Why Brands Like Patagonia (Sometimes) Kick Out Their Customers

About two years ago, the brand Patagonia received a lot of attention when it announced that it would not sell its signature vests and other products to certain companies. The practice had been to give the vests away at conferences and other events with corporate or event logos embroidered on them alongside Patagonia’s. (Patagonia vests with logos from JP Morgan, Goldman Sachs GS and others had become known as “power vests” on Wall Street.) It’s not that Patagonia discontinued unprofitable products; it’s that Patagonia said it would rather be associated with “mission-driven companies that prioritize the planet.”

Patagonia has always focused not just on profitability but on value systems. What’s changed now is how the world has aligned with Patagonia’s thinking. There are now many more companies and brands that are thinking about their customers not merely as sources of revenue and growth but as expressions of what they believe in. Those companies run the gamut from big to small and their approach to customers is crafted and each one is unique.

Cotopaxi, a fast-growing competitor of Patagonia, won’t sell to alcohol or tobacco companies. But about Wall Street firms, Davis Smith, Founder and CEO of Cotopaxi, told me, “if there's a bank and we can influence how they think about the world, we can be a voice for change. We want to be a carrot, not a stick. Our hope is to pull people into our sphere or influence versus pushing people out.” The brand is focused on poverty alleviation, is profitable, and gave away over $1 million last year for its cause. Davis believes that profitability happens “because we gave away a million dollars and people know that's why we exist.” About 75% of Cotopaxi’s online sales are driven by word-of-mouth.

A young brand called Someone Somewhere that also sells backpacks and outerwear made by artisans in five of Mexico’s poorest states has increased its workers’ incomes by 300%. Someone Somewhere has sold to corporations including Google GOOG , Uber and Amazon AMZN but has rejected certain political parties in Mexico as well as companies selling alcohol and tobacco. But management found that another large company it previously sold to was using its product to mitigate impact from environmentally harmful things it was doing and declined to continue its relationship with that customer. Antonio Nuno, C0-Founder and CEO, told me, “it's so difficult because we need the cashflow and we have to balance that against having more jobs for our artisans ... But in the long-term, it will be more harmful to our brand ... and we can't put what we've built at risk.”

Why This Is Happening Now

For a long time, brands defined themselves by their sales channel. Brands sold in Neiman-Marcus or Saks would not be found in Target TGT or Walmart. But now that’s very scrambled. The change is not because online selling has made the world more competitive, it’s because those previous delineations were based on status and now brands are more defined by other things, including values. Consumers who share personal values with brands associate with those brands; the channel where the products are sold is less important than it was, that’s why Target can sometimes carry the same brands as other higher-end stores. Now we are seeing the next step: brands identify with certain consumers and believe their brand identity is injured if less representative consumers become identified with the brand.

It won’t end here. The next step is multi-brand retailers whose offerings are only products that meet their social value criteria. While there is some amount of this in every store, we are seeing more of it in beauty than in other channels. Retailers like Credo Beauty and NakedPoppy sell only “clean beauty” products. If you’re a consumer who doesn’t care about that, these retailers are not for you. But more consumers every day care about these issues and we will be see more expansion of retailers who are defined by their social values.

Importantly, what we also see is that when brands and retailers communicate their values effectively and consistently, they are more profitable. Simply put, consumers who make their values an important component of their shopping decisions are willing to pay full price. Forbes contributor Kiri Masters wrote about the beauty brand Glossier that, “the brand relies on making an emotional connection with the customer, capturing their values, and reflecting these values back in the brand’s messaging—fresh-faced optimism, a healthy lifestyle and self-acceptance.”

You may be thinking this is just about taking sides in political issues and some of it is indeed that. But it doesn’t have to be that to work. If you’re reading this, you probably never heard of a very successful brand called Grunt Style, a brand targeted at US veterans and focused on military lifestyle and patriotism. It would be easy for that brand to market by turning rightward politically and there’s plenty about the brand to like if you’re a right-leaning person. But in the introductory video on its landing page, the company describes patriotism as being about “respect and responsibility ... helping a neighbor in need, regardless of their politics.” Brand values don’t have to be political or divisive to be effective, they have to resonate with what consumers believe about how they want to live.

On its face, getting rid of customers is counter-intuitive. But consumers now look to the things they buy for values they traditionally got from extended family and established religion. The way the world works now, choosing customers more selectively brings meaning to customers’ lives, purpose to employees and profits to the bottom line.