Elasticity is the yin and yang that can unlock the potential of a brand. On the one hand, the more price inelastic your brand is, the greater the price premium you can charge. Decreasing price elasticity is one of the most fundamental objectives for marketing. As Jill Avery, a senior lecturer at Harvard Business School, states: "A marketer's goal is to move his or her products from relatively elastic to relatively inelastic by creating something that is differentiated and meaningful to customers." On the other hand, brands themselves need to become more elastic in order to drive successful line extensions and have the ability to move beyond the constraints of operating in a singular category. These contradictory forces of elasticity - sustaining demand at higher prices and the ability to stretch into new markets - lie at the heart of increasing the commercial value of brands.
The default answer to harness these forces is to define the brand's purpose. Find a point of view on the world, not just a positioning in the category; build a brand that people 'buy into', not just simply buy. I believe there is potential in purpose-driven brands, but too often, purposes default into definitions of inward-looking narcissism and self-aggrandisement. More and more, my sense is that purposes are rarely defined in a way that provides timely instruction and timeless direction and, perhaps more critically, few describe the role they can play in people's lives and how they create value for people. We trot out the same examples - Google's 'to organise the world's information and make it more accessible', Airbnb's 'to make people around the world feel they can belong anywhere' - but these are the exception to the majority of purposes that are more like airbrushed selfies than true North Stars. We can play an important role in making purposes better, but are there perhaps other areas we could look to in order to find better ways to harness the forces of elasticity?
The first might be to re-examine the mental model we use to think about the framework of brands by looking at how business models are changing. According to Professor Marshall Van Alstyne at MIT, thirteen of the top thirty global brands by market capitalisation were platform oriented; they are driven by thinking about ecosystems and how they can better connect buyers, sellers and third parties. As the entrepreneur Sangeet Choudary so memorably put it in Harvard Business Review: "We're moving from pipes to platforms." This means thinking less about how we can do everything ourselves and control the whole value chain and instead thinking about how the brand can create a more compelling ecosystem with others. Being prepared to 'let go' has driven the fortunes of brands from Apple to American Express and has seen many traditional 'pipe-driven' businesses - from Nike to GE - scrambling to incorporate platforms into their models. It's created business models that happily sit across categories: think about how Amazon can play in retail worlds that were once mutually exclusive (books, fashion and grocery) and play a credible role in the entertainment world. If we accept this change in the business model, it opens up some interesting questions on how we think about brands. How do we articulate the value of the ecosystem we are creating? Who should we partner with? What's our role in the ecosystem? How do we co-create with others?
The second area I would argue that brands should explore lies in changing the context. In his excellent British Brands Lecture, Rory Sutherland talks about the price premium of Red Bull lying predominantly in its smaller can and the lack of imagination of Eurostar trying to shave forty minutes off a trip to Paris when it could have created an experience for a fraction of the price that made speed less boring: "Free wifi and supermodels serving free Château Pétrus and you would still have £5 billion in change and people would ask for the train to be slowed down." Too often we get blinded by the '-er' strategy of faster, quicker, tastier, cheaper. All comparatives to what already exists. If, instead, we thought more about how we might change the context in which we compete, then not only would we be able to create something new that people might want to pay extra for, but we would have permission to enter new categories selling this new context. By selling a 'more intense' experience in a smaller can, Red Bull has been able to expand the categories it plays in, to the point that it is now a media company that happens to also sell energy drinks. Changing context opens new opportunities.