What the hell is 'identity value'?
Reading time: 7 minutes
In 2004, Douglas Holt, the Chair of Marketing at Oxford University, introduced the concept of identity value:
“Customers value some products as much for what they symbolize as for what they do. For brands like Coke, Budweiser, Nike, and Jack Daniel’s, customers value the brand’s stories largely for their identity value. Acting as vessels of self-expression, the brands are imbued with stories that consumers find valuable in constructing their identities. Consumers flock to brands that embody the ideals they admire, brands that help them express who they want to be. The most successful of these brands become iconic brands.”
Nearly 20 years later, identity value is still the most important and least understood concept in modern marketing. It is the ‘one weird trick’ of successful consumer products that is routinely ignored by brands and agencies. This is ironic because identity value is rooted in behaviour that everyone on the planet exhibits: people choose products because products say something about who they are.
Products mean things. A product can signal status, wealth, interests, knowledge, beliefs, cultural allegiance and more. This is its identity value. The more attractive a product’s meaning, the higher its identity value. Identity value is as much of a driver of sales as a product’s utility or price.
Identity value is the reason that one product is more desirable than another that fulfils the same function. It is the reason that Waitrose can sell the same container of table salt for 80% more than Asda. It is the reason that Balenciaga can sell a plain cotton t-shirt for 2,633% more than an equivalent t-shirt from Uniqlo. And the reason that lab-grown diamonds are sold at half the price of mined diamonds, despite being indistinguishable from one another.
Any teenager understands identity value. They know the symbolic value that one product has over another — that they can gain and lose status by buying the right or wrong product. (Kids are mean!) Identity value is the reason that seemingly every teenager in London owns a pair of Nike’s triple-white Air Force 1s, while functionally equivalent (cheaper) products like adidas’s Forum Lows are hardly seen.
But when we grow up and become marketers we learn to ignore identity value. Most modern marketers are not taught that they should imbue their products with meaning and cultural capital. Instead, they are taught concepts like mindshare, emotional branding, brand purpose, the four Ps, sales funnels, channel tactics, and the like. Some of these concepts are useful. Some of them are not. But all of them ignore a core driver of demand: what a product means.
As a result, the few consumer businesses that meaningfully understand identity value have an advantage over those that don’t. Brands like Red Bull, Dollar Shave Club and Moncler dominate their categories by harnessing culture. They author powerful stories that create attractive meaning in their products — stories that distinguish them from the functionally-equivalent products of their competitors. This drives explosive sales. Because when a large number of people can tell attractive stories about who they are by buying your products, demand rockets.
From 2012, Moncler has sustained a CAGR in excess of 17%, growing revenue from €489M to over €2 billion in 2021. Dollar Shave Club exploded at the same time, growing revenue from $4M to $153M in three years before being bought by Unilever for $1 billion. By creating large amounts of identity value, these brands experience the CPG equivalent of what Silicon Valley executives call product/market fit:
“You can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it…. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it…. Investment bankers are staking out your house.”
Because there is no substitute for the identity value of their products, these businesses are free to price more aggressively than their functional competitors. Red Bull’s off-trade prices are typically 100% higher than its nearest competitor, Monster. Remo Ruffini sells Moncler’s puffer jackets at a 40% premium to Canada Goose (itself no slouch in the identity value department). These businesses exceed the norms of their categories, and meet Warren Buffet’s definition of an economic franchise:
“An economic franchise arises from a product or service that: (1) is needed or desired; (2) is thought by its customers to have no close substitute and; (3) is not subject to price regulation.”
In other words — to use Holt’s language — harnessing identity value makes these brands iconic.
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Identity value is ignored by most modern marketers because it seems ephemeral, complex and uncontrollable. They think of identity value as an outcome (‘these products are cool because they’re popular’) rather than a driver of success.
But identity value is regularly used to build iconic consumer businesses. It is harnessed by executives who understand how culture works and how their brands should be positioned for maximum impact. These executives deliver powerful marketing work both above and below the line that compounds to generate invaluable cultural meaning.
Since 1997, Red Bull has had a core cultural proposition of superhuman empowerment (“Red Bull gives you wings”). The proposition is validated through a significant, sustained investment in the extreme edges of music and sport, executed by dozens of employees in global culture and sports marketing teams. Nike’s cultural proposition of radical athletic individualism (“just do it”), is even older, dating back to 1987. It is validated through a significant investment in sports, stunts like Breaking2, and global ‘energy’ marketing teams that connect the brand to the heart of culture.
The executives that lead these businesses (and those of other iconic brands) explicitly or implicitly understand three things about identity value. And the marketing they create reflects that understanding.
FIRST, IDENTITY VALUE IS A STORY
At its heart, the identity value of a product is found in a story. It is not the typical story that brands tell — simple adverts that associate their products with happiness, sex or celebrity. Instead, it is a story about identity: about who we are and who we aspire to be. It is a story that we tell about ourselves, to ourselves, and to others through the purchase and use of the product. We choose products that tell us these stories because they say something about who we are — or as Holt argues because they “buttress identity”.
So Apple tells us that we’re a creative. Tommy Hilfiger (in the early days) tells us that we’re an in-the-know fashion insider. Dollar Shave Club tells us that we’re an irreverent, anti-corporate buyer. And Dr. Martens tells us that we’re a countercultural rebel. And we like these stories!
These stories are based on some truth about the product or business. But they’re about far more than just that. They connect the product — indelibly — with bigger ideas about who we are and who we want to be.
SECOND, IDENTITY VALUE IS SOCIALLY CONSTRUCTED
Identity stories are written and told by brands, but they are made true through adoption. Identity value is a network effect. The more that people use a product to tell a story about themselves, the more the story becomes true.
Imagine that you launch a brand tomorrow, selling luxury, handmade t-shirts with premium deadstock fabrics. You design a strong set of brand marks. Your product is high-quality, sustainably made and expensive to produce, so you price each t-shirt at $100.
At launch, you might think that your brand has high levels of identity value because it signals wealth and environmental sensitivity. You hope that people will think it good value for $100. But this is not yet the case. Your product does not have lots of identity value because people-who-are-not-your-buyers have no idea about what your product means. In other words, your early buyers cannot signal anything about themselves by using your product and brand marks. It is not until your story and meaning are commonly understood amongst a group of people that identity value starts to kick in.
The majority of people don’t buy a brand because they like its story. Instead, they buy a brand because they believe everyone else likes the story, and they want in on the group. Or as the American sociologist Charles Cooley put it, “I am not who you think I am. I am not who I think I am. I am who I think you think I am.” We might add a final clause to this quote: “And I buy accordingly.”
THIRD, IDENTITY VALUE IS CONTINGENT ON CULTURE
Effective identity stories are not written in a vacuum. They are not dreamt up in a hermetically-sealed board room. And they are not written by consensus — collating employees’ opinions on what a brand means based on personal experience.
Instead, effective identity stories are about the world, people, and culture today. They work because they are of a time and place, responding to shifts in culture that are driven by changes in technology, demographics, politics, economics and the like. They lead contemporary ideas about who large numbers of people want to be. And they centre their product within those new ideas of identity.
Of course, this means that as the world changes there is a risk that an identity story may no longer work. This happens all the time! Calvin Klein grew by telling a provocative story of radical sexuality. But their story stopped working as eroticism, sex and porn became commodified by the internet. Burberry grew by telling a class-aspiration story of refined British high culture. But that stopped working when high culture became a sign of snobbery rather than refinement. And Axe/Lynx grew by telling a tongue-in-cheek (but not really) story of young male sexual aspiration, but that stopped working when society realised it was incredibly misogynistic.
Identity value creation is contingent on culture. As culture changes, so must an iconic brand’s story.
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CLOSING THOUGHTS
Creating and maintaining identity value is your favourite brand’s favourite strategy. Most iconic consumer brands and marketing campaigns are built on it, one way or another. But you wouldn’t know this by reading the marketing trade press, listening to the industry’s thought leaders, or spending a minute of your time in Cannes.
But for those of us marketers that are in the business of building businesses, it’s one of the most important tool we have. Use it!
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