We are currently living through the democratization of the Ethical Capital, witnessing how brands need to go beyond traditional differentiation levels like pricing and product and leverage on values instead. Unlike products, values can’t be green-washed, thus brands need to deliver on them today and in the future to achieve credibility and compel their audiences.

But being purpose-led (and value-differentiated) isn’t just a matter of statement, it’s a matter of action. This is a paradigm shift we’ve witnessed on a large scale in the past decade, and it is here to stay. And the key to succeed is deep customer observation and understanding.

The A+ student in the value-driven approach is Patagonia, a brand that doesn’t talk about the sustainability of their products but rather is sustainable in every move they make, tying every single action back to their Purpose.

Having an authentic value-based positioning also help brands stretch more their experiences and offer so they can create an open ecosystem where customers are at the center and can engage with the brand at different levels.

Still, brands do face a risk when turning purpose-driven: that of alienating the part of their customer base who does not feel in sync with their value set. But while this is a risk, it’s also an opportunity to embrace coherence, and build deeper connections with those who stay.

Take as an example Gucci. Every single process, initiative, and move (internal and external) is filtered through their values. Many moves were discarded even long into their development process because of their misalignment with Gucci’s ethos/values/purpose.

The expectational shift and perceptions people pose on brands have forever changed. They no longer settle for easy, basic, or evil (but cheap/cool) anymore. The key for brand evolution is to embrace change and failure—to innovate you can’t afford to strive for perception. Even if you’re big, and majorly profit-driven, you need to fail fast and learn from your mistakes.

That said, in this industry, innovation wont’ be led by customers, as they expect the brands to innovate and surprise them instead. They won’t be able to figure it out what they really need and desire, they expect creatives to do so.

This is also why giants like LVMH are giving small brands a chance (a recent example is the stake in Phoebe Philo’s comeback brand)—to learn fast with little risk, and deploy the learnings on their bigger bets (e.g., Louis Vuitton). The objective for holding companies will be that of maximizing niche-coverage across industries, categories, and sub-categories—with every one of these niches sharing the same basic need: self-expression.

Luxury brands used to be about communicating achievement and social status, but now they are here to help people make authentic statements about themselves. Knowledge wealth is the new Capital wealth. You buy certain brands and not others because you want people around you understanding who you are, what you trust, what you value, not how rich you are.

More and more successful brands are built through communities and by communities. This is also why digital native brands are smashing up nowadays, even more than established brands in the same field. And for the same reason luxury brands must strive to be customer centric, understanding that people now will (or won’t’) buy into your values and philosophy, instead of your products.
This is why brands like Balenciaga and Gucci are designing experience for people that can’t afford to translate into customers and heavily buy their products, but that are still important targets to create the brand’s community.

It is important to understand that people who join your brand’s world are not all targets, but rather brand ambassadors and signifiers themselves. People are stronger and far more powerful than brands.

The Micro-targeting on subculture to make money is an interesting perspective about the future of the industry. Far more niche brands designed for relatively small communities of people, cultural and values-based, instead on just BIG blockbusters when it comes to big brands’ portfolio management such as LVMH or KERING.

These groups won’t buy by categories anymore: champagne, cosmetics, fashion and so on, they will buy/develop brands with strong value-based positioning to tap into small likeminded communities.