Instacart valuation more than doubles to $39 billion with latest funding round

FILE PHOTO: Instacart employee Eric Cohn, 34, searches for an item for a delivery order in a Safeway grocery store while wearing a respirator mask to help protect himself and slow the spread of the coronavirus disease (COVID-19) in Tucson, Arizona, U.S., April 4, 2020. REUTERS/Cheney Orr

March 2, 2021

(Reuters) – Instacart has more than doubled its valuation in less than six months to $39 billion with a $265 million fundraising round from existing investors, as the grocery delivery company benefits from a surge in online orders during the COVID-19 pandemic.

The San Francisco start-up, whose transaction volumes surged sixfold last year as doorstep delivery boomed during lockdowns, said on Tuesday it plans to use part of the new funds to increase its corporate headcount by an estimated 50% in 2021.

The company was valued at $17.8 billion in November following the closing of a previous funding round. That same month, Reuters reported Instacart had picked Goldman Sachs Group Inc to lead its initial public offering at around a $30 billion valuation.

Its latest cash injection comes just a few months after California backed a ballot proposal that upheld the status of app-based delivery drivers as independent contractors- a major boost for the likes of Instacart and Uber Technologies Inc, which rely on people to work independently and not as employees.

The new funding round was led by Andreessen Horowitz, Sequoia Capital, D1 Capital Partners, Fidelity Management & Research Co and T. Rowe Price Associates.

(Reporting by Uday Sampath in Bengaluru; Editing by Devika Syamnath)

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Jack Ma’s Ant forced into arms of banks he once dubbed ‘pawnshops’

Jack Ma’s Ant Group has undercut, undermined and insulted China’s big state-owned banks for years. Regulators have now turned the tables on the financial technology group after forcing the company to pull its record $37bn initial public offering in November.

Beijing is targeting the symbiotic relationship that has transformed China’s financial system by matching loans from small regional banks with 500m borrowers via Ant’s Alipay app, the country’s biggest payments platform.

Under new rules that will be enforced from next January, Ant will be required to limit its business with regional lenders in favour of the big state-owned banks Ma derided as having a “pawnshop” mentality in a speech last October. The billionaire entrepreneur has largely vanished from public view since he made the comments in a dispute that has underlined growing tensions between the state and the private sector in China as President Xi Jinping tightens his grip on the economy.

The move to clip Ant’s wings came after the size and scale of the company’s lending operation, which was revealed in its IPO pitch, caught regulators off guard, according to several people familiar with the situation.

“The regulators were surprised that Ant would have a larger market capitalisation than China’s largest state-owned banks,” said one Chinese banker who advises the government on financial policy issues. “When the IPO was priced they looked at it and said: ‘What, this thing is bigger than JPMorgan?’”

Rules designed to slow down Ant

Ant was responsible for arranging about one-tenth of China’s consumer lending last year via two products: Huabei, which is similar to a credit card; and Jiebei, which offers small unsecured loans through Alipay. Ant’s total outstanding loans reached Rmb2.2tn ($340bn) as of June 30.

About 90 per cent of the lending was underwritten by a network of 100 partner banks, many of which were smaller, regional lenders that offered competitive rates in exchange for access to Ant’s vast customer base and national reach.

The new rules mandate that joint-lending made through the internet can account for no more than half of any bank’s total loan book and lending through any single fintech platform cannot exceed 25 per cent of a bank’s tier one, or core, capital.

This will inevitably lead Ant to have to work more closely with the country’s bigger banks to expand its lending business, as China’s top 10 banks hold 64 per cent of the country’s total Rmb20tn of tier one capital, according to Bernstein.

“Since each player, especially the smaller ones, can do less, Ant has to do more with the bigger banks with big balance sheets,” said Kevin Kwek, an analyst at Bernstein. “This will weaken Ant’s bargaining position with them.”

Bernstein has cut its estimate of Ant’s value from $310bn at the putative IPO price to $230bn and said it could fall further. “The model is not completely broken, but growth will be curtailed quite a bit,” said Kwek.

The rules also introduced regional restrictions, so a city bank in Beijing would no longer be able to extend Alipay loans to consumers in Shanghai.

“Ant has more than 100 financial partners but China only has roughly 20 national banks . . . the new rules on cross-region lending will hurt Ant a lot,” said Xiaoxi Zhang, a financial analyst at Gavekal Dragonomics, a research firm.

The Bank of Tianjin, for example, increased its consumer loan book by nearly 800 per cent in 2018 after it signed deals with Ant and other fintech platforms.

The Bank of Shizuishan, in China’s north-west Ningxia region, extended Rmb20bn in loans through Alipay over about 18 months to October, according to state media.

One lender in Hangzhou said Alipay lending had been so good for business that the company tiptoed around negotiations with Ant for fear the group would walk away.

To help fund their lending spree, analysts said, regional banks had offered attractive rates for deposit products on platforms such as Alipay. On January 15, regulators barred banks from offering deposit accounts on third-party online platforms.

“That basically cut their aggressive funding channel possibly used to fund the co-lending with fintech platforms,” said Jacky Zuo, an analyst with China Renaissance, an investment bank. “The trend is smaller banks are retreating from this type of co-operation.”

Data sharing and risk management

The rules will force banks to complete credit assessments on potential borrowers themselves, rather than relying on Ant.

But most banks have mainly dealt in mortgages and business loans, situations in which borrowers have collateral, said Chen Long, a Beijing-based partner at Plenum, a consultancy.

“Banks don’t have the expertise, they don’t have the data” to assess consumer loan risk, he added. “The banks will have to find another way around this regulation.”

Chinese consumer loan annual interest rates by platform

Ant shares some borrower data with lenders but it may have to hand over much more to maintain its partnerships, although this may not suffice.

“Even if Ant hands over the data, banks will find it difficult to create sophisticated risk management systems powered by AI algorithms that can match Ant’s,” said Linghao Bao of Trivium China, a research firm. “Small banks won’t even know what to do with all this data.”

Taking on more credit risk

Chinese regulators were particularly perturbed that Ant earned fees on the loans it pushed to users without having to take on the credit risk. 

The new rules decree that online lenders will have to self-fund 30 per cent of each loan they make with banks. It is unclear what portion of Ant’s lending business this will affect. 

But an expansive application of the rule would turn Ant from an asset-light tech company into a capital-heavy business more akin to a bank. Bernstein noted a shift to on-balance sheet lending would actually improve Ant’s profitability, as the company would earn the interest income, but would also lower its return on capital. 

“Not being an asset-light model will mean investors will punish the stock via weaker multiples,” it said.

Coronavirus causes rise in delinquency rate

Even though Ant reached a restructuring deal with Chinese regulators, the reorganisation of its business as a financial holding company will bring it directly under the thumb of the central bank.

The People’s Bank of China in January also took the unusual step of issuing draft rules that would allow it to push for the break-up of payments companies such as Ant on antitrust grounds.

Ant declined to comment.

Additional reporting by Nian Liu, Sun Yu and Tom Mitchell

Video: Why the Ant IPO got cancelled

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The complex decisions behind Chanel’s new lipstick color matching A.I.

The complex decisions behind Chanel’s new lipstick color matching A.I. | Fortune

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Volvo Joins Anti-Combustion Engine Crowd, Will Be All-Electric By 2030

If Volvo was a TV show, we’d start with a tense voice saying “Previously on…” and note that Volvo has been pushing towards electrification for a while now. Specifically, Volvo Cars has previously said that 50 percent of its sales would be fully electric by 2025. This history shouldn’t take anything away from today’s announcement, but it’s worth putting the news into context.

Which brings us to this new “season” of this show, otherwise known as today’s announcement: Volvo will be eliminating combustion engines by 2030, including all hybrid models, and shifting entirely to all-electric powertrain over the next decade. In a video announcing the shift, Volvo looked back at its history of promoting safety but then took a turn with this line on the screen: “Climate change is the ultimate safety test. That’s why we’re changing to all-electric.”

“There is no long­term future for cars with an internal combustion engine,” said Henrik Green, Volvo’s chief technology officer, in a statement. “We are firmly committed to becoming an electric ­only car maker and the transition should happen by 2030. It will allow us to meet the expectations of our customers and be a part of the solution when it comes to fighting climate change.”

Volvo chief executive Håkan Samuelsson added that this EV-only strategy will allow Volvo to remain successful and profitable. “We are fully focused on becoming a leader in the fast-growing premium electric segment,” he said.

As part of the big announcement, Volvo also took the wraps off of a new all-electric CUV today called the C40 Recharge. Full details are not yet available, but we do know that the C40 Recharge points at the direction future Volvos will go thanks to a new front end with pixel-technology headlights. The C40 Recharge will use the CMA vehicle platform and is the first Volvo model designed specifically to be an electric vehicle and the first to be completely free of leather­. The C40 Recharge’s powertrain will use two electric motors, one on each axle, and a 78kWh battery that will offer a range of around 260 miles. The good news if you just thought “is that all?” is that the range “is expected to improve over time via over-­the-­air software updates,” Volvo said.

Volvo will start building the C40 Recharge this fall in Ghent, Belgium, alongside the company’s first EV, the XC40 Recharge. In line with another big shift for the automaker, it will sell the C40 Recharge online only and is going to offer all of its future EVs soley through simplified online channels called “Care by Volvo,” an expansion of the subscription service with the same name. There will be no haggling – the price is the price – and the EVs will all come with “specially developed Recharge tires,” that are supposed to be safe all year round.

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The Problem with Always Being the Problem Solver

A rising executive must learn how to adapt his problem-solving mindset to lead more effectively.

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These five reopening stocks are being ignored by Wall Street

CNBC’s Jim Cramer on Monday pulled back the curtain on five under-the-radar reopening plays as the stock market anticipates a resurgence in the American economy, turning his attention from the most talked-about recovery stocks.

The reopening thesis was furthered by federal authorization of a coronavirus vaccine from Johnson & Johnson, the third inoculation to be distributed in the U.S.

“This is a less in-your-face, but possibly more potent, reopening [playbook] since they are being ignored, even though they should have a great year if we can just get back to normal by June,” the “Mad Money” host said. “At this point, the in-your-face reopening stocks — the cruises and the airlines — I mean, can we start swapping out of those and go into some less obvious.”

On the shopping list are fintech payments company Square, designer Ralph Lauren, cosmetics company Ulta Beauty, shopping center real estate investment trust Federal Realty and automaker Ford.

The more obvious reopening plays have been in cruise lines, like Royal Caribbean, and the airlines, like Delta. Investors will find stocks in these industries to carry risk via potential equity offerings, as Royal Caribbean announced Monday, or hobbled balance sheets.

As for his new recommendations, Cramer said he expects them to gain steam in the coming weeks.

“These aren’t exactly stealth reopening stocks,” he said. “They’re more like ‘The Purloined Letter,’ hidden in plain sight, and I bet they’ll seem a lot more obvious as they go higher in the next few months.”

The new suggestions come after the market rebounded Monday following a 3% decline in the S&P 500 over the past two weeks. The S&P 500 started the new week rallying 2.38% to close above 3,900. The 30-stock Dow index rose 603 points to close at 31,535.51, a 1.95% gain. The tech-heavy Nasdaq Composite, after falling more than 6% in the past two weeks, surged 3% Monday to 13,588.83.

The U.S. Food and Drug Administration on Saturday approved Johnson & Johnson’s single-shot Covid-19 vaccine for emergency use. As opposed to the two-shot approach in the Pfizer and Moderna vaccines, JNJ’s will have fewer logistical challenges to overcome in distribution.

CEO Alex Gorsky told CNBC Monday morning that the company expects to deliver 100 million doses in the country by early summer and nearly 1 billion around the globe this year.

“That makes me think we’re much closer to the end of this long national nightmare, so it is time to unveil the less obvious reopening plays, if only because the more in-your-face ones feel a little bit overplayed,” Cramer said.

Disclosure: Cramer’s charitable trust owns shares of Ford.


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Zoom sees more growth after 'unprecedented' 2020

Zoom boss calls working from home “new reality” and predicts growth – but not at last year’s pace.

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This is how the Johnson & Johnson vaccine works

The first two COVID vaccines approved in the U.S. both use first-of-a-kind technology called messenger RNA. Johnson & Johnson’s new vaccine is different, and the technology it uses may have helped give it two advantages: It only requires a single dose, and it can be stored for months in a refrigerator instead of an ultra-cold freezer.

All three vaccines are based on the genetic instructions for building the COVID spike protein, the part of the virus that invades human cells. The mRNA vaccines from Pfizer-BioNTech and Moderna inject a solution containing RNA into your arm, which instructs your body to begin making a harmless piece of the protein that then triggers the immune system so it can mount a strong response if you later encounter the actual virus. Johnson & Johnson’s vaccine works in a similar way, but stores the genetic instructions in DNA instead. The gene is inserted in a modified cold virus called an adenovirus. The company used the same approach to make its new Ebola vaccine.

Because DNA isn’t as fragile as RNA, and the adenovirus around it provides extra protection, the Johnson & Johnson vaccine is sturdier than the other vaccines. The Pfizer and Moderna vaccines have to be frozen for long-term storage, but the Johnson & Johnson vaccine can be stored in a regular refrigerator for as long as three months. That makes logistics easier everywhere, but especially in the developing world. “We know that if we can get enough of this manufactured it’ll be much easier to send out into the field, not only in the U.S., but across the globe, which is really important,” says Lisa Lee, an epidemiologist and professor at Virginia Tech who previously worked at the U.S. Centers for Disease Control and Prevention. “Because this pandemic isn’t over for us until it’s over for everyone.”

The vaccine was also designed to work with just a single shot, another crucial factor that can help speed up the pace of vaccinations. “In other vaccines that we use it in, the adenovirus vehicle tends to really help a person mount a pretty substantial response that that is fairly lengthy,” Lee says. “So we have some more experience with that to know that we can expect enough with one shot.”

The company is now testing whether the vaccine could be more effective with the addition of a second dose, but the initial trial showed that it does work with one. (With more time, it’s possible that both the Pfizer and Moderna vaccines will also be proven to be effective enough to use with just one dose instead of two.)

In a global trial with around 45,000 people, the Johnson & Johnson vaccine was 66% effective against moderate to severe COVID infections. That’s substantially lower than Moderna and Pfizer’s vaccines, which are 94% and 95% effective, respectively, at preventing symptomatic COVID infections after two doses. (Vaccine efficacy numbers do not mean that 34% of the people who took the Johnson & Johnson vaccine still got sick; instead its a ratio of people in trial got sick after taking the vaccine versus people who got sick in the control group). The trials of the two vaccines aren’t directly comparable because they happened at different stages in the pandemic. “The Johnson & Johnson vaccine was tested in the reality of the virus variants, while the mRNA vaccines were approved before we believe these variants were circulating widely,” says Maureen Ferran, a virologist at the Rochester Institute of Technology. “I think this might explain, at least to some extent, why the Johnson & Johnson vaccine is less efficacious. Some of the J&J trials were done in South Africa in the presence of a really nasty variant.”

The vaccine was 72% effective in the U.S. portion of the trials (the minimum bar for FDA approval is 50% efficacy at preventing COVID). But more importantly, it was 85% protective against severe cases of the disease across the whole trial. No one was hospitalized or died—and clearly that’s the most critical metric. The new vaccine, along with the others, will help more people survive. It will also help speed up the overall process of immunization.

“The bottom line of all of this is we need to get as many people vaccinated as soon as possible because every time the vaccine or the virus is transmitted, it has the opportunity to mutate, and those variants could potentially do us a lot of harm,” says Lee. “We need to get as much out there as quickly as we can.”

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Opinion: Raise the minimum wage to $12 an hour

Democrats want to raise the minimum wage to $15 an hour to address inequality, but that might not be the best way to fix that problem.

Conservative—and many politically moderate—economists don’t like governments fixing prices above what market forces would require, because it wastes resources—too much milk from dairy price supports and too much unemployment from the minimum wage.

Longitudinal studies show moderate increases in minimum wages don’t necessarily cause immediate bleeding of jobs to neighboring jurisdictions. However, substantially increasing the minimum in low-income regions—like rural Mississippi or upper Michigan—would be quite different than nudging wages a bit in economies likely to enjoy robust growth as COVID recedes—like metro areas in Florida and Texas.

In the latter places, wages paid starting workers are generally closer to $15 an hour already and the effects of the current federal standard on labor markets are minimal or in some places nonexistent.

Among voters the idea gaining traction is that it is better to assist the working poor by offering higher paying employment opportunities than enhanced government benefits financed with increased taxes on more affluent Americans. Conservative-leaning Florida recently approved a $15 minimum wage, and 30 states and the District of Columbia have enacted higher minimum wages than the federal standard.

In places like San Francisco and Seattle economic studies documented that abruptly raising the minimum wage caused significant restaurant closures and job losses.

Counterpoint: Small businesses benefit when wages rise

Dramatic shifts disturb wage patterns for workers further up the wage ladder. For example, it’s tough to raise the pay of a counter clerk at McDonald’s $2 an hour without also raising the pay of the shift manager.

When raised by Congress in 2009 to $7.25 per hour, the minimum was about 33% of average wage paid hourly workers as computed by the BLS. Boosting it to $15, even over several years as proposed, would take it much closer to 50% of the average rate, cause a ripple of rising wages throughout the hourly workforce and inflation, which would negate some of the benefits.

Opinion: This company pays its workers a $70,000 minimum salary, and that’s helping it weather the coronavirus crisis

Depending on the initial new minimum, indexing the federal standard could build an inflationary spiral into the economy whose consequences are difficult to anticipate.

In low-wage markets, raising McDonald’s
starting pay for servers to $15 an hour would increase labor costs about $8 an hour—including add-ons for payroll taxes and unemployment insurance—and increase the cost of a quarter-pound hamburger meal from about $6 to $8.

Take-out restaurants, drugstores and groceries in cities where minimum wages have been set high are relying more on computer-assisted check out to save on labor costs and avoid raising prices enough to drive away customers.

Overall, higher wages favor e-commerce over brick-and-mortar, because fulfillment centers more readily lend to automation. Those favor large businesses—at the expense of smaller and stand-alone consumer-goods manufacturers, retailers, restaurants, hotels and entertainment venues—because they can spread development costs for robotic solutions, software and websites over higher volumes and more outlets.

For workers near the bottom of the income scale, raising the minimum wage to $15 an hour would boost household incomes, even after they pay a lot more for a Big Mac and a little more for UPS
delivery on online purchases, but it would lower real incomes among households further up the income scale.

While progressives might hail a $15 minimum as a blow for economic justice, the Congressional Budget Office found the losses up the income ladder would be greater than the gains for the working poor and reduce GDP. Some 1.4 million low wage workers would lose their jobs and suffer tragic losses of independence, dignity and income altogether.

Related story: 30% of workers would benefit from a minimum-wage hike to $15 an hour. Now for the downside…

It’s simply less harmful to all families to raise the earned-income tax credit but increasing taxes on middle and upper income Americans for such purposes is problematic with slim majorities of Democrats and moderate Republicans in Congress.

With robots and artificial intelligence becoming ubiquitous no matter what we do, raising the minimum wage over several years to $12 an hour or about 40% of the current average hourly wage—and then adjusting it annually to kept it aligned with that benchmark—would have fewer adverse consequences and be a reasonable compromise that hues to the empathy of voters for the working poor. 

Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.

Further reading:

 ‘I will continue happily shopping there forever’: Costco customers react to retailer’s new $16 minimum wage

Low wages are just the start of the problems for millions of U.S. workers during COVID-19—here’s why

U.S. Minimum Wages Have Already Jumped—With Minimal Costs to Business

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Brand Building Isn’t a Happy Accident. Take This Steps to Find Success.

6 min read

Opinions expressed by Entrepreneur contributors are their own.

All you need is an idea, a little grit, and an empty garage to launch a global brand. Right? That’s the story we’ve happily internalized for years. Perhaps it explains why ideas like Juicero and MoviePass not only saw the light of day but were generously funded before their spectacular demises. Or why, despite the endless void that is our current health and economic crisis, the rate of business applications in the U.S. has surged to a 13-year high, according to the Wall Street Journal.

Yes, the barriers to building a business are startlingly low, but the same doesn’t hold true for building a brand. Now, I know what you’re thinking: “Brit, aren’t ‘brand’ and ‘business’ synonymous?” I don’t think so. Businesses sell you stuff; brands make you feel stuff. Businesses can be created overnight; brands must be built over time. Businesses are owned; brands are communal. True brands — the ones that get into our hearts — deliver inherent, intangible value.

Related: 9 Tips for Creating an Awesome Brand

So how do you create value beyond what you’re selling and apart from your core customers? When I pose this question to early-stage founders, they often throw around (and confuse) words such as “purpose,” “vision,” “mission,” and “values.” But these buzzwords aren’t one and the same. They are separate building blocks of your brand framework.

To begin building your own framework, follow these steps:

1. Define your why

At the top of your brand framework sits purpose, or your reason why. It’s an open invitation to the party — a reason for the public to like, subscribe, comment and share, yes, but also a reason to believe in what you bring to the world.

When consumers subscribe to your purpose, they’ll show up for you. Case in point: Research from Zeno Group found that consumers are four times more likely to purchase from brands with a strong purpose. And an Accenture analysis of Unilever’s portfolio of brands determined that its purpose-led ones (such as Dove, which aims to instill confidence in girls by helping them reject conventional beauty standards) grow 50 percent faster than its other brands and deliver more than 60 percent of Unilever’s overall growth.

Related: Why a Purpose-Driven Mission Is Key to Motivating Millennials

Remember: That “why” is the foundation you start from. And during this journey, I find it helpful to keep this Simon Sinek quote in mind: “People don’t buy what you do — they buy why you do it.” Sinek places the “why” at the center of his “Golden Circle” and then builds out to “how” and, finally, “what.” To establish that why at the center, ask yourself these questions: What are you fighting against? What are you fighting for? What are your competitive advantages that will allow you to prevail in these fights? What will be different about the world once you’ve achieved your goal?

2. Find your direction

Under purpose sits vision, which steers you where you want to go. Pangaia is a brand that’s recently caught my eye (and wallet), and it offers a great example. At first glance, it sells apparel, but with only a few scrolls, you realize that Pangaia is using materials science to save the planet.

It’s amassed an enormous following in a short time — selling us sweatpants and T-shirts. Its customers, including me, are buying something bigger than a fashion-forward sweatshirt (though that’s a nice plus). We’re spending our money with Pangaia because we believe this brand can do good in the world and we want to wear that on our sleeve — literally.

Don’t try to force a brand vision based on what’s trending at the moment. Instead, play to your strengths. What are you good at? What do you know? In what way can your skill set support your why? Pangaia, for example, is made up of creatives who’ve worked for luxury fashion and scientists with experience in biofabrication. Combining these two very different strengths brings a unique and exciting strategy to the fight against climate change.

3. Chart your course

Next up is mission. Or in other words, how you’ll accomplish your vision. Pangaia is working to save our planet by combining fashion with the science of sustainable clothing, and the company gives consumers other reasons to buy into the why of what they do. Pangaia uses collaborative philanthropy to reverse planetary harm and benefit people. In October, for example, the company created a collection of hoodies and T-shirts with beauty brand Costa Brazil to support villages in the Amazon, where the fashion industry has historically left a destructive footprint. All proceeds from the collection were used to deliver PPE and other medical supplies to remote villages and helped relocate doctors to the region to fight the novel coronavirus.

To chart your course, think about how to deploy your mission multidimensionally. From what angles can you approach the goals you set when you defined your why?

4. Walk the walk

Finally, your values are what prescribe how you behave along the journey. Does your whole company embody your why? Does your mission align with your vision?

Related: Don’t Let These 3 Threats Kill Your Startup’s Mission in Its First 5 Years

Although the answers to these questions need to be yes, consumers don’t expect infallibility, and having a strong why can secure you some grace. The Zeno Group’s research showed that consumers are six times more likely to defend and protect a purpose-led brand after a public gaffe.

But that can be pushed only so far. United Airlines has long invited passengers to fly the friendly skies. But when it had a paying passenger forcibly dragged off an overbooked plane, with the company’s CEO defending the action the next day, the public noticed. Polls after the incident found that 79% of potential travelers would choose another airline, and 40% would do so even if it meant paying more and taking longer.

Stay in the Game

Brands don’t spring forth from aha moments — nor do they happen by accident. Your business might grind away for years to build its brand identity and still be seen as a business. But when you’re intentional and committed to building your brand’s framework, you will see gains. Momentum builds, word spreads. You start to make the shift from selling to customers to recruiting advocates. And that is what will sustain you for the long haul.

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