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January 21, 2021

Cult Brand Math

Tony Treadway

Cult Brand Math article.

How Being a Cult Brand Makes Money

At Creative Energy, our speciality is building cult brands. Our process for building a cult brand has saved millions in ad dollars while making many millions more in profit. How? By building brand loyalty so strong among followers that they will buy the product or services without having ad dollars spent to keep them or cutting prices in hopes of continued purchase. That’s a bold statement, so here is some proof.

I’ll share the story of Client X. They sell a CPG item within a category with about $1.1 billion in sales per year. About 25% of America’s 328 million consumers buy within the category regularly. Thus, roughly 80 million people are potential brand loyalists to what Client X is selling.

Brand loyalty is very important within the category because when consumers love a brand, it’s extremely hard to incentivize them to switch. Incenting trial is expense. Failed strategies in the category involve offering deep price discounts to encourage someone to switch brands. When you do lower the price, you are mostly bought by a sub-set of consumers within the category who only shop based on price with little loyalty. Instead, cult brands spend ad dollars on sharing its core beliefs to likeminded consumers who connect with the message, without cheapening the message based on saving a few cents off the price.

“Once a brand loyalist for life, the advertising spend can be dramatically reduced to nurture the relationship for as little as a $1 per year to maintain it.”

The marketing challenge is to retain existing brand-loyal consumers and acquire new ones by other means than price. The math for this client was roughly $63 in advertising and marketing spend to acquire one new customer. Yet once a consumer became a cult brand loyalist, they will spend about $3,800 on the product over their lifetime.

Once a brand loyalist for life, the advertising spend can be dramatically reduced to nurture the relationship for as little as a $1 per year to maintain it. That’s for a 3,800% return on investment. Much of the heavy lifting can be done through social media and well-placed advertising that reinforces the brand’s core beliefs and in educating brand loyalists on new products they can purchase and how to use more of the product so they must buy more.

While there is always some churn among loyalists (e.g., they pass away, no longer buying within the category) some new customer acquisition strategies must be employed to grow market share. A cult brand can do this through a deep understanding of those who are most likely to connect with the brand by carving out segments within the buyer population. This increases the return on investing in higher cost advertising as the cult brand steals market share from competitors.

Through the pandemic, the effectiveness of the cult brand approach multiplied. Consumers who sheltered in fear of infection turned to brands that they trust and consumed even more products. The client grew margins because it reduced trade spending and discounting and grew share by encouraging brand loyalists to stock their pantries in case of shortages.

The Creative Energy process for building a cult brand is methodical in first understanding the core strengths and beliefs of a brand, then connecting those beliefs to proper target segments who are most likely to respond with long-term loyalty. Clients who understand the math of the cult brand equation are the ones most likely expand market share year-over-year with higher margins and greater market share.

If this math makes sense to you, the next step is a discussion on your brand and how we might take you there.