I recently listened to an Invest Like the Best interview with Manny Stotz, founder of Kingsway Capital. It’s worth a listen. Manny discusses his fund’s value investment strategy: identifying consumer brands in growing frontier markets. The countries of interest (Egypt, Bangladesh, and others) are experiencing GDP growth of 8%+ year-over-year. Millions of citizens are being lifted into the middle class and are seeing more disposable income to spend on consumables.
It’s an interesting strategy because it takes the Berkshire view of intangible assets to the next level. Manny believes that most product categories in these countries have few established brands relative to the number of buyers in the near future. Second, most consumers purchase goods at tiny, mom-and-pop shops that are fragmented and have no purchasing power relative to the wholesalers upstream.
This translates to an opportunity to profitably develop brands. These brands will be the first to own mindshare in the heads of new consumers, and can retain pricing power / health margins over time.
As we apply this to our own business at Loop, I’ve been asking myself how we can develop a successful brand ourselves. How can we be the primary primary care health brand in consumer’s minds? In a previous post, I discussed building trust as a first step towards building a brand. But trust is just one variable in the formula.
There are 3 elements of a successful brand: trust, identity, and time. Trust is about reliability and quality. Identity is dependent on the product category, audience, messaging, and even company culture. Time is about the reaffirmation of the first two elements with enough frequency to own a slice of mindshare. These characteristics describe a single brand. But, that’s still not enough. Brands compete with one another to grow their respective slices of mindshare.
UberEats and DoorDash compete to be the first place you go when you feel hungry. Amazon and Walmart.com compete to be the first place you go when you want to buy something. If the products are the same and prices are fair, brand association will be the tipping factor.
Now imagine it’s a hot summer night. You head into a convenience store with some friends. Longing for a cold, refreshing drink, you walk over to the big glass window filled with soda. You can choose a Coke or a Pepsi. Both are the same flavor (if you don’t agree, just pretend) quantity, and at same price. Why do you pick one over the other?
Maybe it’s the packaging. Maybe it’s happy memories drinking Pepsi with family. Maybe it was a recent advertisement. One brand has slightly more mindshare than the other and so you go with that one.
In this example, brand is the final layer of decision making. It assumes rationality. As it turns out, most people actually walk into the store and blindly grab the Coke without checking the price or comparing alternatives. Why do they do it? Because it’s what they always grab. They’re a “Coke person” whether or not they even recognize that part of their identity.
Brand is much more than the final variable in a purchasing decision. Brand has the power to remove the decision altogether.
Brand allows the customer to remove cognitive load, representing a path of least resistance. Therefore, a good brand is actually about removing search costs. If I’m craving pizza, I don’t need to do much research to know where I can get a cheap, tasty pie relatively quickly. Dominos and Papa Johns have spent years building a relationship with me. I won’t go anywhere else.
I hope we can do the same for Loop Health. Anytime a person has a health query, feels even the slightest back pain, I want them to text their Loop medical advisor. Treatment can’t be instant, but care can and should be. Our brand should represent this value and remove the search cost for good healthcare. If we do a great job, we can be confident our patients won’t go anywhere else.
I hope to share more thoughts here as my ideas evolve. This writing is meant to be an open-ended exploration of ideas. I welcome your commentary and feedback.