When Do Startups Need to Start Investing in Brand to Avoid a Plateau?

When do startups finally outgrow community- or product-led growth? Ideally, before returns from activation-focussed channels start to drop off – a period known as the performance plateau – a new analysis provides a solid answer.

The analysis by Nigel Hollis, author, consultant, and former Kantar chief analyst is fleshed out in a new blog, addressing ideas encountered in an earlier post, chimes with emerging thinking around the idea of brand as the creation of future demand as a critical objective for maturing startups.

What’s going on

Modern startups are often digital by design, and can often grown on the back of a mix of word of mouth and performance marketing to convert interest. Hollis’ analysis is based specifically on a basket of Direct-to-Consumer (DTC) brands and brand name searches over the 95 months following their founding.

“On average, brand name search doubles each year for the first 4 years. However, between years 4 and 5 the average trend changes dramatically and begins to trend down marginally,” Hollis writes.

“That means they need to start thinking about how best to build their brand at the end of the third year.”

In context

Hollis’ analysis will be of great use to early stage brands working out what to do next as well as to established brands looking to strengthen the argument for building demand.

It chimes with a framing of brand building in harder-nosed terms than ‘brand’, as explored by James Hurman in a WARC whitepaper in 2021 and fleshed out more broadly since then.

The thinking goes that when a radical new product (or channel, like DTC) arrives, a successful innovation will likely find a group of consumers that needed that problem solved but just needed a company to exist in order to buy.

Then, that natural pool of customers runs out and new customers become more difficult and expensive to find – Hurman noted that, anecdotally, this tends to happen around three years from launch. This is when you need to have started building future demand among an audience that is not ready to buy yet but may realistically come into the market in the future.

“When future demand creation and existing demand capture happen concurrently, growth is sustainable and sustained.”