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.

Why Marketing Should Be Your Friend

I have a soft-spot for Box. I think Aaron Levie and his team are building a really interesting and valuable business. One with a simple proposition that is succeeding against multiple 800lb gorillas in an increasingly competitive cloud storage and sharing environment. Impressive stuff.

One of the major reasons they’re succeeding is that they’re really smart marketers.

Now, I know this statement is going to be about as popular as passing gas in an elevator for some people, but please bear with me for a second.

Lets start by heading back around 50 years to quote the late, great, Peter Drucker:

“The aim of marketing is to make selling superfluous. [It] … is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy.”

The final sentence here is key. What Box have been so good at is creating customers who are ready to buy.

They do this by getting individuals to sign up for a free Box account, thereby familiarizing themselves with a product type they’d never considered they needed before. Once there is a large enough set of individuals from any one organization using (and demanding) the product, the Box sell to the enterprise buyer for that organization becomes as easy as saying “why not buy a license so that you control the use of the product your people are already using anyway? Secure and managed for you, no change in behavior for them.”

While the Box product is great, the above approach has nothing to do with product and everything to do with marketing. In Drucker’s words, they’re creating a customer who is ready to buy. And if you consider how conservative enterprise IT buyers have traditionally been, this approach is pure genious. In fact, in hindsight, it may have been the only way for them to succeed in the enterprise space.

Of course, I recently saw an article with the following headline: “How Box built a multi-million dollar business without spending a dime on marketing”.

The truth is that of course Box spent money on marketing. What they didn’t spend money on is advertising. Instead of going out there and spending on media placement, they gave the product away for free. Giving the product away for free is in fact a marketing cost. The revenue you forgo up by giving the product away for free is a pure cost of customer acquisition.

The difference, and why this really matters for startups, is that money foregone is very different from money spent. If you have $10m to spend building a product (and a business) you’d obviuously be foolish to spend that $10m on advertising. You probably can, however, afford to give away $10m worth of free product (particularly since the marginal cost per unit in the digital environment is generally very low). In effect doubling the available budget for your business. $10m on the product, $10m on customer acquisition. Navigating this course is exactly what Box have done so well.

Looking forwards, we can look again at Drucker to find another nugget of marketing wisdom:

“Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

This quote is again important when we look at the direction Box are innovating in. A recent article stated that they are working with their clients to create cross-platform solutions. The unmet need is simple. The modern day enterprise environment is multi-platform (particularly when we take mobile into account). However, the major cloud competitors all have their own platforms they want you to use exclusively, meaning little or no interest in building cross-platform solutions. (As cross-platform solutions mean lost revenue for them)

By working with their clients to innovate cross-platform, marketing is in fact driving product innovation for Box. Not marketing as advertising. But marketing as value creation. Marketing designed to create a customer by creating a product that will, in effect, sell itself.

Unfortunately, a fundamental misunderstanding of what marketing is has become pervasive today, particularly in this startup space. Instead of value creation (creating a customer) many people see marketing as a pure cost (selling me crap products I don’t want). And while this may be true for some, particularly some of the biggest advertisers, the advantages of marketing as value creation are so strong that we should be careful not to fall into this mental trap.

My advice for anyone who wants to replicate some of the success of Box is simple. Get past the idea that marketing is your enemy. Instead focus on how you will create a customer, how deeply you can understand this customer and how you can create a product that meets their needs so well that it makes selling unnecessary.

Get this right and you too will be a great marketer.

Oh, and everyone should try to read Peter Drucker if they can. He said it better than I ever could a very long time ago.

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

Why Positioning Must Evolve

Positioning has had a long and storied history. The original concept, like much strategic thinking (including the word strategy) came from the world of the military where armies would quite literally seek to take defensible positions from which to fight. The origins of modern positioning came from Jack Trout in the late 1960’s. And as Vijay Govindarajan and Chris Trimble note in their book “The Other Side of Innovation: Solving The Execution Challenge” the height of positioning as a business strategy came in the 1980’s, when businesses sought the creation of defensible positions from which to compete.

However, as they go on to note, strategic positioning started to unravel when it became apparent that no position is defensible in the long run. There will always be a competitor or substitute that will come along and destroy value. It is this fact that leads them to observe that modern day business strategies have increasingly moved from defense to offense, and in specific terms toward a dynamic approach focused on constantly innovating new sources of value. For two very successful proponents of exactly this approach just think Apple or Google.

However, while the thinking on business strategy has clearly evolved over time, it isn’t clear that the thinking on brand strategy has kept up. Instead of constant innovation, the idea of  how you “position” a brand has instead become locked into various static models that aren’t taking account of the same shifts.

Unfortunately, this means the way positioning is thought about today has three potentially fatal flaws:

  1. The positioning is almost always arrived at in the context of the existing competitive set
  2. The positioning almost always focuses on something that is “defensible” relative to this competitive set
  3. The positioning is almost always a static statement rather than a dynamic concept

The flaw is not only that nothing is defensible in the long run, but increasingly that businesses do not know who their competitors will be from one year to the next. As the business cycle has sped up and technology has massively decreased the costs of entry across many industries, new competitors are today springing up overnight.

If positioning is to survive as a strategic concept (and I believe that it should) then it needs to evolve beyond these three constraints. Instead of focusing around the competition, it should instead become much more focused on the customer. And beyond focusing on what the brand can defend, it should instead focus on what the brand can create. In order to achieve both of these things, the positioning should also be focused much more closely on the real underlying strengths of the business than is often the case.

In working with brands in the technology space who face radical, sometimes tectonic competitive shifts both faster and more regularly than other industries, I’ve found the following three things to be really helpful when considering a positioning (or re-positioning)

1. Define the role that the brand intends to play in the lives of its customer. Focus this more on relevance to the customer than differentiation from the existing competitive set. What is it about this brand that customers will find both enticing and energizing? Within this, think through the problems you will be solving for the customer and the pain points you will be taking away, and consider bringing the positioning much closer to a value proposition.

2. Define the experience the brand wishes to create. Beyond a product or a way of communicating, what will the experience of being a customer of this brand be like? What are the businesses own strengths and capabilities that will translate into experience innovation over time? Think of this experience less as a statement and more as a narrative.

3. Think of the positioning as a journey and not a destination. Rather than a static thought, work on what the narrative might become over time. Consider the direction the positioning suggests and the journey the brand will need to be on moving forwards. Think through the kinds of things a business like this might do in the future, and how the positioning will become a platform for this kind of change.

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Road image borrowed from http://www.milienzo.com/blogimages/roadahead.jpg

From Products To Services For Growth

It’s interesting that recently P&G has started moving some of it’s most venerable product brands into new service categories. First with Mr. Clean branded car washes, and now with Tide branded Dry Cleaning services. Last year, we also saw Mercedes Benz create their Driving Academy focused on improving the current 90% of all car accidents that are caused by preventable driver error.

On one level this shift into services makes perfect sense. Many service categories are fragmented and suffer from both variable quality problems and inconsistent pricing. A branded champion under these circumstances has the potential to create real disruption. It also makes sense from a consumer standpoint. We’ve seen a phenomenon over the past few years that where loyalty has tended to decline over time (primarily due to the Internet and how easy it is to check out alternatives), consideration has tended to increase (again, due to how easy it is to check out whether something is good or not). Basically we’re in a world where you have to earn your loyalty, but if you do then people are more likely than they have ever been to consider you for other things.

In this case, Mr Clean, Tide and Mercedes are all brands which bring a lot of trust and capability to the table.

The business rationale also makes sense. Clearly these are all brands whose Western markets are facing flat to declining growth. At this point, the logical question becomes one of getting the most out of existing assets (in these cases, the brands) in order to drive growth. Services make sense not only due to their fragmentation, variable quality and lack of brand presence, but also because of their business models. They don’t require large scale plant and machinery and franchising options create the potential to scale rapidly.

With all this being the case then, the question should really be why more product based brands aren’t leveraging themselves into service categories for growth?

I think there may be two related factors at play preventing this.

The first is simply that a service business model is too far from the core operational strength of most product focused corporations. While it may make sense for a consumer, an organization built around the discipline of the things that they produce finds it hard to deal with a services business focused on services that are consumed at the same time as they are produced. Also, while these corporations may understand the nature of things, they don’t necessarily understand the nature of people. And finally on this point, these firms rarely have any direct connection to the consumer. Their businesses tend to work through intermediaries such as retailers (in the case of Mr Clean and Tide) or dealers (in the case of Mercedes).

The second factor, closely allied to the first, is that by the time a brand has achieved maximum strength, it is also likely to be managed in it’s most conservative fashion. Put simply, the discipline of tightly managing a large brand in a mature market tends to attract very different managers than brands which are driving the growth of markets. Brands which have over time shifted from being entrepreneurially driven to being administratively driven tend to find it very hard to get back to an entrepreneurial mode.

However, I do believe that with major well known firms such as P&G and Mercedes creating new services businesses that we’ll see much more services based brand leverage as a growth strategy in 2011 and 2012.

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