The rise of Bitcoin, the ballyhooed virtual currency that has lately exploded onto the world scene, reflects the answer to a question that has historically vexed brands such as Burger King, Pepsi and Microsoft's Bing: "If we build a better mousetrap, why do we struggle to attract customers?"
By any measure of a "better mousetrap" Bitcoin certainly leaves a lot to be desired. Its extreme volatility, with prices swinging between $110 and $1,100 in the last six months alone, limits its use for buying and selling expensive, durable goods.
Its narrow acceptance also hampers its ability to meet day-to-day purchasing needs, and a lack of banking infrastructure exposes those who do use it to considerable risk.
And outside of an increased ability to facilitate international transfers and conduct illicit transactions, the incentive for your average consumer to begin using Bitcoin isn't readily apparent.
Despite these drawbacks, however, Bitcoin continues to reach new levels of mainstream awareness and success. Online retailers Overstock and TigerDirect made waves with news they would begin accepting the cryptocurrency as payment, while megabrands eBay and PayPal are considering following suit. And the number of Bitcoin transactions per day appear to be growing quickly.
Why the popularity? Although its enthusiasts would howl to the contrary, Bitcoin's success owes more to its strength as a brand than its utility as a currency.
Usage of Bitcoin, like many well-known brands, conveys a statement that transcends the product's inherent disadvantages. With three simple words, "I accept Bitcoin," consumers and businesses affirm their individuality, independence and freedom from rule in a way that can't be achieved through using greenbacks alone.
Choosing Bitcoin also makes how one spends money as much an expression of personal identity as where one spends it -- a dynamic that the advertising efforts of big-name credit card brands such as American Express have demonstrated a keen awareness of.
Bitcoin is hardly the first product to have leveraged iconoclasm to succeed in the face of functionally superior alternatives. Apple's positioning over the years, for example, derived not from a list of product features but the notion of the brand as an enabler of revolutionary thinking. Similarly, Harley-Davidson's platform celebrating rebelliousness and outlaw culture has allowed it to thrive despite intense competition from cheaper Japanese bikes.
$137.8B U.S. ad spend for top 200 advertisers
By most measures of health and equity, Bitcoin's brand exhibits considerable strength. Bitcoin users are willing to pay a meaningful price premium in the form of the inconveniences they must endure as a result of foregoing traditional currency. Google searches for Bitcoin relative to competing currencies also reflect sharply growing levels of recognition, recall and awareness.
The most telling indicator of the strength of Bitcoin's brand, however, is the zealous evangelism displayed by its users. After the recent, unexpected shutdown of Mt. Gox, the predominant Bitcoin-trading exchange based out of Japan, and the disappearance of 6% of all Bitcoins in circulation, loyal users furiously rallied in defense of the currency. A sampling of discussion threads on Reddit's Bitcoin forum following the seismic crash included the following:
Bitcoin's success should serve as a reminder to marketers that a strong brand is highly effective at achieving differentiation and establishing a meaningful competitive advantage. In particular, marketers whose category is dominated by vanilla, "establishment" competitors possess an opportunity to stand out by embodying a position that celebrates independence, freedom and disruption of the status quo.