A Question of Value: Monopolies of the mind
- November 17, 2022
Richard Huntington, Chief Strategy Officer, Saatchi & Saatchi
Let’s face it any business or organisation would secretly prefer to be a monopoly.
It’s not a very attractive word and many of us shrink from the whole idea but a monopoly is a highly desirable state of affairs for any organisation. To be the only providers of a product or service gives you an enormous amount of power. Especially over the five factors that we discussed this week.
If you are the only place someone can go for the things that they want or you are the only provider of a product they need, or even the only charity working in a particular field you have an incredible degree of freedom. All the growth that exists and that you generate goes to you. You can’t be undercut on price and in fact you decide the price you would like to charge. You are never in a dog fight to pay through the nose for paid search and can’t be outspent by competitive advertising. And as for your people and reputation, where else are people going to turn? The two alternatives’ people have is to buy from you or buy something else altogether.
Now tell me that this doesn’t feel a tiny bit attractive from a commercial point of view.
Of course, on the whole real monopolies don’t exist.
Sure, depending on your market there are still some state monopolies but the clue is in the name, the state controls and runs them for the benefit of the nation, so this option is rarely open to a profit making business.
You could definitely argue that patents and copyright aim to offer some of the advantages of monopoly for a finite period as a reward for innovation and invention. After all only JK Rowling can write Harry Potter novels and only Pfizer can sell Viagra. Not only do they alone have access to that brand but replicating the product is very difficult for competitors, they certainly can’t make a straight copy.
And without a doubt the biggest tech companies like Google and Amazon have built scale monopolies where the price of entry is so high that competition is stifled at birth or promptly acquired. Uber’s strategy in any city has been to undercut the competition to force it out of business and then enjoy the benefits of the near monopoly that it has created.
For most of us though, selling sausages, broadband, food delivery, washing powder, legal advice or clothing a monopoly is only something we can dream about. And that’s where brands come in.
If a brand exists inside someone’s mind then a strong and healthy brand is able to create a monopoly in those people’s minds that doesn’t exist in the real world.
This is what unlocks the commercial power of brands, their ability to build monopolies of the mind.
While anyone can sell or provide the types of products or services that you do. Only you can do this using your particular brand. And if your brand, that wonderful set of associations that people carry about with them, creates sufficient desire your ability to supply people with that brand becomes incredibly powerful.
Again Apple is a perhaps the greatest example of this. While it has some patent protection and some significant scale advantages it is not a real monopoly, no where near. It’s real advantage is the monopoly it has in so many peoples’ minds.
Anyone can and many do sell high quality laptops, tablets, smart speakers, headphones, TV streaming and in particular, smart phones. And in some cases you can quite clearly buy a better product for a cheaper price from a different manufacturer. But if you want an iPhone you can only get that from Apple.
Apple has a monopoly over the iPhone. And that’s commercially powerful because they have made that brand so desirable in people’s minds that they will go a long way before substituting it for another make.
Using Apple as an example in a book about brands is a horrible cliche. But the reason it comes up so often is that it’s the best example of a brand that is so potent it has freed Apple Inc. from many of the commercial constraints those with less powerful brands have to endure and build the only $3 trillion business the world has ever seen. Much of that is down to the monopoly it has created in peoples’ minds.
In a category that couldn’t be more different Rapha has a powerful monopoly of the mind in cycling.
In their success as a business and the obsessive devotion of its customers we see a powerful monopoly at work. Anyone can sell cycle wear but only Rapha can sell Rapha. And that means a powerful sense of desire from cyclists, particularly road cyclists. And a huge price premium in order to satisfy that desire. Indeed Rapha operates one of the few loyalty programmes, the Rapha Cycling Club, in which members pay more rather than less because it gives them access to exclusive merchandise unavailable to others.
Summary: You will find that your brand becomes instrumental to your business and not ornamental for it
So, yes healthy brands drive share, value, growth, efficiencies and resilience for a business but they do so because they establish a monopoly over supply of something highly desirable.
And that’s your job too. In whatever category you operate in, ensure your ability to provide people with your make or model, your sign or symbol, so powerful that it creates an effective monopoly. That won’t be the case for every customer in the market of course. There will always people that don’t care or don’t see the point, for whom your monopoly means nothing. Hopefully they are people that you were not interested in serving in the first place or more likely they will simply buy into you from time to time.
But if enough people care enough to desire what you make or offer more than your competition and if enough people will pay a little more, or sometimes a lot more, well then you will find your brand starts to drive your business forward.
And you will find that your brand becomes instrumental to your business and not ornamental for it.