Brand Debt, and Methods to Manage it.

Most of the applaudable startup success stories out there are about those who figured out the myriad hard parts of their specific venture. By various measures of grit, talent, and luck, each of those hard parts got identified, resourced against, and solved.

That assumes that they can all be easily identified, and the hard work was in the solving. I believe that’s a perilous assumption to make. Here’s where I’m going to try to offer something useful.

In the ever-exciting landscape of startups, I have seen an invisible predator that can undermine even the most promising ventures. I call it brand debt. It’s an alter-ego to the well-understood engineering concept of technical debt. Others have used the “brand debt” term before me, but their definitions center around ideas of brand consistency and the on/off-brandedness of specific tactics. While I don’t disagree with their sentiments, we already have good ways to discuss those topics, and they’re mostly relevant only to marketing.

I believe brand debt is something vastly more insidious.

This version of brand debt is defined by the staggering and surprising interest rate incurred when marketing efforts are neglected during times of high velocity, or scaled back during times of austerity. It’s an expensive debt, not a strategic debt. And defined this way, the two types of debt — technical and brand — are most similar in that both are often hard to see, until they’re not.

The other similarity is that everyone in the C-suite should care about it.

“How did you go bankrupt?”

“Two ways. Gradually, then suddenly.”

― Ernest Hemingway, The Sun Also Rises

Defining Brand Debt

Brand debt often manifests when a startup pivots sharply, or encounters setbacks such as market downturns, funding uncertainties, missed milestones, or supply chain disruptions. In these moments of tumult, leadership may cut marketing budgets as if marketing was a single faucet, all in a bid to preserve runway. What may seem like a prudent decision in the short term can have far-reaching consequences for the brand’s long-term health. Quietly, a clock starts ticking.

The Cost of Neglect

When marketing efforts are curtailed, the brand’s momentum declines, and the brand slowly erodes. While superficial appearances may suggest business as usual, the underlying impact of brand debt compounds, just like technical debt. Marketing plans are put on hold, goals are discarded, and the sense of acceleration that defines the culture of successful startups evaporates. The brand finds itself coasting on past achievements, and the chasm between its aspirations and capabilities widens. And paradoxically, the better your marketing was, the longer you can coast without the appearance of a problem.

Brand Debt in the Wild

On October 27th, 2022, Elon Musk took over Twitter. As he began to cartoonishly gnaw out the wiring of a number of the company’s departments, marketing was the first to go. Talented people I know personally lost their jobs. Today, 2024, we’re seeing the long term brand debt effects in their highest resolution: advertisers leaving en masse over the rise of hateful content (a few times), alongside giant drops in users and traffic. Fidelity recently marked down their Twitter investment by 71.5%.

For an arsenicy-popcorn timeline of the brand’s slow plunder towards demise, check out the fantastic recent reporting from Amanda Silberling and Alyssa Stringer on Techcrunch: https://techcrunch.com/2024/03/06/elon-musk-twitter-everything-you-need-to-know/

Also note: brand debt doesn’t exist exclusively in personality-based dumpster fires: consider Allbirds, the techy-favored fashion brand, who face some hefty headwinds right now. Their marketing spend in 2023 was $10M below their 2022 spend ($59M vs $49M). Last week’s 8-K makes mention (twice!) of this decline hitting digital advertising, core to any D2C brand’s survival. Anecdotally, the most recent Allbirds I’ve seen at retail were in the clearance rack at REI.

Like Hemmingway said: Gradually, and then suddenly.

Maintaining Momentum

Brand debt can be prevented. A few things that I’ve found helpful:

1. Know what’s important. Marketing is not one thing, it’s a buffet of things. When defining the company’s immediate strategic needs, ensure marketing has a seat at that table. Marketing can then prioritize the specific efforts that support the strategy.
2. Prioritize maintaining momentum. Things can slow down at times, but marketing has a unique superpower in helping a company and culture maintain the feeling of acceleration. Some marketing efforts can achieve this, and this “sense of speed” can become a metric to prioritize while the company sorts itself out.
3. Agree on the metrics. If times are tight or uncertain, fast returns are paramount. Be very specific about what impacts marketing can have, and how fast the results can be achieved. You need results now; clear metrics help prioritize the achievable wins.

Brand debt poses a significant threat to startups by invisibly jeopardizing their long-term viability and growth prospects. By giving brand debt a name, and implementing strategies to navigate through it, startups can build resilience and emerge unscathed (and perhaps stronger) from periods of adversity. Strategic alignment, momentum priority, and clear metrics can all contribute to a brand navigating into the storm, and emerging stronger.

For More

If this idea resonated with you, there’s more about brand debt (and other fun stuff) in my book, Start Telling People, the guide to marketing strategy and brand building for future defining startups. I’m also available for consulting and advisory roles.