Advertising In 2020?

I was recently asked by my friend and former colleague Karl Heiselman, CEO at Wolff Olins if I’d help him respond to a request to predict the future of advertising in 2020. For two somewhat neutral observers of the advertising business, it seemed like something we could take an outsiders view of.

With the somewhat chastening caveat that the only consistently accurate prediction of the future is that predictions of the future will be turn out to be wrong, this is where we netted out.

Advertising in 2020: The New Brand Building Reality

By 2020, advertising as we know will no longer be the primary marketing vehicle used to build brands. Advertising will instead focus on driving transactions. Rather than a tool of marketing, advertising will predominantly become a tool of sales.

Replacing the role of advertising in brand building will be a slow process, but by 2020 how we build brands will have transformed significantly. Instead of relying on advertising to drive extrinsic perceptions, brands will instead be focused on new methods designed to create more powerful intrinsic value.

Why Advertising Will Become A Transactional Tool

Automated, digital, transactions driven advertising will be the single biggest advertising growth arena of the next ten years. The combination of big data (including social data) with ubiquitous smartphone usage and an intense focus on advertising ROI will create a hyper aggressive, transactions focused battlefield.

By 2020, smart devices and high-speed connectivity will have become ubiquitous among almost all consumer groups.  Media consumption will have continued to fragment, turning today’s remaining mass audiences into a set of smaller, more atomized and more on-demand groups. And while this new environment will bring significant threat, it will also provide significant opportunity. For in this digital environment consumers will continue trading their personal information for free access to services, providing more detailed, deeper datasets than we can imagine today.

What will not have changed is the pressure on the business to deliver results, hit sales targets, and deliver growth. The pressures on business by 2020 will be intense. Product cycles will have shortened still further, competition become more intense, markets more volatile and consumers more informed and empowered than before. In this environment, making the sale will be imperative.

As a result, an understandable desire for ROI will be manifest in tomorrows advertising solutions. Tracking which advertisements drive the most sales to which people, when.

By 2020, winning advertising will be those methods that compress the time between the advertising impression and the transaction being made, and do it in a highly measurable and predictable way.

This means we will see advertising that is contextual to our actions and designed to encourage a specific transaction. Searching for a lawnmower? Here’s a deal for that. Eating at the same restaurant regularly? Here’s a deal for the one next door. Friends who like a certain store? Here’s a discount for you to try it too.

Contextual, automated, transactional advertising will be the perfect tool for the discounter but less so for the brand builder. An unintended consequence of the ROI imperative being that the coming era of advertising will act to compress prices, displace brand loyalty and reduce brand premiums.

In this new landscape, businesses will make a concerted effort to shift the risk profile of their advertising spend.  As focus shifts toward measurable sales effectiveness, a new set of advertising players will emerge that are paid not by % of media spent, but instead by % of sales generated. They will be accountable to the sales team, data driven and more interested in efficiency of sales than creative excellence.

The New Brand Building Reality

While advertising is likely to become highly transactional, brand builders have much to be confident about. For just as technological and social shifts will provide new opportunities for the deals driven discounter, they will also provide significant opportunities for the brand builder. Businesses that are focused on building and sustaining a brands premium will find themselves enabled by a new and more sophisticated set of tools with which to engage their customers.

By 2020, those same technologies that are driving discount advertising will be giving marketers and business leaders a more sophisticated understanding of their customers. They will be able to parse vast volumes of customer data, and monitor and hold significant social media based relationships. The knowledge and insights thus generated turning marketers into key actors in the delivery of innovation and the creation of new layers of brand value.

In specific terms, we believe that by 2020 we will see three major areas of brand building innovation take over the role that advertising plays today.

1.    Total Experience Management

Much as Total Quality Management transformed manufacturing in the 1980’s, Total Experience Management will transform brands in the 2010’s. Today’s brand experiences are highly fragmented and as a result are a significant source of competitive weakness (as any trawl of social media will demonstrate). By 2020, this will have changed considerably. Instead of focusing on individual touchpoints, brands will instead be considering the rich ecosystem of experiences they create. They will look at the integration of their brand ecosystem under a common “operating system” as a means of enhancing customer value. By thinking of the total experience, and usefulness, of the brand from the customer’s point of view, brands will create superior experiences across not just a single touchpoint but across the entirety of the branded experience. The beginnings of this transformation are already apparent in the way that technology brands such as Apple, Google and Microsoft are connecting their branded ecosystems together under a common user experience framework.

2.    Marketing Products

Marketing products are products designed to deliver a marketing benefit, rather than something you intend to charge people money for. They exist to expand the ability of a brand to create utility, and value, around its core offer. For many brands, the core offer is often quite commoditized and as such unlikely to change significantly moving forwards. Under these circumstances, a marketing product seeks to create additional layers of value and utility that can ‘lock’ customers in to your brand rather than have them switch to a competitor. Tied directly into the brand experience ecosystem, by 2020, marketers will be using their social monitoring of customers to find new areas of value that can be built up around the core product or service offered by the brand.

A today’s world example is Nike+, which effectively uses technology to connect a community of running enthusiasts together, and in the process lock these runners into the Nike brand ecosystem. The innovation happening around the shoe, rather than directly within the shoe itself.

3.    The Content Ecosystem

By 2020, the simple reality is that every brand will be a media brand, requiring everyone to consider how they produce, distribute and manage their content ecosystems. In tandem with brand experience and marketing products, brands will be focused on the overlap between content that informs a customer about products, services or propositions, content that educates them in it’s use or in the things they can do, and content that entertains them around the core proposition of the brand.

This content will serve to drive multi-way relationships with and within a consumer community, meaning it will be socially, or third party driven, necessitating new skills in curation, editing, governance and presentation.

Increasingly by 2020, informing, educating and entertaining audiences will happen through channels that are controlled by the brands and their consumer communities themselves, rather than channels brands pay to advertise on, meaning consumers will have actively chosen where to go in order to seek the emotional benefits that brands provide.

In Summary

By 2020, advertising will have become a major driver of transactional sales. It will be automated, data driven, contextual and ubiquitous. A disciplined focus on effectiveness will have created completely new models of advertising agency.

This advertising will be discount driven, ubiquitous and hard to opt-out of. As a result, brand building will happen by other means. Brands will be built through new methods: Total Experience Management, Marketing Products and Content Ecosystems.

Those brands that succeed will increasingly become opt-in, controlling their own channels to the consumer, where they enjoy multi-way relationships with an empowered consumer community made up of people who’ve chosen to actively seek the emotional benefits these brands provide.

Advertisements

The world’s largest relationships platform

The funny thing about all the talk about the revolution in marketing is that it generally hasn’t taken into account that every major marketing communications channel that has ever existed has basically been a broadcast channel. Even on the Internet.

The implications of this are pretty straightforward. It’s hard to shift from a broadcast mentality to something else if the opportunities to do so are limited.

Facebook, on the other hand, represents (for all it’s recent travails) the world’s first mass relationships medium. The problem is that from a marketing communications perspective I’m not entirely sure they’ve figured out what to do with this yet.

Advertising on Facebook today is a surprisingly weak proposition. I’m not really surprised that GM decided to pull theirs.

You have essentially two choices:

  1. You pay for display ads that live off to the side and that few, if anyone ever click on. Supposedly highly targeted to people’s preferences, I’ve yet to see one of these that made any sense whatsoever to me.
  2. You piggyback on an individual’s “like” of your brand, message or product and this becomes a sponsored “story” which in effect becomes the ad creative. This is very innovative, and Facebook claim a much higher recall rate for this kind of messaging because it comes from a “friend”. My belief, however, is that this recall will rapidly decline as people begin to realize that their ‘likes’ are being used for this purpose.

The problem with both of these approaches, however, is that they do little or nothing to reinforce the relationships strength of the platform. Ironically, both methods are locked into a broadcast mindset. And worse, neither of them add any real value to the consumer. (And arguably the newer ‘sponsored stories’ approach does the opposite)

As a direct comparator, the reason Google Ad-Words is so effective, so popular and such a huge revenue driver for Google is that it absolutely leverages the underlying strengths of the platform. When I am doing a search, I am specifically interested in a topic. To have targeted advertising based on what I’m looking for makes perfect sense. To have these ads appear as innocuously and helpfully as they do is possible the smartest UI decision Google ever got right.

Facebook today is nowhere near having their equivalent of Google Ad-Words.

On Facebook, the most impressive marketing R&D is actually being done by the brands themselves and not by Facebook as such. To take just a single example, I’m particularly impressed by what Ticketmaster launched in January.

Essentially they are connecting the relationship dots. They recommend upcoming shows based upon your Spotify listening habits, they allow you to share shows you want to go and see, as well as shows where you’ve already bought tickets. If you’ve bought tickets, your friends can see where your seats are and buy their own tickets for seats nearby. And vice versa. All from within the Facebook platform.

Not surprisingly, Ticketmaster state that this has become an incredibly powerful platform for them, with significant ROI.

This is just a single example, but a very good one, of a brand leveraging the underlying relationships strength of the Facebook platform in a much more effective and consumer friendly way than Facebook itself has.

Worryingly for Facebook, the tools Ticketmaster use to do this are currently given away for free. Their income only coming from a percentage of the on-platform sales.

The joy of this approach is that for the first time we are creating advertising that gets close to Peter Drucker’s ideal of marketing that gets a customer ready to buy, rather than marketing designed to sell.

And this is the crux. Rather than the broadcast mentality, what brands increasingly need is the ability to leverage the relationships potential of Facebook in ways that add value to their customers and that makes relevant purchasing behavior more convenient. Do this well and everyone wins.

This would suggest that the future of advertising on Facebook should lie less in solutions rooted in a broadcast philosophy, and more in solutions rooted in a relationships driven one.

The great thing for them, of course, is how many brands are already building on their platform and essentially engaging in R&D behavior on their behalf.

Of course, the need to do this is not just because the existing advertising approach has limited potential, but because the existing advertising approach doesn’t work at all on mobile. And mobile is increasingly where people are choosing to access the Facebook platform.

Put simply, the mobile environment demands a shift in mindset. And while the details are a topic for a different day, I’d argue that the mobile environment should accelerate the shift from a broadcast to a relationships mentality, rather than slow it down.

But we’ll see where it all ends up. I’m pretty bullish on Facebook to succeed. They’ve overcome every previous obstacle, so I hope their current troubles don’t lead them down a more short-sighted path.

Learning From Groupon

 

 

 

 

Yesterday Groupon chose to pull their advertising campaign. Just five days after the Superbowl, CEO Andrew Mason posted an admirably honest and sincere retraction of their ads, where he chose to take personal responsibility for running them in the first place.

While many found their Superbowl advertising to be offensive (myself included) there are a set of very interesting dynamics that may have been happening which I think many, especially startup businesses, can learn from.

When you look at young companies they are rarely concerned with their brand. In fact, in many cases brand has become a five letter swear word. Instead, these businesses tend to be laser focused on getting their product right and getting it out there. As a result, the underlying narrative of the company tends to be a highly personal one – focused on the founding partners, their backgrounds, the opportunity they spotted and why they are doing what they are now doing.

Because so few startup businesses actually succeed (some estimates suggest that less than 5% make it through their first year) this personal narrative also tends to be both highly emotional and highly self-centric. Which shouldn’t really be a surprise.  When the likelihood of failure is so high, you pretty much have no other option but to take on the arrogance of an “us versus the world” mentality.

As such a business grows, and Groupon has grown amazingly quickly, the narrative has to shift from a founder-centric, introverted one to a company-centric, external one. Instead of being about “me and my product” the narrative has to shift to being about “us and our brand”, where the “us” isn’t just the company and the people who work there, but the shared “us” with the customer.

This shared “us” is where Groupon failed. Instead of focusing on the very real customer value inherent in their business model, they were instead talking to themselves through an  in-joke based upon a very personal (but not particularly relevant to the customer) narrative related to their original founding.

Unfortunately, this set the tone for the personality of Groupon as a brand. Up until this point Groupon as a brand has been largely silent to the bulk of people in the world. The value inherent in the product has been doing all the talking. As a result,  they now have to combat the new sense that Groupon is arrogant and self-centered rather than a true advocate for customer value.

So with all this in mind, what are the learnings that others can take?

1. As you grow, make sure that you consciously shift your own narrative from an introverted, founder-centric one, to an externally focused brand-centric one. Within this, ensure that you’re considering the shared notion of “us” with your customers rather than any sense that you might be against your customers. Achieving this means considering your brand as something much more important than a five letter swear word.

2. Don’t hire an advertising agency until you have a very strong sense of  the shared “us” that you want to get across. An external party such as an advertising agency will generally attempt to build from your narrative.  If this narrative is still a highly personal and introverted one, then agencies such as Crispin Porter & Bogusky (who did the Groupon campaign) and who are known for pushing the envelope anyway, will simply enhance what you already have with potentially disastrous consequences. Better for you to already understand the shared “us” before they begin, so that you have a customer-centric frame of reference from which to judge their work.

3. Seek advice from your customers. If you are growing and you find yourself in the incredibly fortunate position that Groupon find themselves in, then your customers almost certainly have a strong sense of what they already like you for (maybe even love you for). It isn’t hard to ask their views and invite them to participate. Amazon, for example have done a great job of asking customers to share their ideas for their Kindle advertising. Simply by asking and listening, you will learn a tremendous amount about what your customers think the shared “us” might be. At this point, your job is to curate these views and map them against what you want the “us” to be in order to create a definition.

4. Don’t be afraid to apologize if you get it wrong. The smartest move Groupon made is to issue a sincere and heartfelt retraction, taking personal responsibility for the mistake. No-one wants to offend their customers, but few business leaders actually have the balls to stand up and publicly apologize to them. This acknowledgement of human frailty is probably the single most important factor in Groupon eliminating the sense that it is an arrogant brand.

For Groupon, I believe this experience will actually be a highly positive one. They’ve learned in a highly personal, and no doubt painful way, how important brands are to their customers and how not to engage with these same customers. And after reading the CEO’s blog post, I highly doubt this will be an error they repeat twice.

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