By 2020, advertising as we know it 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, the way we build brands will have transformed significantly. Instead of relying on advertising to drive extrinsic perceptions, brands will 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 pervasive 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 data sets than we can imagine today.
What will not have changed is the pressure on businesses to deliver results, hit sales targets, and deliver growth. By 2020, these pressures will be intense. Product cycles will have shortened still further, competition become fiercer, 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 tomorrow’s advertising solutions. Tracking which advertisements drive the most sales to which people, when.
By 2020, the winning advertising methods will be those that compress the time between the advertising impression and the transaction being made, and do it in a highly measurable and predictable way.
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. 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 brand’s 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 touch points, 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 touch point 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 its use or in the things they can do, and content that entertains them around the core proposition of the brand.
Often this content will be socially, or third-party driven, necessitating new skills in curation, editing and presentation.
Increasingly by 2020, informing, educating and entertaining audiences will happen through channels that are controlled by the brands themselves, rather than channels they pay to advertise on, and where customers have chosen to actively 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 new models of advertising agency.
This advertising will be ubiquitous and hard to opt-out of. Instead, brands will be built through new tools built through Total Experience Management, marketing products and content. The brands that do this will increasingly become opt-in, controlling their own channels to the consumer. Customers will go to these channels, actively seeking the emotional benefits these brands provide.
Karl Heiselman is CEO of Wolff Olins. Paul Worthington, strategic advisor/former head of strategy at Wolff Olins also contributed to this piece.
As the world shifts ever faster into the digital realm, we’ve spent a lot of time asking ourselves and working with clients on the questions this raises relative to their brands.
One of the key questions raised by the digital age is about the level of integration between product and brand. In simple terms how connected should they be? How mutually reinforcing?
Traditional marketing thinking would tell you that to be successful, the brand has to elevate above the product and be somewhat aspirational. However in a digital world where useful is the new cool what we observe suggests that this isn’t always the case.
For a simple example just look to Google. Is the Google brand elevated beyond the Google product, or does the Google product create the expectation and underlying narrative for the Google brand?
We believe it is largely the latter, so we decided to create our own product in order to see what we could build for ourselves.
Over the past couple of months we’ve been working with the really awesome digital product specialists Henrik and Philip from Prehype. With their assistance, we’ve been piloting our own internal VC project in New York. This is designed to identify and then create a digital product, where the product will form the underlying expectation for the brand.
We’re really excited about this pilot for lots of reasons. First, the best way to learn about digital products and the agile methods necessary for creating them is to build them for yourself. Second, because kicking off the process gave the office a real entrepreneurial energy boost at the end of the year. Third, because of the really excellent ideas people came up with (not least the idea we’re currently pursuing). And finally, because we really enjoy collaborating with folks like Prehype.
As we continue along this journey, seeking to build a brand into the product itself, we’ll post more progress reports here on the blog. So please keep an eye out.
There is a huge opportunity in the world for brands to both build trust and create new revenues. And while the world may be getting more complex, this opportunity is in essence very simple: To do good things.
Trust in corporations to do what is right is hovering around a historically weak level. This is no surprise in a post Enron, post financial crisis, post BP world. However, what drives improvements in trust appears to be shifting from a narrow view around product and service quality to a broader view around transparency and honesty.
Against this backdrop, we also have huge social problems to deal with. Take the single issue of childhood obesity. Here, a third of America’s children are clinically obese, we have an epidemic of diabetes to deal with, and worst of all we have the first generation in 100 years who’s parents may systematically outlive their children.
Clearly, helping to reverse or even just reduce levels of childhood obesity is not just a worthy program of social good, but also a huge commercial opportunity. An opportunity with the potential to re-instill trust in those brands who pursue it. A win win, rather than simply a win.
The beauty is that we have the ingredients at our fingertips to make radical change happen. We know many of the reasons why our children have become so fat. One reason they’re fat is because brands have become so good at innovating, marketing and branding things that taste great, but aren’t very good for us.
There’s no reason in the world that we can’t use the exact same techniques and focus on things that are good for us. There’s no reason we can’t brand broccoli to make it sexy. After all, it’s no more a commodity than caramel flavored fizzy water spiked with high fructose corn syrup. Equally, there’s no reason we can’t use technologies like Xbox Kinect to create entirely new sports that people can engage with from their living room. Connected online, through Facebook, phone and more.
And childhood obesity is only a single datapoint. What about education, healthcare, managing our finances, reducing our impact on the planet and finding new ways to wean ourselves off of oil? The list goes on.
The commercial and social opportunities are immense. The solutions only as limited as our imagination’s. Just think about amazing that is. To do something good, make yourself feel good, tap into real commercial opportunity and rebuild trust in your corporation. And maybe even leave a legacy.
It’s not that often I talk about new websites for corporate holding companies, but I have to admit the new MDC Partners site is great, and for lots of reasons.
MDC have taken their idea - that they are where the best talent lives (which of course I’d have to dispute somewhat) and made a demonstration of it. By demonstrating rather than communicating, they’re showing that they ‘get’ digital and our increasingly mobile, socially connected world. They’re also showing quite viscerally that their business is about the people, and wrapped it all in a package that doesn’t take itself at all seriously.
No easy feat.
In simple terms this is a potentially brilliant move in an increasingly fragmented world where the holding companies often matter to clients.
It’s not perfect, and who knows it’s longevity, but bravo for putting something interesting and different into the world.
By way of comparison, take a look at some of the other Marketing Services holding company sites: Omnicom (which Wolff Olins is a part of) WPP, Interpublic and Publicis.
I was interviewed last week by Brand Week magazine who were writing an article about the sales success of Special K over the past year.
I’ve never really considered myself a CPG expert, we just don’t do that much work in this arena, but what really interested me about the subject is that this is a typical low-growth category.
The challenge for Special K, and anyone else in similar categories, is that innovations in new flavors and product types are usually destined to create marginal improvements in revenue at best, and dangerously fragmented low (or no) profitability extensions at worst.
Add to this the unsustainable levels of promotional spend that are required to create uplifts in market share and you’ve got some pretty dangerous economic factors at play:
- Micro segmentation of brand/product portfolios creating chaos on the shelf and increased marketing management and operational costs
- Unsustainable advertising costs and value destroying sales promotions designed to drive share (but usually at the expense of profits)
What this means is that it doesn’t really matter how good your advertising creative is, or how engaged in your campaign the consumer becomes, the net result tends to be a falling back to the status quo once the unsustainable level of marketing spend reduces to normal levels.
Which creates a massive growth conundrum faced by many, many brands. What do you do when incremental product extensions and marketing promotions are no longer enough to drive meaningful and sustainable growth?
Clearly there isn’t a silver bullet answer for this (if there was, I wouldn’t be here writing this) but one solution that more brands should consider is the leverage of their brand into new, higher growth categories that may require a new business model.
Mercedes Driving Academy is a great example of this that Wolff Olins worked with Mercedes to create. Here, the idea is to leverage existing infrastructure owned by Mercedes (test track and cars) and leverage it into a completely different growth model (a service to provide driving instruction for children)
One wonders what the Special K brand could leverage into?
If you take the view that Special K isn’t really a cereal or food brand, but is instead about healthy living, then this is a brand which could potentially leverage into dieting, fitness, wellness and more.
What the growth potential of these is I don’t know. But I suspect that if the US Military see obesity as a risk to national security because 27% of potential solidiers are too fat to fight, then there’s probably significant upside potential.
And if memory serves, I believe Curves was the fastest growing franchise in America for some time.
So, with the launch of the new iPhone 4 yesterday the big question shouldn’t be whether we’ll all get one. I’m sure we will.
While the hardware looks typically powerful, beautiful and lustworthy it seems that Apple has a major cloud problem.
Syncing with iTunes has become such an anachronistic idea that I’m surprised that it comes from Apple. If we weren’t already used to it and someone launched this today, there’s no doubt there’d be a lot of head scratching going on.
MobileMe, which is their attempt at cloud services is also pretty much terrible to use.
Ford, in contrast, just launched a pretty amazing cloud service to demonstrate what our lives will increasingly be like. It takes a Google maps address from your phone and connects it with your sat-nav via bluetooth, calculating the optimum route in the cloud. To quote their press release “Printing paper directions from a website is a relic in our digital age.”
Which, in a slightly roundabout way brings me to Microsoft.
Often written off in terms of the mobile market, there is no doubt that Microsoft let Apple, RIM and Android overtake them. As Steve Ballmer said, “we missed a whole cycle” which in technology terms is a huge statement.
However, as this article demonstrates, the new Windows Phone 7 is going to pack a major punch. Enterprise integration through Office and Exchange, the world’s largest gaming network through Xbox Live! and arguably superior entertainment software with Zune (including the definitely superior Zunepass).
The killer app, however, probably won’t be any of these directly. For the first time we’re going to see the whole Microsoft ecosystem in the hands of the consumer on their phone. And not only that, but MIcrosoft are betting on the cloud, and they are betting big.
Cloud services like the one described above from Ford (or the awesome Kin Studio) represent a level of utility we couldn’t have conceptualized even a couple of years ago, and will increasingly define what we look for in a phone.
Just like a computer, the hardware itself will quickly become something which you just don’t need to be any faster, bigger or better. Instead you’ll worry more about how useful it is and how easy it makes your life.
So while I’m sure that Apple will sell boatloads of their new phone, I’m much more interested in how the cloud will change the future.
And if Apple are going to win there, they’ll not just need a sexy new device that lets you make video calls, they’ll need to revolutionize their approach to the cloud.
Supply outweighs demand. This is the new reality. This is why best practices have become the enemy of any successful brand.
Following best practices in your product, service, marketing communications and overall experience simply achieves one result: commoditization.
Once you become a commodity you leave yourself with a single competitive advantage: price.
Price is a dangerous thing to compete on. Even WalMart has learned that price alone is not enough.
Industries obsessed with best practices have actively commoditized themselves. Just look at the airline industry.
The brands who are successful today are not following best practices, instead they are setting them.
They’ve understood the relationships they want to have, the systems of value they are trying to create and have worked hard to provide unique value in these areas.
It may not be everyone’s place to be a leader, but if your industry is one in which supply outweighs demand then you simply have no other choice.
The challenge is that the consultancies and agencies who service these industries thrive on the dissemination of best practices. Identifying them and aiding clients in delivering on them is easier and much more profitable than helping clients create something completely new. A situation that is undoubtedly better for the adviser than the advisee.
So the next time someone recommends an industry review of best practices, consider focusing less time and attention on what others are doing already and instead on what you could be doing uniquely.
Creating a definition of the word brand seems to be both the easiest and perhaps the hardest thing to do. The challenge is not that the existing definitions aren’t correct (or more accurately weren’t correct). The challenge is that the environment in which brands live is inherently Darwinian.
As the environment changes brands must adapt. Once brands have adapted enough then what you get are effectively new species - entities unlike what have gone before and that must now be defined in completely new ways.
This has been a constant process over time, but I think we could now define ourselves as being in the third age of brand.
1. USP
The first age was the product age. The environment was post war baby boom America and the defining factor was the rapid growth of the middle class.
In this age brands were built from functional attributes of the product, which spawned the concept of the Unique Selling Proposition or USP.
The technology that enabled this age of brand was television and the platform was television advertising.
In this age the Creative Director was invented and their role was to find creative ways to communicate this USP to the consuming public at large.
2. ESP
The second age was the marketing age. The environment was one of 1980’s excess and the growing demands of Generation X.
In this age the realization was that functional attributes were not enough. It spawned the concept of the Emotional Selling Proposition or ESP, which was defined through the mechanism of Brand Positioning - the technique of identifying and then owning an emotional territory for the brand.
The technology that enabled this age of brand was the desktop PC and the platform was consumer research.
In this age the Account Planner was invented, and their role was to more deeply understand consumer wants and needs in order to understand which emotions to manipulate for each of the brands audiences.
The second age represented a logical progression from the first. Marketing followed product. The connective tissue was that brand owners retained an information advantage relative to brand consumers. In both these ages an information asymmetry benefited the brand owner at the expense of the brand consumer.
3. XSP
Today we are in the third age, the experience age. The environment is one of unprecedented choice and transparency and the defining factor is a fickle Gen Y audience who demand more from less.
In this age brands must be built around their Experiential Selling Proposition (XSP). Unlike the simplicity of USP’s and ESP’s, the transparency of the third age demands that brands manage complex systems of value - understanding how all of the actions of the brand owner (product/service, societal, environmental, technological, marketing) interrelate to create the experience.
The technology that enables this age is the Internet and the platform is Social Media.
The definitive role that this age will invent is not yet clear, but so far we see Innovation leaders, Engagement leaders, Digital leaders, Social Media leaders and Experience leaders.
The fundamental and exciting shift is that the third age represents a sea change from the other two.
The brand owner no longer benefits from an information asymettry over the consumer. Instead this relationship has been reversed. As such, the old rules and indeed the very definition of how brands must behave in order to succeed has also changed.
The tools of brand positioning and advertising that have held such strength for so many years must now be replaced by both new tools and new rules.
XSP demands integration of product, service, social, environmental and marketing layers. It demands the creation of value across the system of the brand. And fundamentally it is built from a trust that brand owners will have to earn from their consumers on a daily basis.
The implications of this change for many brand advisers are potentially dire. Entire industries optimized for the more effective communication of a brands ESP now find themselves facing a systemic decline in efficacy and indeed value.
This will mean one of two things:
1. Brand advisers will need to focus less effort on how a brand communicates its ESP through marketing communications, instead focusing their efforts on helping brands to innovate across the entire system of the brand in order to generate revenue driving XSP.
2. Brand advisers who choose to remain focused on marketing communications will need to find ways of innovating and re-engineering their business model and offer for a lower value, lower fee world. Seeking structural change to create value both for themselves and the brand owner.
Wolff Olins have chosen to follow the first path: Our focus is increasingly on helping brands create new revenues and new value across the entire system of the experience.
Victors and Spoils on the other hand appears to represents an innovative new model designed to deliver the second.
Whichever model wins, whoever defines the new role(s) that will represent the third age, there is no doubt that this is an incredibly exciting time to play.
We may even get a new definition of what a brand is.
Today’s article about AOL on Fastcompany.com includes a quote we made about changing AOL’s name. The quote was that changing the name would have been the “lazy consultant” answer. I’d like to explain why in a little more detail.
The world we live in today is more transparent than ever. As a result, changing names has become a much more sensitive topic than it used to be. It will never be the ‘fresh start’ as is often claimed, as the court of online opinion will be swift to point out who you really are, and to ask the question “what have you got to hide?”
AOL is a controversial brand for many reasons. Against this, changing the name would simply have been perceived as a defensive move, a weak position from which to enter life as a newly independent company. Had the name have been changed, the very same people who today say it should be changed, would instead be highlighting the name change as a “desperate move” to break with the past.
AOL are not Altria. They don’t make products that kill people. Their problem isn’t fundamentally that they are hated. Their problem is one of relavence and of perceptions. Their future is as a content brand, not an access brand. That had to be our singular point of focus.
AOL also has a huge strength in that everyone already knows who they are. If you change the name, you introduce the significant cost of building as much awareness all over again - money that instead will be better spent on developing the AOL product experience.
In sticking with AOL, they’re not hiding from anything. They’re stepping into the future with a confident stance, and focusing all of their attention on what really matters - creating amazing content experiences for their users.
There’s a question that floats around in Wolff Olins from time to time, and that I’m sure happens in other agencies too. Simply put, it’s whether or not we are enough of a ‘safe pair of hands’, and whether we need to do more to demonstrate this safety to potential clients. And while no client wants to make a bad choice in agency (can’t deliver, poor quality product, doesn’t listen to client etc.) the question is actually more dangerous than this.
When we ask ourselves whether or not we’re a safe enough pair of hands, what we are really asking is “should we be more conservative” and much more dangerously “should we be more like our competition”.
I think not, and here is why.
Sir George Bernard Shaw once said “The reasonable man adapts himself to the world; the unreasonable man persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.”
You could just as easily swap the word “brand” for the word “man” in that statement.
In perfecting the art of adapting themselves to the world, brands and the agencies that service these brands have found themselves becalmed on the sea of sameness we see around us.
To back up what any consumer already intuitively knows, recent research from Bain & Co. suggests that 80% of CEO’s believe their product to be differentiated, but only 8% of consumers agree. This is a staggering statement of failure.
To succeed in an environment where merely being adequate is not enough, I firmly believe that more brands need to become more unreasonable. Our world is one where taking no risk has become the biggest risk of all.
This means new innovation in products, services and experiences, and new approaches to how brands will present themselves to not only get noticed, but also to change how people think about brands.
So if the question is “are we a safe enough pair of hands” I’d answer by saying “it depends”. If you’re a brand that wants to adapt itself to the world and not take any risks then we’re probably not a very safe pair of hands.
On the other hand, if you’re a more unreasonable brand who intends to take calculated risks in order to drive progress, then I’d like to think we’re the safest pair of hands there is.
