Published //
July 27, 2020

Although most people only experience your brand on a subconscious level, the human mind is very good at recognizing patterns. This becomes especially easy to do when the pattern is interrupted or broken. The Black Sheep Effect is when your brand engages in a new activity that does not align with it’s vision, that is of course if your brand has a vision and you did a good job at communicating it successfully and consistently across time.

1. Bad Advertising

The Black Sheep Effect is very common in advertising. Whether they run social media ads internally or hire big firms to plan and execute large campaigns, a lot of early stage startups don’t pay that much attention to how their brand integrates with the ads that they put out. An easy and common trap to fall into for example is seasonal or sales/discount campaigns, which feel empty of meaning and pushy.

The blame here is not on the startups themselves though. Throughout my career, I have never seen a single brand strategy document that shows how to create a throughline that ties branding with the rest of a company’s marketing efforts, especially advertising. So it’s no surprise that a KPI driven meeting about an upcoming advertising campaign will have no mention of brand vision.

Here’s an example from Forbes of a great campaign that promotes a product and builds brand image at the same time: “The mattress maker Casper [...] launched a chatbot to offer virtual company to those who can’t sleep [...]. Insomnobot-3000 was almost an admission by Casper that a good mattress can’t always guarantee a goodnight sleep. But through this act of transparency and down-to-earth honesty, they’re [...] positioning themselves as a brand that has a genuine concern for their customers’ sleep”

2. Mergers And Acquisitions 

Another area where The Black Sheep Effect happens a lot is when startups are acquired by bigger companies—or even just establish new partnerships. You’re probably familiar with the famous “Don’t sell your company” Tweet, posted by Vine’s Co-founder Rus Yusupov right after the announcement that Twitter had pulled the plug on the short-lived social app. His statement was a warning to clueless founders who think that selling their startup is the best thing that could ever happen to it.

There’s no hiding that Vine’s failure was due to poor management and not brand unalignment with Twitter. But that doesn’t mean that the latter shouldn’t be on your list of things to consider before an acquisition, here’s why:

  • The B.E.C Syndrome: Your startup will very likely inherit the reputation and image of the company that acquires it. B.E.C stands for Big Evil Corporation, and Facebook is a classic example of one. They earned the name in the eye of the public because of how little effort was put into their brand compared to the speed at which they were growing, causing a disconnect between what they claim to be (a company connecting the world) and what people think they are (a faceless entity that sells your data). Trust in Facebook has actually dropped by 66% after the Cambridge Analytica scandal. And although Instagram still maintains a sense of independence, the public’s opinion of what they're doing as a company started to shift towards negativity because of the association with Facebook after they acquired it for $1 Billion.
  • Solving Problems V.S Making Money: Startup ideas are usually born out of necessity and sometimes passion, at least the good ones are. But when a bigger company decides to acquire a startup, it’s because they see potential to make more money. There are of course exceptions to this, and we see good examples of M&As all the time, but realistically speaking most of these deals are motivated by financial gain. The problem with that is the pressure that comes with it, where a startup’s team no longer looks to maintain their vision but rather spend time looking for ways to turn a profit.

Knowing the consequences of a bad decision is necessary to make good decisions. And knowing what will happen to your startup’s brand after you sell it is by no means a small concern that can be ignored.

3. Reaching New Audiences

Startups wanting to expand their reach and audiences is not unheard of. But when done incorrectly it can be very detrimental to the brand they had built over years. A very simple analogy to illustrate this is friend groups. We all know what happens when one member of a tight knit friend group (We can call him Freddy) goes out alone one night and meets new friends, who let’s say have different backgrounds or interests. Now Freddy who loves his old friends, but also has lots of fun with his new friends, attempts to get everyone to hang out together. Fast forward a couple months and Freddy has less friends then what he started with.

This might seem like a silly comparison, but it is true. People are different, which means that communicating with different people requires using different ways of communication. This in my opinion, is a straightforward and logical argument for why having a niche is important. Furthermore, sticking to that niche for as long as you can is one of the best trust building strategies that can be used by any startup.

“They’re not like they used to be.” Just how often have you, or anyone in your close social circle, said this about a brand that you used to love. My bet is that you hear it enough to understand how we can change our opinions so drastically in very little time—sometimes without even thinking about it.

Conclusion

“Getting acquired and finding the right exit is 10 times harder than raising capital.” Said Alejandro Cremades, author of The Art of Startup Fundraising, in an article he wrote for Forbes about the lessons that he learned after his startup got acquired—describing just how hard it is. Now imagine going through this immensely demanding journey, during which you will sacrifice and lose so much, only to be disappointed after realising that you made the wrong decision. What if the company that acquired your startup doesn’t care about it’s brand and ends up shutting it down? Or even worse, that you were tempted to scale and grow by reaching new audiences and ended up destroying your brand in the process? 

The way to avoid this is to truly understand how branding can affect your startup for good or for worse. Learn more by reading our article about what factors go into making a startup successful, and how brand communication is a big part of that process.