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How New Media Is Eroding the Mass Interruption Model

Friday, March 4th, 2011


(Warning: This is a #longread that I’ve been marinating on for about a month now. I would highly advise you, dear reader, to take advantage of the Print functionality below or use a service such as Instapaper to enjoy when you have some good thinking time. Have a look and please share with others and share your thoughts in the comments!)

From time to time we all take some “facts” for granted and fail to question them until it is too late to adjust. For example, many of us grew up hearing the repeated fears that we will see human population grow at an increasing rate, and past the point of resource exhaustion. Futurists predicted that current growth trends would continue unchecked. This led to much worry over the past several decades, and even inspired the government of China to create a one-child-per-couple law.

But now we know better. We were silly to miss the fact that rising standards of living around the world would lead to a natural reduction in birth rates. While population is still growing, the warning signs are pointing in the opposite direction: Birth rates in some countries are declining at a rate below what is needed to sustain the current population, and some United Nations scenarios show that our population could shrink from a little more than 6 billion today to 2.3 billion by 2300. While there will be less traffic on your great-great-grandchildren’s daily commutes (by hover car, of course), a population implosion has its own dangers and would dramatically reorder societies and economies. I believe the false inevitability of population growth is mirrored by the false inevitability of advertising impression growth—and if you don’t readjust to this new reality, your business could be left in the past.

For ages we have heard the siren song of growing advertising spending, powered by the digital media shift and rise of ad-powered start-ups. Nearly everyone in our business excitedly shows upward trending prediction graphs of marketers’ new outlays on mobile, social, virtual gifts—you name it. Just this week Eric Schmidt, outgoing CEO of Google, spoke before the IAB to share his firm belief that the online display ad market—what many of us call “traditional digital” at this point—could rise to $200 billion in the near future.

This seemed high to me, so I went a-Googling to discover that J.P. Morgan claims today’s global display market is only $25 billion. Further, the global TV commercial market is $169 billion, and the entire advertising market has been fairly flat for years at a total of $500 billion. Unfortunately, Schmidt did not share his model with the IAB audience, but I do wonder how digital display advertising could grow at a 700% rate. In fact, I believe that the media trends we see today and increasingly in the future point to a world in which advertising spending might just shrink. Much like the false claims of population explosion, I believe a new world order is resetting old assumptions and the next evolution of marketing will usher in a world of fewer advertising interruptions. Heresy, I know, but please allow me to make my case…

Consumer Media Choices Make Mass Advertising Harder

One of the reasons we are accustomed to 3,000 ad messages per day and buy into the assumption that ad spending will only increase is that it has been relatively easy to create and distribute advertising over the last few decades. Mass media arrived in the form of newspapers, magazines, radio, and television. Following closely was the chance to do mass advertising; brands could create a print ad once and run it across a critical mass of millions of eyeballs. Enough people were moved to purchase products by these handful of ads that marketers could see sales as a direct consequence. Life was good.

But today, fundamental shifts in media habits and practices are making it much harder for mass marketers to hit their target audiences with impressions. Here are just some of the changes, which are only accelerating:

  • We have gone from three television channels to more than 1,000 on most cable systems. Brands now need to negotiate media buys across dozens of networks in order to hit a similar critical mass. Many are now spending more for less in a handful of “mass-like” television programs. For example, viewership of this year’s Academy Awards was down 10%, while the cost for a 30-second ad was up 20%. Because audience is not guaranteed for advertisers, this translates into a 33% year-over-year increase in the cost per impression.
  • People are multitasking in ways never seen before, and clearly at the expense of ad impression impact. In the near-past, some people flipped channels or walked out for a beer or bathroom break, but today’s TV viewer is habitually distracted. A recent study in the U.S. by Deloitte shows that 42% of people surf the ‘Net while watching, while 29% talk on the phone and 26% text.
  • Our consumers have decided to use digital technology to shift media to their needs—not marketers’ needs. Once a group of people are given freedom and control, a funny thing happens—they like it and want more of it. So it’s not a surprise that time shifting of media consumption has grown thanks to DVRs, DVDs, Netflix, and Read It Later. Conveniently, these media shifting tools allow the consumer to skip over advertising messages. When we had no choice but to watch or page through advertising, we couldn’t complain much—but once we have the freedom to control what media we consume, we guard it jealously—and advertising feels much more painful to sit through.  And no matter how “must see” a particular program is, there is simply too much other good content out there to hold people hostage to 20 minutes of commercials for every 40 minutes of content.
  • People are employing tools to actively avoid advertising. A rising number of people are moving from “passive” to “active” advertising avoidance thanks to simple technology. Take Adblock Plus, for example, a free plug-in for the Firefox browser that removes 100% of banner ads from a Web page—often putting useful content and links in the ads’ place. You might think this is deployed by only a small fringe group of users—and you would be wrong. Adblock Plus is used by 12 million people on average each day, and has been downloaded 112 million times (84,000 per day). Compare that to a tool that has gotten 10 times the hype: Foursquare has only about 600,000 daily users, and it is downloaded 25,000 times per day.
  • Government is limiting the number of impressions we see. Democratic governments usually listen when voter trends emerge. Europe continues to pass laws limiting everything from TV commercial time to product placement. In the U.S., the Do Not Call list was an overwhelming success, and now legislators are eagerly considering a Do Not Track law that will prevent banner ad targeting that our industry claims will help drive ad spend further.
  • And while new media offers new advertising opportunities, it is still exceedingly hard to make them work. Take gaming, for example. This is one of the media choices that young men are leaving TV for. And for years we have read hype about how in-game advertising networks would be the prime time of the future. But then reality caught up. Game companies have found that it is too hard to build big enough scale to win mass marketer dollars, and the people who have paid $60 for a game don’t like the idea of having additional ads forced upon them. The general manager of EA says, “We actually aren’t getting much from ad revenue at all”—while his competitor at Activision laments that, “There was a time when we thought advertising and sponsorship was a big opportunity…”

New Media Can Make Fewer Impressions

Aside from these fundamental changes in consumer behavior, there is a dramatic change in how new media alternatives behave in terms of advertising: They allow for a lot fewer impressions, often of poorer quality. Let me take this as the cue to tear down the age-old assumption that advertising dollars will follow consumers’ media attention. Again and again we have been subject to a PowerPoint slide showing the percentage of time people spend with various media in comparison to the percentage of marketers’ budgets that go against advertising in them. Most recently, industry guru Mary Meeker presented this argument in an otherwise strong deck about trends in mobile.

A lot of smart people have pointed to this “gap” in spending, but I have heard none of them spend as much as one additional slide considering what could lie behind it. Allow me: This is not an apples to apples comparison. Advertising spending amounts are guided by much more than how much time consumers choose to spend. First, there is the quality of the creative platform—TV and print allow a much higher-quality ad experience and are much more “interruptive” than typical banner ads. Second, a lot of marketers are still struggling to build ROI models for digital while they have decades of experience and test results from traditional ad platforms.

And the future of digital marketing does not necessarily spell more opportunities for closing this perceived gap. The shift to mobile offers a perfect case study. This is another specific area that has gotten prognosticators excited. eMarketer predicts mobile will be a $2.6 billion market in the U.S. by 2014, and one mobile expert, Paran Johar of Jumptap, claims that, “Mobile advertising will eclipse traditional PC ads very quickly.”

Johar might be right, as each dollar to mobile could take $3 from display. The mobile screen (whether phone or tablet) is significantly smaller than a laptop browser window. By my back-of-the-envelope calculation, a consumer’s shift from a PC to mobile Web page is at least a 3-to-1 reduction in the amount of space available for banner ads. So, at consistent CPM rates, the move to mobile could shrink the ad market dramatically—or they would have to be 3x the CPM of display ads, which is so far not close to holding true.

Or perhaps mobile will get bigger because there will be a lot more ads squeezed onto the tiny screen, and ways for businesses to helpfully alert passersby of what is on sale inside their stores. Unfortunately, there’s another problem: Consumers already find mobile advertising to be the most disliked marketing platform, per this research by Advertising Age.

Other new media similarly might mean a trade down in the number and/or price of advertising impressions, and thus a contraction in the global market. For example:

  • Hulu—One of the fastest growing “channels” is only willing to show one-third the number of commercials as network broadcasters show during the same programming. Its CEO has boldly claimed that “Traditional TV has too many ads. Users have demonstrated that they will go to great lengths to avoid the advertising load that traditional TV places upon them.”
  • Groupon—Only one offer per city per day. This might grow to more offers, but they will increasingly be personalized—so you will get one, more-relevant offer per day.
  • Twitter—Has added and plans to expand Promoted Tweets program to try to monetize the service. It will interrupt your Twitter stream with advertising, but if these are more than a handful per person per day, there will be a mass exodus of users.
  • Facebook—Current advertising formats are few, small, and out of the way on the right. The company learned from MySpace that ad clutter leads to lost users. Unfortunately, that means fewer clicks and low CPMs. With more than 600 million highly active users, and an ad-building tool that can have your small business up and running in minutes, the company only reached $8.9 billion in display sales in 2010.
  • Pandora—If you are a frequent user like me, you have likely noticed more ads between songs lately. But, again, there is a natural limit of only a handful of interruptions per hour of listening or you lose people to one of the many ad-free alternatives.
  • AOL—Well, AOL isn’t a new company, but it is reinventing itself with a model that has a lot less advertising. AOL CEO Tim Armstrong strongly believes that, “There are just way too many impressions on the Web.” And he has put his money where his mouth is by redesigning AOL to reduce the number of banners per page—to the tune of a 25% drop in ad sales.

Efficient Targeting Means Less Spending

We’ve all heard the old saw about “half your advertising spending being wasted; you just don’t know which half.” Well, with the increase in targeting information and new ways to track actual purchase behavior, there is growing hope that marketers will be able to discover and eliminate the 50% (or likely much more) of spending that is wasted. So the multi-billion-dollar question is: What will they do with the savings?

I believe that the majority of saved dollars will be taken to profit, thus removing a significant amount of money from the $500 billion global advertising market. Shareholders have this odd desire to see companies improve profits, and too many CFOs are closely eyeing the marketing budgets.

What This Means to You

My first hope at this point is that you have become a little more wary of the hype that continues to plague the digital marketing world. I know it might sound crazy for a leader working in a large, global digital advertising agency to sound pessimistic, but the reality is that we all suffer when companies make poor business decisions. The last thing we need is another digital bubble that will cause marketers to overreact in a very negative direction. Instead of falling for the hype, marketers must examine the bigger trends and changes in the landscape and take the time to shift how they go about their jobs.

Here are three implications of the shifts in media and marketing that you must begin adjusting to today:

  1. From Impressions to Engagements—Now is the time to choose a new common denominator for marketing performance across media. As I hope the 2,000 words above made clear, the impression—while somewhat measurable—is more and more meaningless. Instead, a growing number of marketers and media companies are moving toward Engagement-based planning. I wrote a lot about this in my book and in this blog post, and just this week YouTube and the IAB came together to suggest a new engagement measure: the Cost Per View (CPV). The CPV is a way of pricing advertising or other videos in which a consumer actively chooses to push the play button. It is meant to complement an impression-based plan, adding some further performance data. Marketers must begin to measure engagements and start to build financial models that allow them to uncover the value of an engagement.
  2. From Paid Media to Earned and Owned—In a world where it becomes harder and harder to track down your customers and interrupt their attention, it becomes imperative to attract them with content that they choose to engage with. Of course, this is the story behind Marketing with Meaning—but it is even clearer in the growing recognition that marketers must create Earned and Owned media. Earned and Owned is not only often cheaper than Paid, but it delivers a higher-quality experience—whether it is Charmin’s iPhone app for finding a public restroom or Red Bull sharing “Drunkish Dials” from its consumers on Facebook. (Disclaimer: Both are Possible Worldwide clients.)
  3. Relentlessly Track to Sales Results—One of the most exciting things that I have seen in business is the rise of e-commerce, which allows companies to closely track the price and performance of every marketing decision and investment all of the way to the final sale. This is the main reason search marketing took off and Google is now a $30 billion/year company. I believe that every large-spending company must invest in tools and models to apply this way of making marketing choices—whether or not e-commerce is the way a sale is made. In this future, brand managers will come into the office and get a heads-up display of the previous day’s sales results, quickly alter spending on the fly, and measure the response in real time. If the Shake Weight can do it, you can do it. And we’d love to help you.

Conclusion

To quote Sir Martin Sorrell, “The 21st century is not for tidy minds. It’s messy.” The wrong way to behave is to sit on the sidelines and wait for new advertising media to evolve to meet your historic marketing model. On the other hand, just jumping on the bandwagon of hype can end up burning your business as well. I believe the right answer is to step back and look at broader trends in how people live and society works today—then invest time and money into building a new approach that beats the competition and meets customers’ needs.

This is what our agencies recently did by combining into a new global digital network with a purpose to create interactions between our clients and their customers. We saw a future and shifted multiple organizations into a position to survive, thrive, and lead. What will you choose to do?

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Posted in Organizational Behavior, mobile | 1 Comment »

Book Review: “Linchpin” Our Needed Wake-up Call

Wednesday, February 23rd, 2011

Way back in December 2009, Seth Godin offered his blog readers a chance to get an advance copy of his new book, Linchpin. The first 3,000 folks who were willing to donate at least $30 to one of his favorite causes, the Acumen Fund, received a book. I jumped at the chance to do so, both because I enjoy Seth’s books and I wanted to participate in this novel form of meaningful book marketing.

Godin’s plan was to get a flood of positive reviews and word of mouth in time for Linchpin to hit bookstore shelves. He even followed up a few weeks later by sending an additional book to people who accepted the original offer. I’m a little more than a year late to the party with my own blog review of the book, but I would be doing my readers a disservice by ignoring the positive impact of reading Linchpin—and I hope Seth benefits from new long-tail sales.

Simply put, Linchpin is a motivational tool for businesspeople who are seeking a new path and need a loving kick in the pants. For years Seth Godin has given us books to help us think about marketing and business positioning in a different, evolved way. But this time he sets his sights on providing individuals with the mentality they need to become “linchpins” in whatever they do. Here are a few of the key points that I underlined in my copy of the book:

  • The “factory contract” of the economy is going away; we can no longer expect to plug into a job, follow the rules, and be taken care of. The future will belong to artists who create something original, interesting, and meaningful. “…History is now being written by the artists while the factory workers struggle. The future belongs to chefs, not to cooks or bottle washers.” “Art” can mean whatever you uniquely bring to the world—a skill, knowledge, experience. It can come to life in a painting, a business idea, or a blog like this one.
  • Education is ripe for an overhaul. “The launch of universal (public and free) education was a profound change in the way our society works…. We trained millions of factory workers.” We need to transform education to teach children two things: (1) Solve interesting problems; and (2) Lead.
  • We must think differently in how we look at success in the workplace or hunt for jobs. “The problem with meeting expectations is that it’s not remarkable…. A resume gives the employer everything she needs to reject you…. Having a resume begs for you to go into that big machine that looks for relevant keywords, and begs for you to get a job as a cog in a giant machine.” It is your visible results that matter in today’s economy: “Projects are the new resumes.”
  • “Real artists ship.” (‘Nuff said.)
  • We must continually learn about the world and ourselves, and have strong opinions but be ready to shift them. “It’s not an accident that successful people read more books.“
  • “One of the fascinating aspects of business and organized movements is that there’s some correlation between the passion and effort that people bring to a project and the outcome…. In great organizations, there’s a sense of mission.”
  • A new model for success is to create valuable art and share it broadly (especially thanks to the power of the Net), and if helps others they will repay you in many ways.

Even if everything here seems that it has been said somewhere before, it’s worth the time to read Linchpin. I know you will find something that inspires you, gets you out of bed in the morning, or refocuses your best efforts. I personally was most moved by Godin’s ability to distill the work I have done around the concept of Marketing with Meaning for nearly three years. It is my passion to help others succeed, and by giving  knowledge and assistance away as much as possible, I have benefited from seeing our company enjoy better business results—but I also get the pleasure of hearing how a blog post, book chapter, keynote speech, or email with advice has helped others.

Sometimes it is difficult to trust that “giving the gift of your art” will allow you to continue to grow your business and yourself. I thank Seth Godin for giving us the manifesto we need to keep creating a new and better future of work.

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Posted in Organizational Behavior, book, purpose | 1 Comment »

Big Companies’ Rising Demand for Digital Leadership

Wednesday, February 9th, 2011

If you work in the digital marketing world like me, you might have noticed a gradual increase in the number of recruiters calling with a wish to fill some pretty big roles in Fortune 500 companies. Just last week my friend Pete Blackshaw was hired as Global Digital Officer for Nestle. I won’t list other searches I’ve heard about here for obvious reasons, but let’s just say that some of the largest, most respected brands in the world are looking for senior digital talent. Roles like Senior VP of Digital Marketing and Chief Digital Officer are opening up. These companies are looking to hire candidates with skills that you might expect—things like several years of experience with both traditional and digital marketing. But there is a bigger theme running through this rising need. Companies are looking for digital experts who can confidently lead them through change. Digital experience, titles, knowledge, and awards do not equal leadership, but if you have the latter, the doors could open quickly.

It should serve as no surprise that major marketing-driven corporations are elevating digital leadership roles. Their consumers are increasingly going to digital media first, and the line between offline and online has become sufficiently blurred. In some cases, Chief Marketing Officers are looking for a right-hand digital native who can help them learn the new rules of the lead marketer role. And a little more than 15 years since the first websites and banners went up, there is now a pool of candidates with seniority and experience.

Despite the high demand for such roles and what should be an ample supply by now, recruiters tell me that many potential candidates lack the ability to provide the needed level of organizational leadership. I hear this in comments like, “We need someone who is confident in front of the CEO,” and, “Digital people seem less willing to bring forward recommendations and more frequently just wait to receive guidance.”

After spending my past 15 years working on both the client side at Procter & Gamble and now on the agency side, I generally believe that there are both perceived and real issues around the leadership skills of digital experts at large companies. Perception-wise, there is usually a bias to give more weight to the opinions of those who “own the P&L.” Experts in every area—from PR to Design to Product Supply—rarely have direct business decision-making responsibility, so senior leadership can have a tendency to discount what they say.

But I believe this lack of P&L ownership leads to a very real issue: Digital experts can come to believe that they are not really key business influencers, and end up waiting for an assignment or request for input rather than driving the dialogue, project list, and budget requests. One friend of mine in a senior digital position recently told me that, “I am waiting for one of my people to come into my office with a recommendation on what our brand should do next.” Instead of “managing up” and leading the thinking on what the team should be doing—say, what new technology is ripe for attention—his team was waiting for assignments to trickle down.

The good news is that a leadership mentality is something that you can take on at any time in your career. You certainly do not have to come from the client side or have owned a P&L at some point. Sometimes you just need to reset your thinking and choose to drive your work plan rather than waiting for it.

I have generally seen digital experts succeed in leading when they are given more specific ownership of projects or pieces of the business (for example, “owning” the brand website, a CRM program, or an e-commerce initiative). In these cases individuals tend to feel that they are expected to drive overall business success, rather than simply delivering on a project plan. The best digital leaders take on this mentality at a corporate-wide scale. They convince themselves (and others) that the entire company is depending on them to figure out how to win in digital marketing, and they propose and fight for the strategies, budgets, and work plans needed to win.

Thinking bigger picture—I expect that in the future we will see the “digital expert” role go away and instead brand leaders have digital knowledge and experience baked in. This goes hand-in-hand with all of the talk that traditional and digital advertising agencies will merge into one. So if you’re in a digitally focused role today, this is your opportunity, your mandate, to lead your organization into a new land. You just might become the CMO of the future.

Posted in Organizational Behavior | No Comments »

Working vs. Nonworking in Digital Marketing

Wednesday, February 2nd, 2011

As I tell people frequently, the driving purpose of the work I do each day is to help brand marketers make the move to the next evolution of marketing. Therefore, one of the core challenges that keeps me up at night (and gets me out of the bed in the morning) is the need to provide marketers with tools and perspective that can help them make what can feel like an enormous change in habit. After years of thinking about marketing in one way, it is incredibly difficult to break principles that have guided us to success for decades. Today I wish to show how new media demands new principles and to blow up the old habit of using strict formulas to dictate the amount of money clients spend on media versus production—or Working versus Nonworking dollars.

As many readers know, in budgeting, brand marketers set aside funds for two broad categories of spending: (1) “Working Dollars”—the price to purchase impressions for an advertisement on a media channel; and (2) “Nonworking Dollars”—funds that are used to create the advertisement itself (e.g., production, editing, agency fees) and measure results before or in market.

Marketers typically wish to minimize total spending on Nonworking dollars (itself a denigrating term), as these costs are mainly perceived as a drag on ROI. After decades of work in traditional media such as TV and Print, many marketers have established guidelines for the appropriate budget percentage allotted to these Nonworking costs—usually 10% to 15% of total costs.

Unfortunately, we increasingly see brand marketers pass up opportunities to grow their businesses and change the marketing game for the better through new forms of media. By following old heuristics, many are giving up opportunities to optimize Search and Display, and are under-investing in Mobile, Social, and Websites, which can generate superior, Earned media engagement. Here’s what I believe is breaking down these historic principles:

1. New digital media is altering the formula that brands historically have applied to guide spending.

According to research by Exane BNP Paribas (adapted into the chart above), traditional media is holding at around 12% of total spending, yet newer media forms push that number up significantly. Search and Display (e.g., banners) rise to 15% to 20%, and recent efforts in Mobile and Social shift up to 55% to 60%. Search and Display have been used by brands for more than a decade each, leading to efficiency gains and a gradual decline in Nonworking percentage. However, these new media will stay higher than traditional media because they typically include in-market measurement and refinement. Brands should adjust their expectations and budgets accordingly for Search and Display.

2. Mobile and Social are even higher in Nonworking percentages because they represent the rise of Earned media that breaks from the traditional, Paid media model.

Generally, brands’ efforts in Mobile and Social do not simply turn over to paid media placement, thus breaking the age-old formulas that have been applied. Brands active in Mobile have focused on producing mobile-friendly Web pages and useful or entertaining apps. And in Social, marketers are building platforms to connect directly with consumers (e.g., active Facebook pages). None of these activities is transitioned into a typical media buy, so under the guidelines of historic habits they are labeled as Nonworking. I have seen brands decline to spend the tiny amount of money necessary to update their Facebook pages because of this self-imposed rule.

3. Although Nonworking costs may rise, Earned media offers a greater ROI than traditional, Paid/Working media.

Our research with several major brands/categories proves that Earned media engagements beat Paid media interruptions in nearly every measure. For example, Paid media does not account for the vast majority of impressions that are not noticed by consumers, while Earned media only counts those who lean forward and give attention to the marketing. Paid media must be repurchased continually, while Earned media can generate repeat visits and CRM activity. Further, the fragmentation of media consumption means that CPMs on Paid media are rising, and brands must produce more ad units across more media channels—thus lifting the Nonworking percentage even for traditional media.

4. New media offers the opportunity for scaled, Earned, and Owned media for brands that invest in creating content.

Brands that break the Working versus Nonworking mind-set and create valuable content platforms are reaping new levels of success. Examples include the Kraft 15 million person email database and successful iPhone app, Old Spice’s Twitter/YouTube videos generated 35 million views in seven days, General Mills’ Box Tops for Education with 30 million engagements per year, and Coke Rewards with more than 10 million members. And a recent Syncapse study suggests that a Facebook “Like” is worth $136 for the average brand thanks to low-cost, earned impressions, engagement, and word of mouth.

Conclusion

Chances are high that your brand or your clients have had at least a few discussions about how the next evolution of marketing is testing these tried-and-true formulas. My hope is that you have hard conversations about this change and make the adaptations that are required, rather than resting on old models that might help you sleep at night but won’t move your business forward.

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Posted in Organizational Behavior | 3 Comments »

Why Companies Still Don’t Use Data Mining

Wednesday, January 12th, 2011

There is one prediction that seems to come and go in every end-of-year business magazine or blog. This common prediction is more frequent than even calls for “The Year of Mobile.” The claim we “gurus” make and miss time and time again is that companies in the year ahead will mine deep data pools to develop brilliant, personalized recommendations on the products and services that you and I will want next. But decades since people started filling up storage facilities with data, we still see few marketers putting data to use. Amazon continues to be common case study, cited for its “You Might Like” feature that makes recommendations based on past purchases. But we all know how even Amazon’s algorithm fails to learn how to remove something you had wrapped as a gift, Banana Republic continues to send me offers for women’s apparel, and Jet Blue can’t even nail a basic user experience on its ticket-selling website. This is the kind of question that keeps me up at night in my quest to shift the world to Marketing with Meaning; but I think I have an answer.

Over the holidays I read an interesting article in the MIT Technology Review about how a handful of companies are actually putting their consumer knowledge to work to do some pretty interesting and successful micro-marketing. The concept, called predictive analytics, actually uses a combination of an individual’s specific personal information and purchase history, as well as traits from the entire customer database, to predict which types of products and services people might be interested in next. For example, the Cabela’s brand, which sells outdoor equipment through catalogs, online, and physical stores:

built a model that ranks customers from those with the best buying history to those with the worst. Next, it adds more than 15 predictive variables, including a customer’s preferred product categories and zip code. Each customer is then assigned a score from 1 to 100—the higher the ’star rating,’ the greater the revenue projection. The score determines whether and when Cabela’s mails that customer each of its catalogues.  The goal is ‘to determine how much each customer is going to spend with us over the next 12 months,’ says Corey Bergstrom, director of market research and analysis for the $2.6 billion company. Some high-value customers get special perks, such as more sophisticated telephone support. ‘If you deserve the white-glove type treatment,’ Bergstrom adds, “we need to know who you are so that we can go the extra mile for you.’”

Cabela’s has quadrupled the rate of response to its catalogs since implementing the system. That’s an almost unbelievable improvement on an age-old business model. The article notes that “predictive analytics software is a fairly small part of a $1.4 billion global market for business intelligence software”—and goes on to suggest that companies need more of a top-down commitment from the CEO to customer service support.

But let’s consider this question: Why can’t more companies make this commitment to smarter, personalized marketing through tools such as predictive analytics? Why are we getting the same catalogs, the same email specials, and the same credit card mail offers when so much of our data lies there for the interpreting—and sales are there for the taking? I believe there are four organizational behavior hurdles that stop this no-brainer from happening at the companies we work with and buy from every day:

Known Costs, Unknown Upside

We humans are often pretty bad at examining and judging risk and reward. For example, we have a bias against taking risks when we know the costs but are unsure of the rewards. I’ve been in too many meetings where companies are unable to achieve the revenue upside of a marketing investment because there simply isn’t available budget. No matter how high sales could go with a predictive analytics tool, for example, the $750,000 price tag for implementation is hard to swallow.

There is one piece of business where advanced data mining and personalized predictive analytics is hot, though: credit card fraud prevention. According to a recent article in Wired, in the U.S. alone, retailers and the big credit card issuers lose more than $3.4 billion a year due to lost and stolen cards. That is a very real number sitting on the income statements of these companies, thus providing them with a guaranteed bang for their buck by investing in analytics platforms. No wonder they are using tools to, say, predict that a card used to buy gasoline and then a piece of jewelry is likely a theft and flagged.

Too bad such technology isn’t being used nearly as often by these companies to make smart sales recommendations. The problem is that these lost sales opportunities never hit the books.

No “Burning Platform”

We humans and organizations also shy away from risks when things seem to be going well in our current situations. And such is the scenario of most businesses that could or should be using tools such as predictive analytics. Big, successful companies—and even not-so-successful companies that are still hanging on—are safe from the ravages of radical change, so they tend to keep on keepin’ on. It’s easier to do a study on something new and kill it in a committee, and then return to our everyday habits and do what we’ve always done. Sure, sales might even be flat or down a bit, but most jobs seem secure and we can always blame it on the economy, which we hope will pick up soon.

Individuals and companies take more risks when their jobs lives and livelihoods are actually on the line. Whether it’s Sears jumping into personalization and community tools that outstrip anything Walmart and Target are doing, or a start-up such as Zappos embracing killer customer service in order to stand out in a crowded marketplace and create a company from nothing, organizations that are standing on “a burning platform” recognize the need for something new much faster and more often than the leaders. They know their jobs are at risk so they take big risks that lead to big rewards. This is the heart of the concept of The Innovator’s Dilemma, and it is incredibly hard to overcome.

The Law of Big Numbers

Another classic marketing trap happens when a business is so large that improvement goes unnoticed and unappreciated. The big, national brands that most of us use every day rely on millions of purchase decisions and scale, scale, scale. The incentive is to spend your time and money on sweeping activities that impact many people at once. Personalized offers and actions fly in the face of mass marketers’ business models.

Take, for example, a major retail grocery chain that has a sophisticated data analytics tool that brands can use to gain insights about how people buy their products and shift marketing efforts accordingly. If I am the brand manager at a soup company, I can do basket analysis of what people buy, and how often and at what price points they buy my brand versus others, and then do some personalized offers through direct mail and checkout systems that the retailer makes available. Let’s say I spend several hours of my time testing various offers and hit a remarkable result—say, doubling sales at this one chain. The problem is that this retailer represents only about 1% of my annual sales. So after adjusting for time lost on other efforts and share that was simply stolen from another retailer, that doubling of sales in one chain has negligible impact on my business. It’s simply a waste of time to even think about. That’s why you see the same grocery store ads in the newspaper rather than a personalized list of specials in your email inbox.

Many Marketers Prefer Art to Science

A few years ago I was in a new business pitch with a major, global financial services company and brought forward an idea for a killer predictive analytics tool that would still be remarkable. I reasoned that because the company had access to individual credit card purchases, we could make smart recommendations about what people might be interested in now—and next. For example, we could see when someone was starting to pick up a new hobby or interest such as skiing or wine, and offer products, services, and experiences that could help him take that growing interest to the next level. Or when someone landed in a new city we could make proactive recommendations on restaurants. As I excitedly presented the idea to a CMO and his team I saw their eyes glaze over. They simply didn’t get it. And I think the main reason was that this company and all of its marketing staff was used to creating ad campaigns, not smart buying-recommendation tools. It simply didn’t compute.

I believe many people in marketing and advertising got into the jobs in large part because they lean toward art over science. We want to create cultural icons and memorable ads. We are attracted to creativity and imagination. And most of the big-company CMOs in charge today got to where they are because they learned how to judge whether or not a 30-second advertisement will break through the clutter during prime-time television. Many marketers find the concept of writing algorithms, analyzing personal buying habits, and testing hypotheses to be completely foreign.

…But Hope Springs Eternal

To paraphrase my favorite sci-fi author, William Gibson, the future of marketing is here; it just needs a user manual. The purpose of this blog, my book, and a big part of my everyday work at digital ad agency Bridge Worldwide, is to help guide marketers into the new world around us and give them new habits and tools. The first step for anyone in marketing is to recognize the need for change, and the reality that what made us successful in the past will not necessarily be the skills and methods needed going forward.

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Posted in Organizational Behavior | 2 Comments »

Looking Back on Our Burning Question at #Canneslions

Wednesday, July 7th, 2010


“Wow!”

That was my first line to kick off our seminar at the Cannes Lions International Advertising Festival on Friday, June 25. “Wow!” is also the easiest way for me to describe the amount of work we put into the event, and the combined reactions of those who had a chance to join our seminar. After months of planning and preparation we pulled off our first-ever seminar in Cannes at the annual gathering of the world’s leaders in advertising and marketing. Although I am still in a bit of a daze since coming off the stage nearly two weeks ago, my mind is already racing to develop ideas for the next big way that we can spread the next evolution of marketing. But before rushing on to what’s next, I want to capture and celebrate what we pulled off here.

Before I go on, though, I suggest that you invest the 45 minutes to view our complete seminar footage, which is up and available here. Or if you’re really time-strapped, first check out some highlights in the YouTube video above.

Recap

Way back around October 2009, our President, Jay Woffington, and I had lunch with Jim Stengel, former Global Marketing Officer of Procter & Gamble and now global speaker/consultant and professor at the UCLA Anderson School of Business. My book had just launched and Jim was continuing to spread his belief in brand ideals. We talked about our common desire to change the way marketing is performed, and we agreed that there was no better place than the annual Cannes Advertising Festival—a place where advertising and marketing leaders from around the world gather once a year to judge the best work, compare notes on where the industry is going, and bring back lessons that might be applied to the incredible changes surging through business and society today. We decided to team up and the folks at the Cannes Lions organization were excited to have us onboard for a seminar in late June.

In retrospect, deciding to do a seminar in Cannes and getting agreement from its leaders was the easy part. The real challenge lay in deciding what to do on our big stage. Thankfully we had some help. Two of our top creative leaders at Bridge Worldwide, Jason Bender and George Alexander, came up with the idea of asking a Burning Question. They argued that people in our industry are spending too much time searching for answers to questions such as: “What percentage of my budget should I spend on digital?,” “Do I need a new ad agency?,” and “What should my Facebook strategy be?” They reasoned that marketers are spending too much time looking for answers in new media tactics, and are therefore missing the big, fundamental shift that is happening in business and society. Their idea was for Jim and me to ask our Cannes audience a Burning Question, that, when asked, could help organizations hit the reset button and fundamentally adjust their methods to not only improve business results, but also improve life for customers, employees, stakeholders, and society overall.

To prepare for the event, Jim and I set up interviews with key leaders at some of the world’s largest marketers in the world. We were blown away to get 100% of our requests accepted from IBM, AT&T, Kraft, P&G, Levi’s, Luxottica, Pepsi, and Samsung. We flew camera crews around the country to ask these leaders our Burning Question and learn about how they recognized a need for change, the initial efforts they are making to shift, and the business and stakeholder benefits that are resulting from these early efforts. We were surprised to hear similar stories, and eager to share them with our audience in Cannes and beyond.

And to engage with more than the relative handful of folks who can go to Cannes, we sought to bring marketers around the world into the discussion. On BurningQuestion.com we asked people to post what they believed are the questions we should be asking ourselves. And we even ran a contest to bring two people over with us based on their personal efforts to improve the marketing world. Our winners were Stan Phelps, who is pioneering a new way to “give a little something extra” through his Marketing Lagniappe project, and Tyson Adams, a budding “philanthroprenuer” who just started a business called liveGLOCAL, that sells high-quality coffee and provides books for children in Laos for each bag sold. Both guys are incredible leaders who will continue to drive the next evolution of marketing in their own unique ways.

The Results

After a week of final-final preparation and taking in the other seminars and award-winning work in Cannes (see my blog posts here, here, and here), I was very eager to finally take the stage on Friday. Overall I was very pleased with the seminar. As you can see in the full-length video, we did a lot of things to drum up excitement and ensure that no one was disappointed to be sitting in our session on a Friday afternoon. I think we were able to weave together many threads that were running through Cannes all week and give the group something to thinking about, our Burning Question:

“How can we, in marketing and business, hold ourselves to a higher standard to create a positive impact on those we serve, our employees, and even the world?“

After the seminar we invited everyone in the audience up to the roof of the Palais to continue the conversation. I loved the chance to meet people from places as diverse as Ecuador, Turkey, India, and Australia—all struggling to figure out where the marketing world is going, and all coming away with some new thinking that they can apply to their brands and businesses. I gave away a few hundred copies of my book and collected a pocketful of business cards from potential clients, partners, and even competitors who wanted to keep talking about how we might work together toward this common goal. (Check out some of the after-seminar photos below…)

I find that it’s always hard to look at the time and money investment of an event like this and figure out if it was worth it. This was the biggest thing our agency has ever put on, and ultimately we are betting that by driving the industry conversation forward we will attract new clients and further build our business. Just like all of you, we are betting that we will succeed by creating Marketing with Meaning.

The work is not over, however, as we’ve come back down to earth and back to our desks and day jobs. We are working on plans to further share our seminar and the hours of amazing interviews footage with industry leaders. Jim and I even have a few requests to repeat the performance at industry events and corporate training facilities.

And, of course, I’ve already started thinking about what we could do in Cannes next year. I think the topic will only be hotter in 2011, and we want to continue to build on the momentum we have started. I would love your ideas and feedback in the comments below!

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Posted in Awards, Organizational Behavior, cannes | 1 Comment »

Pepsi-Cola Brands Add Meaningful Mojo

Thursday, May 27th, 2010

In this blog and my book I’ve written often about my goal to drive a fundamental shift in the way that the marketing function is performed—rather than just some small experiments as part of a traditional, interruptive campaign, true change will only occur when major companies change their organizational alignment toward Marketing with Meaning. Well, dear readers, when I look at the pattern of work that is coming from the Pepsi-Cola brands I begin to gain confidence that the shift is indeed happening.

There certainly have been other companies that are farther down the road of turning Marketing with Meaning into their way of doing business. In my book I talk about Pepsi’s Frito-Lay subsidiary, which has shifted remarkably along these lines with brands such as SunChips and Doritos. There’s also some major change going on at Kraft Foods and Procter & Gamble. Until recently Pepsi has been known more for continuing the pattern of big, traditional advertising campaigns. Its “Got G” campaign for Gatorade last year did not reverse a sales decline, and a rebranding effort on Tropicana bombed.

But if you were writing a history of Meaningful Marketing today you would have to call out Sunday, February 7, 2010. It was Super Bowl Sunday, if you remember, and it will be noted in the Museum of Advertising as the day that Pepsi decided not to advertise for the first time in 23 years. Instead, the brand quietly launched The Pepsi Refresh Project weeks earlier, an effort to provide funding to individuals and groups with important causes. Some say that Pepsi won by not wasting dollars on the big game, but I believe we all won because the company showed us how even a huge brand built on traditional, interruptive advertising could shift to Marketing with Meaning with a big idea.

But Pepsi Refresh has been the first of other major steps down this path of a new way of marketing. Another great example is the latest innovations on Gatorade. After years of simply reminding us that Gatorade exists with the assistance of a phalanx of highly paid celebrity endorsers, the brand has gone back to its roots in innovation. It recently launched a line called G Series with different SKUs for Before, During, and After a workout. Here the brand is giving its buyers something that is specifically formulated for each step, and instead of pricey pitchmen, the marketing is direct, informative, and—because the product is unique—interesting. This is the innovative brand that I’ve missed for years, and I look forward to trying this new regimen in my next long run. It is a reminder that Marketing with Meaning starts with a meaningfully different and beneficial product.

Another great example of the shift at Pepsi-Cola is the next chapter in DEWmocracy. I first wrote about this user-driven campaign around new Mountain Dew flavors in my book. It was originally launched in 2007, and I included this case study in my chapter about how you can turn a one-time meaningful idea into an ongoing source of engagement and sales. Even way back then, Frank Cooper, Vice President of Marketing for Mountain Dew, alluded to chance for this to be much more than a one-time win. Back then he said:

“If we get a significant reaction, we think there’s an opportunity to expand this game into a broader online property. We’re seeking feedback from the consumer about what parts of the game they enjoy; is the story resonating? And if it is, we do have plans to expand it.”

Over two years later, the latest “game” of DEWmocracy has launched its third iteration with a very impressive and engaging execution. It’s not the immersive game that was more appropriate for the Web in 2008; instead, the brand has evolved to use even more consumer creativity and direct involvement. Trucks sampled several new flavors with more than 200,000 people across the U.S. And 50 “Dew Labs” fanatics were chosen to narrow down to the final three flavor/color/name candidates. The brand then offered designers and art schools the chance to create the next can. And now Mountain Dew is tapping small agencies, digital content creators, and other small producers to create TV ads for each flavor. Even media companies such as CollegeHumor are campaigning for their ideas to win.

It’s no wonder that Frank Cooper was recently promoted to the role of Chief Consumer Engagement Officer and last week was listed as #6 on the Advertising Age Entertainment A-List.  Advertising Age praised the fact that Mountain Dew retained 80% of the citrus soda market from 2006 to 2008, despite seeing traditional media spending cut in half.

Three big beverage brands, all moving toward Marketing with Meaning, and all doing it in ways that are differentiated based on their brand equity and target consumer. I call it a trend. And I’m excited to announce that we will include executives from Pepsi in our “Burning Question” seminar at the Cannes Advertising Festival this June. We’ll get the chance to learn more about how this company is shifting its marketing approach toward purpose and meaning, and gain insights on how even a giant, traditional advertiser can learn new tricks.

We have a lot more news coming about our Cannes event in the weeks ahead!

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Posted in Organizational Behavior | 1 Comment »

Tito’s Vodka Mends My Heart at #SXSW

Tuesday, March 23rd, 2010

titos sticker

My favorite new brand story from the SXSW Interactive conference last week actually came from a brand that I thought I knew fairly well. At a small workshop called “Booze Blogging,” we tasted various cocktails and got to hear from Beth Bellanti-Walker, who worked on the start-up Tito’s Vodka brand, which is based in Austin, Texas. She filled in some blanks on the brand and shared some insights into the challenge of taking a small, meaningful brand to the big time.

Several years ago I first heard the fascinating story of Tito’s Vodka: A man named Tito Beveridge was a geophysicist with a side hobby of making flavored vodka for his friends. After years of friends’ encouragement and talking with bartenders who said they would love a smooth vodka that people could drink straight, he decided to learn how to distill his own liquor. Thanks to his scientific skills, passion for perfection, and 19 maxed-out credit cards, Tito got the first distillery license in Texas created a brilliant vodka that is distilled six times for a pure taste. One day a fan of his new vodka suggested that he enter it into the World Spirits Competition. Beveridge couldn’t attend himself, so he sent up a few bottles. It was named a Double Gold Medal winner.

Over time word of mouth fueled the expansion of Tito’s Vodka. Sales went from 1,000 cases in 1997 to currently more than 200,000 cases each year. During our session at SXSW, I learned a few other stories of the world of Tito and its bootstrap marketing. Beth essentially worked for free and spent most of her time stoking fans’ passion by responding to emails, managing a blog, and sending vodka to parties. According to Beth, “Everything about Tito’s marketing success has come from people’s love for the brand.”

She told us how Tito designed the label and logo for the brand by himself on his basement computer. Tito seems unconcerned with selling out or taking the world by storm. He is a complex guy who has several other hobbies and has some clever ideas about clean energy and improving the world.

I personally tried Tito’s roughly five years ago after reading about it on a marketing blog (that I can’t remember now), and I became one of these rabid fans. I enjoyed ritually mixing my martinis at home with Tito’s and loved taking friends down to my basement bar to give them a taste of this mysterious Texas concoction. I even enjoyed the process of finding a place to order it online, and waiting for a package to arrive weeks later. My friends would see or hear about Tito’s Vodka and say, “Hey, that’s the brand Bob loves.” And I enjoyed being the first guy to turn my friends onto the brand. The closest thing I can compare this to is when you become a fan of an upstart band and enjoy introducing the music to friends.

But my Tito’s fandom hit a bump a few years ago. A buddy of mine shot me an email and told me to look in The New York Times; he had just seen a full-page ad for Tito’s Vodka. Unfortunately, I wish he hadn’t told me about the ad, because it broke my heart. Here was my great little vodka brand advertising in one of the largest newspapers in the world. Tito’s Vodka had sold out.

In the two years or so since I saw this ad, I have reached for Tito’s Vodka less often in my liquor cabinet after a long day. I no longer raved about it to friends, and when I need to resupply I was more likely to grab Absolut at the nearby package store rather than order a Tito’s shipment. So I was eager to ask Beth why she and Tito embraced mass advertising on a brand that had such a special place in my heart. Her response, in a nutshell:

“That was a difficult decision for us and a large expense—our first advertisement in 12 years of making vodka. But our main challenge is that while people are discovering Tito’s through friends and blogs, the liquor market is dominated by wholesalers and distributors in individual states across the country. We had to get their attention by using the traditional advertising that they still believe is the key to success.”

Upon hearing this my love for Tito’s was rekindled. The print ad campaign made perfect business sense to me and I no longer felt that the brand was selling out. I happily ordered a Tito’s martini at my hotel bar that night. By hearing this inside story of how the brand was forced to embrace some amount of traditional advertising to keep its momentum going, I personally reconnected with Tito’s.

While this level of openness at the SXSW conference with 50 people was great, it shows that Tito’s Vodka and other small brands trying to make it big should be more careful when they risk losing the core fans that drive their early success. I wonder if Tito’s could have dumped the newspaper ads and worked harder to get its fans to call distributors and liquor stores to ask for the brand. Or Tito’s might have done more to let its fans know that the newspaper ad was coming and why.

I know it might sound strange to ask a brand to apologize for putting full-page ads in a newspaper, but in this new world of meaningful marketing it becomes critically important to think of your core fans first.

Posted in Conferences, Organizational Behavior, small business | 1 Comment »

Must Viral Videos Start with a :30?

Thursday, February 18th, 2010

Last week the folks at our office were passing around links to the commercial above from Old Spice. It’s another manly ad from the brand’s agency, Wieden+Kennedy, and it certainly earned lots of LOLs in our office space. I personally found it amusing but very rushed. Many of the words are said so quickly that I missed them and had to go back. I wondered why the pace was so quick, until I began to recall sitting in an editing suite reviewing commercials with my then-agency when I used to be a brand manager at P&G. It came together for me when I looked down at the total time of the video on the corner of the screen and saw :30. Yep, this was a TV commercial also uploaded to YouTube.

Now, let me begin by saying that I don’t have an incredibly strong opinion on this case. Regular readers know that I usually come down hard one way or the other in these blog posts. But in this situation I have more of a working theory to air—and I’m not soft-pedaling just because Old Spice is a brand from one of our big clients, Procter & Gamble, and one of my long-time friends works on the brand.

My working theory is that starting with the 30-second ad is no longer the right way to do branded video. Note first that I am talking “branded video” instead of “commercials.” I think a lot of smart marketers and agencies are starting to reset how they think about “sight, sound, and motion” and are defining their success by whether or not people are choosing to view and share their marketing, rather than the number of impressions that can be bought.

My point is this: In a world in which it is more important for people to choose to engage with video, you can work without the confines of a 30-second box. One of the best early examples is BMW films, which became a DVD series. Other examples range from Will It Blend to the recent Coca-Cola Happiness Factory that I blogged about a few days ago. In these cases the focus is on creating video that people enjoy viewing. With this freedom, filmmakers can go to two minutes and far beyond. Remember, 30 seconds is no magical measure of the ideal consumer attention span—but rather a number that worked for TV networks to slam in multiple messages between content breaks.

So it feels to me that Old Spice and its agency started with the 30-second hole to fill and fought to push its funny content into the box, rather than making the most fun video possible, posting that online, and then, perhaps, placing an edited version onto the TV screen. Then again, people have chosen to view the Old Spice video on YouTube about 1.5 million times (and counting). I might be wrong. What do you think?

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Posted in Organizational Behavior, video | 3 Comments »

Why Write a Book? For This Guy

Thursday, February 4th, 2010

open letter

This week I had lunch with an old friend who had not yet heard that I recently wrote a book. His first question was: “Why did you write a book?” It’s actually a question that I get a lot. It’s not that people believe that writing a book is a dumb idea. Rather, most people understand that it is a huge investment in time and energy on top of a day job, so they wonder what motivation drove me to make it happen. There are many answers that I give to this question. I usually talk about how I grew up with a father who wrote several books and his experiences struck a chord with me. I mention that it is a chance to help grow the profile of our business and serve as a point of pride for our agency, Bridge Worldwide. But at the end of the day, the reason I wrote the book was for people like Jason Sokol, who last week wrote “An Open Letter to Bob Gilbreath.”

In a post on his blog (please read it above or at this link), Jason shares the story of working at a large company and working to make changes in how the business does its marketing and sales. He writes about how the book was an inspiration, and he used it to craft a manifesto email for his senior leadership. The ideas in the book gave Jason “the leverage [he has] needed to make a difference.”

For me, this story represents the absolute height of personal satisfaction. When I got up at 6 a.m. every Saturday and Sunday for months to write the book, I was always thinking about people like Jason. I remembered being in his shoes, struggling to make changes in a big company that had been doing the same (broken) things for so long, and drawing on the words and suggestions of authors such as Seth Godin. I wanted to write a book that brought great ideas, along with tips on how to convince an organization to go along with them. My goal was not to sell a bunch of books, or even to have lots of people talk about it. I knew that I would fail if the book was unable to actually effect change in how companies work.

Ironically, last week Seth Godin wrote a post titled “Why write a book?” In this post he writes about the many reasons to write a book, and mentions that articles, blogs, and even tweets can all have some power to benefit others. But books can do something more:

“The goal isn’t always to spread an idea. Sometimes the goal is to make change happen…. If you want to change people, you must create enough leverage to encourage the change to happen.”

Godin’s point is that books are powerful tools that give great leverage to ideas. A book takes time to read and absorb; it is a journey into the mind of the author. The publishing process helps ensure that only a relative handful of the best ideas make it to the shelves. This power of a book is that it gives ideas more leverage to impact people’s lives and make change happen. Jason takes the idea of “leverage” further, by showing how a book can serve as the leverage he needs to make change.

This really represents the Purpose of my life: I want to figure out how the world works, and give as many people as possible ideas and tools to make positive change. I know that more than 10,000 people have purchased and read the book so far, which is great sales-wise for a marketing book after only a few months. But now I know that at least one person has been able to use my book to make positive change. That alone is worth everything that I put into it. My thanks to Jason for sharing his story—and I hope many more readers write their own meaningful marketing stories in the years to come.

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Posted in Agency Marketing, Organizational Behavior, book, purpose | 2 Comments »

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