands are approaching it] with the attitude of ‘we are going to try it and see what it’s like’, rather than [totally] jumping on board to start with,” notes Bladen.
“You can be disruptive when
you are a startup or a mature global business”
Yonca Brunini, Google EMEA
Chargifi is also developing a licensing strategy that allows it to sell the distribution rights to its technology to franchise operators in different countries such as Hong Kong, Singapore and India. This provides the dual benefit of generating much needed revenue and cash-flow, while also expanding awareness of the technology worldwide.
Chargifi raised $2.7m (£1.9m) from an investment round led by Intel Capital last November, which it is investing in its software, while the business recently hired its first PR agency to help it develop its communications strategy. However, Bladen concedes that the concept of wireless charging needs to gain more traction before his business can truly take off.
“Not many devices come with wireless charging built in and to use it you often need an accessory like a dongle,” he says. “As the market matures, Chargifi is positioned to benefit.”
2. Nurture and evolve your brand
Emerging brands must carefully fine-tune their marketing as they grow, making adjustments that expand their appeal to a wider audience while retaining the values that made them innovative or disruptive in the first place. Craft beer maker BrewDog, for example, rose to prominence following its launch in 2007 by taking an edgy, unconventional approach to brand building that set it apart from the rest of the beer market.
This approach is embodied by the company’s founders, James Watt and Martin Dickie, and has included PR stunts such as driving a tank through London and openly defying the Advertising Standards Authority in a foul-mouthed tirade. Such stunts have become less commonplace as BrewDog has grown in recent years and a rebrand in 2014 hinted at the company’s maturity. It now has more than 40 bars around the world, with more openings planned this year, is expanding its domestic production capacity and is investing $30m (£21m) in a US brewery to meet the demand for BrewDog beers in North America.
Despite this growth, Watt insists that the business has retained its original brand ethos. He highlights its recent DIY Dog initiative, whereby the company gave away all of its recipes online for free, as proof it is keeping its values alive. “We were founded on the punk mentality. Being anarchic and disruptive is in our blood,” he says. “DIY Dog was not only a celebration of everything craft beer, it was another advance on the ongoing war with global mega beer corporations. We’re rooted in the promise to never sell out.”
One of Uber’s biggest challenges has been keeping pace with its growth
Watt adds that the brand remains averse to traditional marketing or advertising tactics. The business has grown through its innovative crowdfunding scheme Equity for Punks, which encourages beer fans to invest in the brand in exchange for shares and exclusive access to new beers. BrewDog has raised more than £26m through the scheme over four rounds. According to Watt, this community-based approach remains at the heart of the business.
“We don’t believe in glossy TV ads – our number one priority is the beer we produce,” he says. “We have recruited an incredibly dedicated army of over 42,000 equity punks, and keeping them supplied with new brews continues to drive all of us. We are only here because of them, they’re our greatest ambassadors, our harshest critics and our most vocal proponents.”
By contrast, Pact is a small startup brand that has similar ambitions to shake up the coffee market. The company, founded in 2012, operates a subscription model through which it sources and sends packages of premium coffee to customers in the post. It also aims to change the wholesale coffee buying process by negotiating fair prices directly with farmers and helping to improve their farm infrastructures.
Depesh Mandalia, who joined Pact as marketing director in January, believes the business has not yet done enough to communicate these brand values to the world. He was hired to improve Pact’s marketing output, which includes helping the brand to reach a broader base of customers beyond its current core market of speciality coffee drinkers.
“We have only recently told customers that last year we funded $7,000-worth (£4,830) of equipment for a particular farm to help them develop better coffee and that they will pay us back in future coffee stock,” says Mandalia. “We’re always working on these things behind the scenes and it plays so much into our brand values, but we don’t communicate that yet. Brand development is a big piece of what we are trying to do.”
Pact doubled its turnover last year, according to Mandalia, and is considering opportunities for overseas expansion. It also recently diversified its product offer by developing its own pods for Nespresso machines. Yet the business has encountered the types of teething problems that afflict many emerging brands. In March, it was forced to abandon a crowdfunding round on the website Crowdcube after failing to meet its £1m target, while a reorganisation of the business led to redundancies for 16 of its 74 staff.
Mandalia says the redundancies were a necessary measure to streamline the company, which is on track to reach profitability by the end of the year. “Given the choice I don’t think there was anyone we would want to let go, but essentially we have had to take one step back to take two or three significant steps forward,” he explains. “We are a lot leaner for that and we have a clear direction over the next 12 months of where we want to be now.”
“We were founded on the punk mentality. Being anarchic and disruptive is in our blood“
James Watt, Brewdog
3. Keep taking risks
Yonca Brunini, vice-president of marketing at Google EMEA, suggests that disruptive brands cannot rest on their laurels once they become dominant industry players. She joined the online giant 10 years ago and has seen huge growth during that period, but believes the same pioneering spirit drives the business today. “A company’s size and innovation potential are not necessarily correlated,” she says.
“You can be disruptive when you are a startup or a mature global business; the key is to have great people and a great culture. Our original mission – to organise the world’s information and make it universally accessible and useful – remains as true today as it was 17 years ago. It keeps us focused but also restless and always looking to explore and innovate. It keeps us on our toes. Remember, we could easily be disrupted too.”
Brunini also highlights the importance of taking risks, noting that “each milestone we have reached was by asking big questions [and by] betting on technical breakthroughs”. Not all of these ‘bets’ have paid off, as shown by Google’s decision to halt sales of its Google Glass product last year. But others, such as Google’s acquisition of YouTube in 2006, have proved enormously successful and the business continues to bet on other forms of technology, including in its approach to marketing.
“We are always experimenting, [looking at] the best way to engage with mobile users on YouTube or using virtual reality and 360-degree video, or experimenting with dynamic creative to respond to live events with real-time ad creative,” says Brunini. “Digital offers a rich canvas of experimentation, and that testing and learning on all platforms is important.”
Taking risks is equally important for startup brands. London-based Landbay, which was founded in 2014, has become an early leader in the emerging market of peer-to-peer mortgage lending. The business employs 18 people and has grown its following using paid search, affiliate marketing through comparison websites and by increasing its exposure through PR.
Head of marketing Louise Pegg explains that the company founders, John Goodall and Gray Stern, have played a vital role in creating a workplace culture that encourages free-thinking. “Not only are we a new company – we’re a new industry, so they allow us to experiment and make mistakes,” she adds. “That part of the culture has been really refreshing. Also, because we’re a small team, if we see that we are not doing something so well, we can make changes and adapt quickly.”
Pegg reveals that the company is at present focused on marketing itself to people who are already familiar with peer-to-peer lending, rather than trying to convince a more mainstream consumer audience. Like many of the businesses in our list of 100 disruptive brands, Landbay expects consumer behaviour to catch up to its own vision.
“Over time, alternative finance will become less alternative and a lot of customers will take control away from the banks and start to be more active in managing their own finances,” she suggests. “[Our business] will become more mainstream by the very nature of it.”
Has Uber’s marketing and brand image evolved or matured as it has grown?
We have quickly gone from being a luxury, to an affordable luxury, to an everyday transportation option for millions of people and our brand has changed to reflect that. In February, we rebranded our company to better reflect that change, celebrating both our technology and the cities we operate in with more patterns and a colour palette for each country.
Does Uber spend a lot more on marketing now than it did when it was starting out?
We have always had the same mentality to our marketing spend – profitable growth. Marketing is an investment into the business and so we’re incredibly rigorous in our approach to assessing which channels, campaigns and strategies will grow our business. Additionally, we have a test and scale mentality, testing ideas to check they’re hitting our key metrics and if the test holds, we scale.
Do you still think of Uber as ‘disruptive’, despite its huge size?
Our core philosophy has always been to put our customers first. From that special moment where you request for the first time and your car arrives in minutes, to delivering unique experiences across the UK with our on-demand stunts, to opening up our service for more and more riders with the introduction of UberPool and UberWav, our riders and partner-drivers will always be at the heart of our business and brand marketing ethos.