To Succeed, Hardware Startups Must Put a Bigger Effort on Branding

January 8, 2016

4:00 pm

Excerpted with permission from The Hardware Startup: Building Your Product, Business, and Brand (O’Reilly Media 2015) by Renee DiResta.

As you go through the customer development and market research processes, you are collecting valuable information that will help you formulate a brand identity. Your brand is the personification of your company, and developing a strong brand is absolutely critical to your success. It builds a foundation for a long-term relationship with customers.

Branding can feel like a rather elusive concept, as the value-add of a strong brand is difficult to quantify and measure. Startups often undervalue the importance of building a brand, particularly if the founding team is strong on tech but has no marketing or sales experience (as is often the case). In any early-stage company, there is much to do and precious few resources to do it with. There is never enough time, money, or people, so most founders put all of their resources toward nailing the product. Branding, marketing, sales strategy…those are problems to push off until a later date.

Don’t make this mistake.

The problem with this approach for a hardware company is that your product will be competing for shelf space (digital or physical) with established players. When you are on a physical shelf, there is no website with help text or comparison charts that can explain the virtues of your product. Your package messaging must be appealing enough to convince a busy shopper to put your widget into her cart. If your product is on the shelf next to one of similar price manufactured by a competitor who has better name recognition, your product is at a disadvantage. People have many choices, but little time. They’re going to grab the product they’ve heard of, or the brand they are loyal to.

While startups often neglect brand building, Fortune 500 companies prioritize it. They treat branding as a critical facet of their business strategy. A study by Interbrand and JP Morgan determined that, on average, brand accounts for close to a third of shareholder value. Though valuing intangibles is notoriously difficult, the study says:

The brand is a special intangible that in many businesses is the most important asset. This is because of the economic impact that brands have. They influence the choices of customers, employees, investors and government authorities. In a world of abundant choices, such influence is crucial for commercial success.

In 2013, Apple was the most valuable brand name in the world, worth an estimated $98.3 billion. Google was second on the list, at $93.3 billion, and Coca-Cola was third, with $79.2 billion.

Brand equity is the monetary value that comes from having a recognizable brand. Marketing experts have found that positive name association enables a company to justify a price premium over similar goods.

Think of the product options on the shelf of your drugstore: is Clorox bleach better than store-brand bleach? Is Advil better than generic ibuprofen? In both cases, the generic is exactly the same product, but it costs more. And yet, people still buy it. That price premium is Clorox’s and Advil’s brand equity.

In the world of devices, your product is not exactly the same as your competitor’s product. At a minimum, you likely have a few different features and a different design. But when customers are deciding what to buy, they are purchasing a product to meet a need or fulfill a want. If either your device or your competitor’s device will satisfy their objectives for approximately the same price, brand becomes a powerful differentiator.

A recognizable brand can help a company increase (or defend) its market share by inspiring trust and enhancing the perception of quality. Having customers who identify with your brand engenders loyalty. Brand loyalty is important in an industry in which product turnover is high. Within a few years, new technology renders many hardware products outdated. People upgrade consumer electronics (phones, music players, cameras, speakers) every few years.

High-quality software products are developed to engender what’s known as lock-in: over time, customers become accustomed to the feature set, learn advanced shortcuts, store their data, or create large libraries of files. They become loyal customers and will often pay to upgrade the software as new versions are released. They have invested time and energy in learning how to use it, and this makes them reluctant to switch to a new product. This phenomenon is particularly prevalent in enterprise software, where corporations want to ensure continuous availability of data and internal documents. They don’t want to risk losing document integrity porting to a new product.

With most hardware products, this kind of lock-in is difficult to achieve. Unlike with software, where you can push an update that incorporates new technology (and suggest that your users buy it), hardware upgrades eventually require new physical components encased in new plastic. At the point of purchase, whether on the shelf or online, your customers will be confronted by alternatives. Strong branding generates loyalty and makes customers more likely to have you top-of-mind when they intend to purchase; even when they’re not actively intending to purchase, you want your brand to be top-of-mind.

Renee DiResta is part of the founding team at Haven, an online exchange for freight capacity, as well as an angel investor and advisor to hardware startups. Her book, The Hardware Startup: Building Your Product, Business, and Brand, was released in July 2015. She was previously a VC at O’Reilly AlphaTech Ventures (OATV), where she invested in seed-stage technology startups with a focus on hardware, manufacturing, and logistics. Prior to OATV, Renee was an equity derivatives trader at Jane Street Capital, a quantitative proprietary trading firm in NYC. You can follow her on twitter @noUpside.

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Ronald Barba is the managing editor of Tech.Co. His primary story interests include industry trends, consumer-facing apps/products, the startup lifestyle, business ethics, diversity in tech, and what-is-this-bullsh*t things. Aside from writing about startups and entrepreneurship, Ronald is interested in 'Doctor Who', Murakami, 'The Mindy Project', and fried chicken. He is currently based in New York because he mistakenly studied philosophy in college and is now a "writer". He also likes to cook things; you can check out all the noms on his Instagram. Email Ronald ([email protected]) or tweet @RonaldPBarba. You can also subscribe to him on Facebook or find him on Google.

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