Purpose-driven brands are everywhere. Consumers love them, employees flock to them, and marketers can’t get enough of touting their “authentic purpose.” But the uncomfortable truth is that purpose alone won’t keep the business behind the brand afloat in the long run.
Being “purpose-driven” only works until it doesn’t.
The hard work comes when maintaining that Purpose over time, especially when the mix of shareholders, employees, and customers begins to pull in competing directions. Focusing on purpose is easy when the brand takes off and everyone is aligned and excited about the topline growth. But will that mission still hold when growth levels off and profitability expectations change?
If a brand’s purpose matters to the founders, they also need a plan for sustainable business beyond the moment when growth plateaus.
Purpose-Driven Brands: A Promising Start, But Can They Sustain It?
The allure of purpose-driven branding is undeniable, especially when you look at the early success stories of brands like Beyond Meat, Lemonade, and Allbirds. They entered the market like meteors—bright, bold, and full of promise. Their purpose was clear, their missions aligned with the values of a new generation of consumers, and their IPOs reflected that excitement.
Beyond Meat burst onto the scene with a mission to transform how the world eats, offering a plant-based alternative to meat at a time when sustainability was on everyone's minds. Consumers embraced the idea wholeheartedly, and investors rushed to get in on the action. Its IPO was explosive, and for a moment, it seemed like Beyond Meat might just reshape an entire industry. But as the brand grew, the challenges piled up: rising competition, supply chain hurdles, and the realities of scaling a niche product. Its stock price dropped, and suddenly, the question became: can Beyond Meat deliver the profits that investors expect without compromising its mission?
Lemonade, too, aimed to disrupt the traditional insurance industry with a people-first, purpose-driven approach. The brand's fresh perspective on insurance resonated with customers hungry for change, and its IPO was met with the same enthusiasm. However, turning purpose into long-term profitability proved challenging, as high customer acquisition costs and losses raised concerns. Lemonade’s stock dipped sharply, showing the difficulties of scaling a business without sacrificing its values.
Finally, brands like Allbirds and Warby Parker, darlings of the sustainability and social responsibility movements, faced similar fates after their public debuts. Both connected deeply with values-driven consumers and built passionate followings. But as they tried to scale, the stock market’s hunger for profitability clashed with their missions to do good. Despite these setbacks, their stories aren’t finished yet. Both continue to innovate and search for the elusive balance between purpose and profit.
It’s important to remember that these brands are still writing their stories. Purpose may have brought them to prominence, but that doesn’t mean they’ve reached the end of their journey. The pressure from investors to deliver financial returns is real, but so is the possibility of finding a path that satisfies both the mission and the bottom line. As these companies grapple with that tension, they can also define success for publicly traded purpose-driven brands.
The Reality Check: Scrutiny and Financial Strain
Purpose-driven brands often face a harsh reality when it comes to profitability. While consumer love and early enthusiasm can fuel growth, sustaining long-term success is not enough. Investors, by and large, aren’t sentimental—they want returns. If a brand can’t deliver financial results or show a path to profitability, investor patience runs thin, leading to stock declines and increased pressure. At the same time, consumers become increasingly skeptical. They sense when a brand’s commitment to its purpose begins to waver in pursuit of profit. This creates a balancing act where brands try to meet investor expectations while maintaining consumer trust, often putting them in a Catch-22 situation.
In addition to this scrutiny, purpose can come with a price. Socially responsible missions often place businesses at a cost disadvantage compared to more established, traditional competitors. Higher operational costs related to sustainability or ethical sourcing can strain the bottom line, making it harder to achieve profitability while staying true to the brand’s mission. That doesn’t mean that the brand needs to abandon its ethics, but it needs to accommodate the higher costs somehow.
Large companies with broad portfolios are often better equipped to absorb these costs, spreading the financial burden across different business units. This flexibility allows them to weather the challenges of being purpose-driven more effectively than smaller or single-focus brands. Conglomerates often observe purpose-driven brands and steal ideas that work; that’s great for society but can cap the growth of early innovators leading the way.
Practical Business Benefits of Purpose
Differentiation and Alignment
Purpose can help your brand stand out in a sea of sameness. Etsy successfully positioned itself against giants like Amazon by championing sustainability and small business support. The result? Strong stock performance during the pandemic, when many others faltered. For marketers, Purpose carves out a unique narrative in crowded markets.
Loyalty and Advocacy
Gen Z and Millennials gravitate toward brands that align with their values. Warby Parker’s socially responsible mission hasn’t solved its profitability issues but has created an army of loyal customers.
Talent Magnet
Today’s employees want more than just a paycheck. Brands like Allbirds and Ben & Jerry’s attract and retain talent with their strong internal cultures rooted in purpose.
Long-Term Brand Equity
Purpose can build long-term value. Unilever, with its focus on sustainability in its portfolio, has built lasting equity through brands like Ben & Jerry’s and Seventh Generation.
Driving Positive Change in the World… and Across a Portfolio
Purpose-driven initiatives don’t just benefit the brand; they can have ripple effects throughout the entire company and beyond. Take PepsiCo and Coca-Cola, for example—both have embraced sustainability as part of their broader mission. These efforts improve the companies’ reputations and create long-term value by driving innovation in product development, reducing operational costs, and fostering stronger relationships with stakeholders. Purpose can catalyze internal transformation while doing real good in the world, resulting in a more resilient and future-focused organization.
Sustaining the Brand’s Purpose
Purpose as Strategy, Not Sideshow
Purpose can’t just be a marketing gimmick but rather baked into the company’s core strategy and drive real business outcomes like customer acquisition or market expansion.
Show How Purpose Drives Profit
Purpose can be profitable when integrated with solid business fundamentals. Make sure purpose-driven initiatives have clear links to financial performance.
Measure Impact
It’s essential to track the business impact of purpose-driven campaigns. Metrics like Net Promoter Score (NPS), Customer Lifetime Value (CLTV), and brand sentiment can be powerful tools. Tie these to revenue and profitability to make the business case for purpose clear.
Transparency and Authenticity
Be upfront about your purpose-driven journey's successes and failures. Consumers and investors appreciate honesty. There are many great examples of sustainability reports that foster stakeholder trust.
How can my brand use these insights?
Reevaluate Purpose-Driven Initiatives
Take a closer look at how purpose is integrated into the brand strategy. Are we over-indexing on purpose without delivering financial returns? If so, consider pivoting or scaling back on initiatives not tied to profitability.
Strengthen Communication with Investors
Be proactive in communicating the business case for purpose-driven strategies to investors, focusing on how our purpose contributes to growth, customer loyalty, and/or long-term brand equity.
Invest in Measurement Tools
Initiate or improve the ability to measure the impact of purpose-driven efforts on customer sentiment and financial performance. This will help solidify the case for continuing—or adjusting—these strategies.
Ensure Authenticity
Walk the talk and lead efforts to audit the brand’s purpose messaging. Any hint of "purpose-washing" is a red flag, so push for transparency in reporting progress on social or environmental goals.
Reinforce Profit Focus in Messaging
Refocus messaging and internal strategies to ensure that while purpose is part of the brand story, profitability remains front and center.
Purpose Must Pay Off
The power of purpose lies in its alignment with profitability, ensuring that businesses not only inspire but also sustain. Purpose can differentiate a brand, nurture loyalty, and convey authenticity, but it must operate in tandem with sound financial strategy to fulfill both the vision of founders and the expectations of stakeholders. To thrive long-term, a brand’s mission must be actionable, measurable, and impactful, driving growth and engagement while maintaining the fiscal health of the organization.
Remember, purpose is not a substitute for business fundamentals; it is a catalyst for advancing them. By fostering this balance, brands can achieve lasting impact and prosperity, underscoring the enduring relevance of a purpose-driven ethos.