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.

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Reputation Risk

In this world of 24-hour news cycles and instant access to information, reputation matters more than ever.

The B2B world has known this explicitly for years. Arthur Andersen wasn’t killed by operational failings; it was killed by a reputation that went from highly respected to highly toxic almost overnight. Proving in very public terms how hard it is to stay in business if no one wants to do business with you.

Over the past few years, threats to reputation have happened faster, and hit harder, than ever. There is no bank, professional services firm or energy company today who isn’t thinking hard about their reputations even as we speak.

Yet managing reputation isn’t actually very easy to do, and one of the most prevalent brand decisions of the past decade actually served to make the job harder rather than easier.

This decision was the overarching brand strategy of consolidation; a time where mergers and acquisitions created a new era of mega-companies trading under singular mega-brands.

There were three very logical reasons for this extreme level of brand consolidation:

  1. That by consolidating the brand under a single identity and a single set of values, that this would bring the disparate cultures of acquired businesses together to form a new, singular culture.
  2. That by creating a single brand under which to trade, you’d be maximizing brand building investments in order to drive superior brand value.
  3. That a single brand is more efficient, more cost effective and easier to manage than multiple smaller brands.

All of these factors do in fact have merit, but the thing they fail to take into account is reputation risk and the potential for negative reputation contagion.

Making this more specific, what this approach doesn’t take into account is the level of potential risk that exists across the disparate activities of the corporation and the potential impact a localized failure may have on the whole.

Take BP for example. It’s highly unlikely that any of the small business operators who’d franchised the BP name for their gas stations took reputation risk into account. For them, BP was a big and reputable brand name, something to take advantage of.

Unfortunately, in the oil industry, reputation risk appears to flow downstream. I’m sure that none of these gas-station owners thought their forecourts would become instant ready-made protest sites primed for 24/7 news-media coverage. (One also wonders how different things may have been had the only available BP location been an anonymous headquarters, hidden among the skyscrapers of a large city)

Equally in the banking space, it appears that reputation risk flows quite freely from the most risky to the most risk averse parts of the business. In this case, the risk-taking investment banking arms of large banks have created significant negative reputation risks for the more risk-averse, and publicity shy, private wealth management arms.

In fact, adding the reputation risk lens on top of the decision-making factors above, and I don’t think so many banks would have consolidated investment banking operations and private wealth management activities. In fact, I wouldn’t be surprised to see banks with large private wealth management businesses looking to undo these brand consolidations in order to create risk-managing separations over the next 2-3 years.

Beyond brand strategy, however, reputation risk also needs a new mindset going forwards.

In the past, reputation has largely been silo’d within the business. On the operational side, risk is a technical discipline where risk/reward decisions are calculated. On the HR side, risk is a behavioral equation to be mitigated by policies and adherence to values. On the communications side (both marketing and corporate communications) reputation risk is something to be mitigated by getting out ahead and projecting an image of success, competence and of admiration.

The challenge is not that these are wrong interpretations, but instead that they have to work much more in sync with each other.

Instead of thinking of reputation in separate ways, I think we need to consider reputation in terms of layers:

  1. The operational layer.
    This sits at the core, because very simply some business areas are inherently more risky than others. Understanding where the operational risk lies is central to considering how to manage reputation, whether or not to use multiple brands to do so, and what to do in the event of a crisis.
  2. The cultural layer.
    In this layer, the key is to set expectations for what is and is not expected, and accept that this may in fact differ depending on the amount of operational risk being taken.
  3. The communications layer.
    In this layer, the key is to focus on the areas of genuine value to be projected, and to create scenario responses to the worst potential impacts on reputation. These need to be developed with representatives of both the operational and cultural layer. While you can do much to mitigate reputation risk and build a strong reputation, it will be the job of the communication layer to deal with the fallout of something catastrophic happening. Successfully navigating this is likely to be much easier if you’ve already practiced your responses using disaster scenarios. In some senses, this will be almost like military exercises for corporations.

In our instant response, 24/7 world, reputation risk is not going away. In fact, it will only become more and more difficult to manage.

Against this, the ability to take reputation risk into account when making big brand decisions, and then push it down to scenarios of the “unthinkable” are going to become increasingly important.

And hopefully, if fundamental brand strategy decisions were made with risk in mind, and strong response mechanisms trained, then reputation risk can become much, much less of a risk to the business.

Image borrowed from here

Collaboration. It’s like Prozac for corporations

The overwhelming meme of the moment is that collaboration is the new key to value. It will cure us of our sins. It will change the world.

All the challenges of innovation, marketing, brand, agencies and of business in general will be solved if we can all be just be that-little-bit-more-collaborative.

The problem is that it won’t work. Collaboration creates compromise and compromise blunts the edges of the brilliant.

Collaboration is the corporate equivalent of Prozac. By eliminating the extreme lows, you also eliminate the extreme highs. Which is a really big problem if you rely on those highs to cut through and make a difference.

There are two aspects of the idea that collaboration is the answer which are flat out dangerous:

  1. Collaboration will spare us the need for more radical organizational surgery. I’m sorry, but that’s a pretty wrong-headed way to think. A business landscape that has shifted radically doesn’t need collaboration between the now-defunct structures of the past. What it needs are new structures that adequately meet the new needs of the market and correctly align the incentives of all participants.
  2. Collaboration will spare us the need for real expertise. This reinforces today’s dangerously populist view that expertise is no longer necessary. That in a world where everyone can invent and create, that we no longer need experts in invention or creation. Yet look at the fruits of this. Have we seen greater creativity or invention from the explosion in crowdsourced advertising? In a single word, no. Have we seen an amazing product created by a crowdsourced team of consumer advocates. Again, no.

In fact, what we tend to see are pretty basic derivations of existing themes rather than brilliant departures.

While MyStarbucksidea.com might be an interesting example of collaboration, it isn’t because it will change the world. Rather it’s because it gives Starbucks a roadmap for incremental improvement. This fundamentally isn’t invention, it’s a beautiful new form of customer driven TQM.

Of course, this shouldn’t surprise us. After all most of the world’s most amazing inventions and inventors were written off as crazy before they became successful. And let’s not forget that a hell of a lot of them didn’t play well with others.

Call me old fashioned, but I actually think expertise still matters, vision still matters, leadership still matters, risk taking still matters and brilliant individuals and their brilliant ideas fundamentally still matter.

Now, of course collaboration is necessary to get things done. I’m not advocating on behalf of the brilliant asshole here. Instead, what I’m saying is that collaboration alone is not enough, it’s not everything. While collaborating nicely with each other might feel good at the time, like Prozac it won’t fundamentally solve any of the tough problems on it’s own. That still requires vision, guts and brilliant people.

Let’s face it, the iPhone, so ironically beloved of the advocates of collaboration-as-the-answer is patently not the fruit of collaboration. (That would actually be an Android phone. Probably running Cyanogen Mod) No, the iPhone is the fruit of single minded leadership and a highly performing organization clearly focused on an uncompromised end goal.

And that’s what it would be great to see more of out there. More people prepared to get off the corporate Prozac, admit that the benefits of collaboration might in fact be limited, and instead choose to focus their energies on coming up with things that are truly brilliant.

If only I could do it myself. Unfortunately, I’m stuck with trying to be a good collaborator…

 

 

Image borrowed from: https://pworthington.files.wordpress.com/2011/10/collaboration.jpg?w=300

Products, Ventures & What I Learned

Prior to leaving Wolff Olins, two of our long running discussions related to the importance of product and technology relative to brand and the need for the agency to experiment with new business models beyond the traditional project/billable time mentality.

Although these were generally two separate conversations, there were some of us who believed quite fundamentally that the gap between product, brand and technology is narrowing and that in the future only cohesive experiences that connect these dots will win.

Rather than continue to talk about it, we decided to do something about it and experiment with creating something for ourselves rather than for a specific client.

We called the program “Project Venture”, and recently the first product from this approach was launched. Whtespace is a collaborative email journal designed to help people curate and navigate the web. It’s really great and you should check it out.

However, rather than get into the details of the product itself I thought I’d write about some of the learnings that came out of the initial process, which might help others considering a similar approach.

The overall hypothesis that we worked from was that we could identify an idea for a new digital product/business and a founding team from within Wolff Olins. That we could then coach and fund this team to quickly create a product, which we could then launch into the world in order to understand whether or not it would be viable. If viable, we’d then investigate potentially attracting further funding or maybe even sell it to someone.

This is what I learned:

1. Put learning at the heart
There’s no guarantee that anything you create will make any money. 75% of all new products fail, less than 5% of all startups succeed. With those kind of odds stacked against you, there has to be an inherent value beyond making money. For us, the experience of identifying a potential product, building it and getting it out into the world was an incredible learning opportunity. It was a chance to put theory into practice and gain a deeper understanding of some of our clients issues. Putting this at the heart, rather than a revenue target, freed the process up and took a tremendous amount of pressure off of what was essentially an experiment. We simply didn’t know what the final output would look like. This isn’t to say that we didn’t want to do something that would make money, we did. We just didn’t put undue pressure on it having to succeed straight off the bat. I’m glad we did that, and I think the product is better for it.

2. People generally aren’t entrepreneurs just waiting to be released
There is an easy to make, but flawed assumption, that people in creative businesses are inherently entrepreneurial and that they just need the right opportunity to release it into the world.

The truth is rather more complicated. Rather than having a drawer full of business ideas waiting to be brought out, we instead found that although people were excited they were also quite intimidated. They were concerned that their ideas perhaps weren’t very good, or that they didn’t know how to be entrepreneurial.

To get past this, we created a very simple brief:

“What is a problem in your life that you think needs to be solved?”

We weren’t asking people to figure out the next Google or Facebook, but we did want them to think about things they’d like to see improved in their own life.

3. Coaching beats competition
In our original plan, we wanted to do things in a very pure startup and VC kind of way. We wanted people to come up with ideas that they would then have to “pitch” to a venture board. Because of point 2 above, we quickly realized that we’d have to abandon this approach. Instead of “pitching” ideas we instead created drop-in casual advice sessions where people or teams could discuss their ideas and be coached in how to tweak them into something really interesting.

After a few weeks of these coaching sessions we had six groups who felt they had really good ideas they wanted to share with the rest of the office. At that point, we turned their five-minute pitch presentations into a bit of fun and asked everyone viewing for anonymous views on their preference.

While a small venture board (made up of people from different seniority levels from most junior to most senior) made the final decision, everyone got to participate in this entire stage of the process.

4. Get help
Wolff Olins weren’t a digital product development company, so we had fairly limited capabilities when it came to building a product and keeping everything under control. To help, we reached out to the very nice folks over at Prehype. Their approach meant that we could deliver the coaching sessions, and focus not just an idea with commercial potential but also something we could build in a very lean way with a limited financial commitment.

Getting this kind of outside help was also beneficial in other ways. It gave an honest broker aspect to the process, gave us new and different insights and created a learning and coaching environment for skills that we didn’t already have.

5. Make everything as clear as you can upfront
As we started the process, there were some areas we didn’t have answers to. The biggest was the question of who owned what and who would benefit if it made any money. Unfortunately, we had some unanticipated accounting and financial issues here that really held up getting to a definitive answer (Which to be honest, I’m not really qualified to get in to).

The net result, unfortunately, was a lack of clarity to people in the organization around what they’d get out of it should their idea be chosen. I guess its human nature to assume you have a multi-million dollar idea even if the chances of its success are extremely low!

If doing it over again, I’d recommend being clear upfront about who owns what, and also be clear that the value proposition to the employee isn’t just about what they get out of it financially, but also the learning they get from what the agency is putting in.

In our case, Wolff Olins was funding the process, the employee time, the Prehype assistance, a development budget and some financial support for running the business post-launch.

Effectively, this was a zero risk proposition to the employee, with the opportunity for the winning team to learn from top digital product people how to get something new out into the world.

I think the overall driver of success though lay how flexible we were. When things weren’t working we changed them, creating an extremely positive experience in the process. We learned a lot, we had six really great ideas to choose from, and the one which was chosen has turned into a really interesting version 1 product.

I know that Wolff Olins intends to continue doing more of this in the future, and that everyone involved has learned tremendously about how to align brand and product in a new way.

I’m certainly very proud of everyone who participated. I know that I learned a lot, and I really look forward to Whtespace having great success in the future.

Image borrowed from http://www.whtespace.com

You Still Own Your Brand. Best Act That Way

Contrary to popular opinion your brand doesn’t belong to your customer it belongs to you. No, seriously it really does. Just ask your finance team. I’m pretty sure they’ll tell you it’s an asset of the business. A powerful and valuable one at that.

This isn’t to say that how your brand lives in the world isn’t changing fundamentally. It is. And this isn’t meant to be a tongue in cheek statement. I’m deadly serious. You should be too. Because if you really believe that your brand belongs to your customer you might just start abdicating responsibility for your brand. And doing that will lead to nothing but trouble.

Now I don’t blame people for thinking like this. As the world inverts and connected technologies become cheaper and more ubiquitous, your customer is doing three things they couldn’t do before:

  1. They’re accessing more information about you and about what you are selling than ever before.
  2. They’re talking to each other about you and what you are selling, without necessarily including you in the conversation
  3. They’re creating media by and for themselves, faster, cheaper and to a higher standard of quality than ever before (HD video and editing on an iPhone anyone?)

Combine these factors and you begin to see the brand landscape we’re seeing all around us. One where people “hi-jack” brands, bad-mouth, celebrate them or choose to co-opt them for their own purposes.

Fantastic. You should be thrilled. At least people are paying attention. (And believe me, there are a lot of brands out there who’d love to be noticed let alone be talked about)

The reality is that while you used to have to do everything for yourself (with assistance from your agencies and media partners), today you don’t.

If treated well, your customer will do a lot of work for you. Gladly. And for free.

This doesn’t give them ownership of the brand, although it will hopefully make them closer to it. Your job is still to call the shots and decide what the brand will actually do and the direction it will take. It’s also your job to create the context and perhaps the platforms upon which your customers can better participate.

While you can’t dictate what your customer will say about you (and in fact never could), you can decide how you will use what they say about you.

This self-determination is the critical difference between the “customer is in charge” philosophy and mine. Why?  Because I truly believe that brands who abdicate responsibility for leading their customers will become nothing more than the passive victims of their customers. And as a result, they will fail.

Once you get past the volatility of change, the truth is that brands today have more levers of influence over their customer than they’ve ever had. They’re just new levers that need to be thought of a little differently. Three of these are below:

1. Active Listening
Technology that enables you to listen in on your customer and how they’re reacting to your brand is evolving rapidly.  We’re almost at the point where you can have as much or as little detail as you like. The real value in listening isn’t of course in the listening. Instead it’s in the actions you choose to take after listening. If you subscribe to the “customer is in charge” school then you run the risk of constantly putting out fires and reacting to all of your customers all of the time. Even the one’s who disagree with each other. Your job shouldn’t be to do that. Instead, it should be to actively listen and respond in ways that push forwards in the direction of your brand. Not to ignore people, but simply to lead them and navigate this new environment.

2. Crowdsourcing
Crowdsourcing can either be a fantastic tool or a terrible disaster depending on how it is used. The real value isn’t so much in the answers that come back, but rather in the brief you create and how well you curate these answers. This simple fact means crowdsourcing is in no way an exercise where the “customer decides”. The customer clearly isn’t deciding. You are. The customer is giving you options, viewpoints and potential answers all based upon your direction, and from which you get to choose. Done well, this is very powerful. Done poorly, you risk lurching from one seemingly random suggestion to the other.

3. Platforms for action
If your customer likes to create as well as consume, then why not give them the platform to do this? Again, you decide what this platform will be and the context in which it will work. The customer decides what they will do with it. I’m an unabashed fan of Demoslam from Google, but there are many examples of creating platforms, which allow greater consumer participation. Nike+ in running or the much heralded Pepsi Refresh campaign to name just two. In all cases, you decide on the platform and the ‘rules’ of engagement. The customer decides whether and how to engage.

If you think of your brand as a universe, then you get to decide the physics, make up, characters and overall plotlines within that universe. If your customer likes this universe, and it sparks their imaginations, they can then participate and decide how the stories will get played out.

Of course if they don’t like the universe then you’ll know about it: bad service, crappy products, lame advertising and poor experiences have the same effect as inconsistent characters, weak storylines and confusing physics. But then these are things you shouldn’t be doing anyway.

So to finish, please stop thinking that the customer is in charge. They’re not. Please stop thinking you have few levers of influence over them. You actually have many. And finally, please stop thinking that you have little self-determination. Because if you get it right, you’re absolutely the one calling the shots.

Just ask Apple.

 

Image borrowed from:

 

Branding In An Inverted World

Thinking about the landscape for brand building today is a bit like looking at an upside down map of the world. There are lots of things you already know about it. Countries, continents, oceans and seas, but at the same time everything looks quite unfamiliar.

Navigating this new and inverted world means you have to look at things very differently and try to understand the forces that are driving the change.

One of these forces is so fundamental that it actually enables many others. I describe it as being where the traditional information asymmetries have been inverted.

Put more simply, while we as individuals used to have less information than brand owners, today we often have more.

Intuitively we all know the truth in this. For an easy example, just think about how buying a car has been transformed in recent years. Most car buyers today walk into the car dealership with more knowledge of the car they are considering than the dealer does – from how powerful the engine is, to how reliable it should be, to the best pricing deals within a 20 mile radius, to how many of their friends think it’s a great car.

What is less understood is that this traditional information asymmetry has in fact been the foundation of the past 50 years or so of marketing activity and brand thinking.

In the past, the cost of information was high in terms of both time and money. Today it is free. When the cost of information is high, you’re not likely to search it out very often. This reality created the concept of the sales funnel. This foundational assumption holds that a consumer has only a limited number of brands they are likely to consider for any purchase. Depending on the value and emotional significance of said purchase, they will only conduct deeper information searches within this pre-existing consideration set. If we use our car example, the assumption would be that a consumer might only consider from within a subset of the total choices on offer at their price-point and car type, for example Chevy, Dodge, Ford, Chrysler and Toyota and as a result, exclude such brands as Honda, Hyundai, Volkswagon or BMW.

In this world the use of advertising spend and promotion creates a barrier to entry and an exclusionary force preventing new brands from entering the consideration set. Historically, having this power has at times allowed inferior products from better known (and hence considered) brands to triumph over superior products from lesser known (and hence not considered) brands.

However, as David Edelman noted in the Harvard Business Review the assumed funnel no longer exists. Instead the consumer today is constantly flexing their consideration choices throughout the purchase process, sometimes increasing the number of considered brands, sometimes decreasing them, and sometimes changing their minds at the very last minute. He calls this new mode of purchase the Consumer Decision Journey, and the article is well worth a read.

When Fred Wilson of Union Square Ventures stated that “I believe that marketing is what you do when your product or service sucks” I’d say it was this old world that is currently breaking down that he was describing.

Living in an inverted world where the information search is free and the traditional sales funnel no longer exists means brands now need to consider some very different things:

1. That loyalty is something to be earned daily
It isn’t that consumers have intrinsically become less loyal. Instead, the elimination of cost (in money and time) from the information search has increased their consideration of other brands with potentially superior products. In this world a brand owner needs to consider what they can do for that customer to earn their loyalty on a daily basis, and not simply assume that past purchase behavior will translate into the future.

It’s no surprise that Apple, Amazon and Zappo’s (who Amazon purchased) have created rabidly loyal customers at exactly the same time as other have bemoaned the decline in loyalty. In each case, their strategies for earning loyalty have focused on consistently delighting their customer. For Apple, this is through building innovative and desirable new products supported by Applecare,  iTunes and the App Store. For Amazon and Zappo’s, this has been through superior customer service and customer relationship management.

2. That inferior products, no matter how strong the brand, won’t succeed
Just ask GM and Chrysler. The days when an inferior product from a better known brand could win over a potentially superior product from a lesser known brand are over forever. Without the Internet, it’s unlikely that brands such as Vizio or Hyundai could have so radically and quickly disrupted existing markets and consumer considerations sets. But they did, and it will happen again to anyone who isn’t focused intently on continuous product and service innovation.

3. That you need to consider the entirity of an increasingly non-linear sales path
The days of the sales funnel were relatively straightforward, and easy to map, particularly in terms of when and where people fell out of the funnel and what you needed to do to become more relavent relative to your competition. In fact sales funnel analysis was (and still is) a staple offer from many marketing consultancies.

Today, we’ve swapped a linear funnel for an often highly non-linear ( and sometimes seemingly completely irrational) decision making journey.

In this world, all channels of communication and of information search, particularly the explosion of digital one’s that exist around the brand become incredibly important.

Today, for example, it may be that having someone providing customer service on a major 3rd party product-category forum be a more important driver of final sale than any of your traditional marketing communications.

Image borrowed from: http://www.geeksix.com/wp-content/uploads/2010/03/upside-down-world-map2.gif

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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