Your Bank’s Hot Chocolate Agenda
Nostalgia is driving innovation for lots of legacy brands. FIs are, of course, the OG legacy institution. It's time to use nostalgia as a springboard for innovation.
Photo by Nica Cn on Unsplash
Hot chocolate. The beverage that reminds you of snow days off from school, snowball fights, skiing & all your other winter childhood memories. Nostalgia is powerful stuff. It’s driving innovation for a number of consumer companies. As the original legacy institution, FIs everywhere must consider how they, too, can use nostalgia to innovate.
Since it’s been dark and cold and a bit snowy here, I eagerly read Jason Wilson’s latest The Nostalgia of Snowy Days and Spiked Hot Chocolate. He starts with a memory of his son’s childhood and hot chocolate on a cold & snowy Philly day, but ends with something new: Hot chocolate for adults.
Spiked hot chocolate is simple. But like all great and simple things, there is nuance and variation.
Focus first on the chocolate. Bitter or sweet? Mexican or French style? Cocoa powder or ganache? Whole milk or heavy cream? Sea salt or spices? A pinch of ancho chile? A little bit of butter? Marshmallow or whipped cream?
Adults, unlike kids, can drink alcohol,
Then, there is the matter of what to spike the chocolate with. I’ve experimented with all manner of spirits.
Wilson gives several new recipes & ideas for the reader to innovate on his own. I’m not going to repost the entire piece here – go read it on
Jason’s substack and subscribe. He writes about wine, spirits, food & travel & I know you enjoy many of those topics.
As I read this piece, I was reminded of a couple of themes I’ve seen over the last few months: innovation and nostalgia.
The Case for Nostalgic Innovation
Photo by Lu Amaral on Unsplash
I’ve seen an increasing appetite for what Barb Mclean coined “nostalgic innovation.” That is, using a legacy brand as the foundation to create something new.
I wrote about legacy brands and the Stanley phenomenon. A while back, I commented on a LinkedIn post about Dunkin Donuts partnering with Native, a fragrance brand. Yeah. Fragrance. Before you roll your eyes consider the appeal – maybe not for you, but for someone else:
If you’ve ever stepped into a doughnut shop on a busy Sunday, you’ve already gotten a whiff of pure heaven. That warm, nostalgic smell of freshly fried pastries with a thick glaze icing is enough to make anyone stop in their tracks — and didn’t you just wish you could bottle it up and wear it as a fragrance
When you saw the photo above, did you not immediately remember the smell of the last donut you ate - no matter how long ago it was?
Nostalgic Innovation is Flourishing at Toy Companies
Toys are a classic example of nostalgic innovation. Toys have been considered to be a thing of childhood, desired by and purchased for children ages 8-12. Yet, many toy brands have found that teens and adults continue to buy them – and to want new toys that reflect their nostalgia and interests.
A few years ago, Legos began to target adults for their sets. They are creating new sets especially for adults. For example, they have identified people who buy Legos who are also nostalgic for 1980s:
LEGO is going back to the 1980s with an upgraded Blacktron Renegade set that’s ready to explore the far reaches of nostalgic space.
But the innovation doesn’t just target boys or men who like cars or space ships. Legos are also for Valentines Day.
An unforeseen innovation of adults buying Legos is that some adults are gathering in-person to build large scale LEGO creations.
A new adults-only Lego group has opened in Lincolnshire.
The sessions have been running in Grantham for the past few weeks to aid mental health and to bring people together.
Organiser Ollie Crowder said he was inspired to set up the group after building a 10,000-brick model of the Titanic liner.
He said the group is working on a special model for the Lincolnshire Brick Lincs exhibition.
Adults getting together to build Legos. Is that simply nostalgic for childhood and playtime? Or is it people gathering to do something they like and perhaps make friends with like interests? Perhaps any and all of these reasons. Does it matter? No, but it sure supports profitability of nostalgic innovation.
Companies aren’t pursuing nostalgic innovation for nostalgia. Bryan Clagett has pointed out that Hot Wheels, too, is profiting from nostalgic innovation. Hot Wheels focuses on the collectors, car enthusiasts and racing fans - which crosses many demographics:
Last year, Hot Wheels sales grew 14% annually to $1.43 billion.
“The demographic capture is incomparable,” UBS Investment Bank analyst Arpiné Kocharyan said. “You can target a kid that’s 3 years old all the way to a collector that’s 60 years old.”
Part of the Hot Wheels innovation is its metaverse of digital assets for collectors.
Bringing Legacy Brands into The Present
Nostalgic innovation isn’t always a pursuit of the past - but a way to bring a legacy brand or flavor into the present. Pepsi is creating flavors based on its Wild Cherry flavor to create a “dirty soda” (which is a TikTok drink trend).
The original Pepsi Wild Cherry has been around since 1988, so it’s only natural that the brand would seek to put a distinctly modern twist on the nostalgic soda. In fact, Pepsi points to the recent resurgence of fruit-forward flavors as one driving inspiration behind the development of the Wild Cherry & Cream offering.
"Pepsi Wild Cherry has always been a flavor favorite in the cola world, especially among millennial and Gen Z cola fans — we’ve seen 8% growth year over year on the product — so we knew we had an opportunity to deliver something special this year that consumers will love," Jenny Danzi, Pepsi’s head of marketing, shared.
You don’t have to be a TikTok devotee to appreciate a new flavor based on one you remember from childhood. And you don’t have to remember Wild Cherry from childhood to enjoy the new “dirty soda.”
Nostalgic Innovation is Uncovered Hidden Tribes
What all these retailers have in common is their ability to jettison their assumptions about their customers – and those who are not customers: that their customers must or should fit a certain age range or income.
These brands have successfully adapted or pivoted to attract new customers. How? By discarding their old assumptions about demographics, their brand and their products and building new fragrances, Lego sets and sodas. They are doing what I’ve been advising financial institutions and digital banking vendor providers, to do for several years now: Uncover hidden tribes by going beyond your traditional demographic analysis and assumptions to find the customers you aren’t serving and new ways to serve them.
Meanwhile, many financial institutions are keen to ditch their legacy brand and build new, better, more digital bank brands with brand new products and services. And AI. And BaaS. There’s nothing wrong with that, but what if financial institutions – and the vendors that support them - are missing a profitable opportunity that is right in front of them?
Developing Your Hot Chocolate Agenda
How can financial institution in 2025 leverage their legacy brand to innovate? I believe it requires a hard look at the FI’s infrastructure and ability to work outside its traditional boundaries.
Fit foundation. Innovation on a legacy brand assumes that the legacy has a technology foundation that enables it to move into the future. To leverage your legacy FI, your executive team and board must come face-to-face with the your FI’s business and technology realities.
Uncover more hidden tribes. This is an iterative process. I’ve written about how to discover hidden tribes.
Collab with brands that can create a new take on the legacy brand. I’m not talking about the traditional collaborations with a sports team for new debit or credit card designs. You might laugh at a Dunkin Donut fragrance, but it’s a head turning idea. It’s not designed to appeal to everyone. It probably appeals to those who love Dunkin’ enough to have the app on their phone and collect rewards. That’s the nature of hidden tribes – you aren’t necessarily targeting all customers or potential customers.
Find the nostalgia in your old brand. Is your FI part of a community that is enjoying a resurgence? I don’t mean just gentrification but a growth in small businesses? A popular restaurant or bookstore that has become a gathering place for various groups? In Philadelphia, an example is Black-owned bookstores and shops in Philadelphia.
Enjoy your hot chocolate, with or without alcohol. These days, I’m enjoying mine with homemade whipped cream – because culinary student at home.
What’s your hot chocolate memory?
Let’s talk nostalgia and nostalgic innovation in the comments!
Who writes PivotAssets?
I’m an independent analyst, strategic advisor & consultant (& a former Gartner analyst). I’ve worked in and covered the banking industry for over 2 decades.
This newsletter is designed to challenge you & to give you a fresh perspective & analysis on the transformation that is —and isn’t happening - in the industry.
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Want more insights and analysis on small innovations, ghosting customers, hidden tribes and leveraging your bank’s legacy? Need help positioning your digital banking solution or fintech to meet the demands of today’s banking environment? I have my own firm PivotAssets.
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Contact me at stessa@pivotassets.co or via LinkedIn.
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Me, Elsewhere
Did you miss the last Fintech Book Club? We discussed Jason Mikula’s Banking as a Service.
I’m an expert advisor at Third Eye Advisory. Ready to help your company or financial institution:
Lead with problem solving
Develop Value-Driven Customer Experiences
Build Product Innovation & Differentiation
Create Strategic Intelligence for Investors.
I spoke with Theodora Lau and Barb Maclean on their podcast One Vision about smart banking & hidden tribes.