3 January, 2024 · 5:28 am

Three Ways AI Will Start Impacting Marketing in 2024

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As the old quip goes, “predictions are difficult, especially about the future.” That witticism serves to remind us of the hazards of predicting the future of AI and its impact on marketing. But there are three outcomes that seem self-evident as we witness the early applications of AI to the marketing toolkit.

The size of marketing and agency staffs will decline

There are debates about whether AI will inspire more or less creativity. On one hand, AI is a great enabler that will allow ideas to develop with less constraints on executional limits on bringing them to life. On the other hand, AI is a great imitator that will respond to prompts with a tedious recycling of what’s already been done. Agency viewpoints have tended to emphasize the second view as a basis for saying that the creativity they bring to clients will be in more demand than ever. Whether most agencies actually are truly a source of creativity or are just human recyclers is beside the point. The point is that the business model of agencies is based on the executional effort rather than the intellectual effort of marketing. Most agencies have an hours or people-based model similar to that of a law firm. They may attract clients through the strength of their creative ideas, but they make money from those clients by how many bodies they can assign to produce and distribute those ideas. Clients may value the “big ideas” of the agencies even more in an AI world, but they won’t need large staffs to produce the marketing materials, create the media plan, and optimize media channels.  Agencies have given lip service to getting paid for their ideas in the past. But they’ve never convinced clients or themselves to adopt that model. The role of agencies may be enhanced or degraded by AI, but their billable revenue will decline as more human tasks become automated.

For the same reasons, company marketing departments should grow smaller in number as well. The relative scale of the ipact will depend on how they were organized. Marketers than built large in-house teams to handle creative and media tasks will shrink in line with agencies. Brand managers will be less affected but their skill set and responsibilites will change as they spend less time and task management and more on true brand development.

The best marketers will shift their focus from local optima to global optima

That’s an admittedly jargon-filled phrase. But these mathematical terms do the right job for describing the main marketing challenge of the early AI era. The figure below illustrates the general idea. Imagine you’re kicking off a marketing campaign represented by the blue dot. As you move to optimize your messaging, target, and channels, you move nicely along increasing your performance until you get to the top of the first curve. As you move beyond that peak, the metrics will tell you that you are going in the wrong direction and push you back to the first peak. But there may be a new audience, a new selling point, or a new channel strategy further down the path that would actually get you to an even higher maximum return. But the data won’t take you there incrementally. You’ll have to push past the optimization signals to move from a local optimization to a global optimization.

The challenge is that you’ll never know if you’re at a global maximum or a local maximum. You can’t tweak yourself to the highest outcome. Marketers will rely more and more on AI to get them to an optimal local maximum. But to unlock superior performance, they’ll have to explore ideas that are beyond the A/B testing mentality to constantly explore whether there is a better outcome than the current approach can give you.

The best job of humans will be to interface with other humans

There has been a lot of conversation around the jobs that will be lost to AI. If historical trends are a meaningful precedent, AI will eliminate many jobs and create many others. But of course, the losses and gains will be spread unequally. Middle-skilled physical laborers bore the brunt of machines and manufacturing robots. Similarly, middle-skilled and many high-skilled administrative jobs will quickly fall away in AI. Media planning, optimization and reporting will become mostly automated. A good portion of pre- and post-production workers will also be replaced by AI. The jobs that will survive or even grow are those related to human tastes and connections. Humans are a mess of reason, emotions, and instinctual quirks. How we react to things is difficult to interpret or predict. Taylor Swift was not named Person of the Year because of the accuracy of her pitch and efficiency of her lyrics. She created a cultural moment that people wanted to be a part of. The ultimate goal of any brand is to create a human connection that transcends the attributes of the product. The nature of that connection is elusive. But humans recognize when it happens and, more importantly, are the mechanism by which it happens. The people who can inject humanity into customer service, product design, and marketing strategy will always be in demand. To the extent that AI frees up people for more human-centered thinking, there is even potential for growth.

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3 October, 2023 · 3:46 pm

Why Are Sports Attracting the Smart Money?

It’s no news that big money gets poured into buying sports franchises. For decades, the going price of a major sports franchise across leagues has been climbing at an ever-accelerating rates. In some ways, the rise in team valuations paralled the art world where very high net worth individuals pushed collectors aside as the driving force in setting prices for the top of the market. What is news is that the “vanity money” that drove a good portion of the escalating sports pricing in the past is being increasingly joined by “smart money” private equity investors and investment consortiums.

A major driver for this new source of investment was a change in the regulatory environment. It started in 2005 when Formula One took a major PE investment from CVC Capital. Other leagues saw the benfit of widening the potential ownership pool to bid up the value of franchises and to create liquidity events (i.e., profitable sell-off opportuniites for minority investors or partial carve-outs for majority investors). The MLB led the change in 2019 when they allowed private equity funds to buy passive stakes in teams. The other leagues soon followed, with the NBA, the NHL, and MLSnow all allowing PE firms to buy up to 30% minority stakes in teams. Pitchbook estimates that there have been more than 20 major PE investmetns in sports since 2019. That rate is likely to continue to accelerate. Discussions between Florida State and Sixth Street Capital suggest it won’t be long until PE establishes a beachhead in the as-of-yet untouched territory of college sports.

What do investors see in sports that is so attractive? From a business perspective, many things make it a uniquely attractive asset class. Among them are:

  • Barriers to Entry – Whether by law or by the nature of the business, established sports leagues have fairly wide competitive moats. It is hard to start of rival league. While the AFL (football) and ABA (basketball) show some success, they are the historical exception. Far more efforts to create rival leagues have failed, and even these exceptions defined success as being subsumed into the pre-existing league. As opposed to tech, there’s very little chance of a start-up competitor disrupting the competiive market for premier sports.
  • Uncommon Customer Loyalty – How long would people keep going to a restaurant if half of their meals there didn’t turn out well? Sports teams have a hold on their core fan base that survives even worse outcomes than that. For most teams, being fairly successful once in a while is enough to keep a stable customer base. Team loyalties are passed down through generations, and our collective base instincts make us treat rooting for the home team as a civic duty. While players, coaches and owners increasingly flip over, the fan base stays stubbornly connected to their team affiliations. Compared to most businesses, sports are more resilient to mismanagment and underperformance.
  • Multiple Revenue Streams – Sports teams draw on multiple sources of revenue. The most impactful of these is media rights. As audience diffusion across media platforms, channels, and time-shifting has reduced the value of traditional broadcast fare like sitcoms and dramas, it has increased the value of live events that command large simultaneous viewing. The price of broadcast rights keeps rising higher than inflation every year. In addition, teams draw revenues from ticket sales, merchandise, events and sponsorships. The rise in legalized gambling has opened up yet another licensing stream for teams to tap into, showing they’re may be other untapped opportunites ahead.

Because of these factors, there is one more important source of attraction to PE investors: the ability to add value. While much has been made about the increased rigor and sophisitcation with which team analyze their on-field performance, they’re relatively unsophisticated in their approach to off-field performance. There have been investments at the league level, with top talent overseeing media negotiations and expansion opportunities. But at the team level, most organizations are operated more like lower middle-market companies than companies with the multiple billion dollar valuations they command. There is a large variation between teams, so this isn’t true across the board. But in general, because there is such a natural and persistent customer base, little time or money is spent on customer acquisition, market expansion, customer relationship building, new product development or brand differentiation. The main focus of individual franchises is on marketing operations (ticket sales, fulfilling sponsor deals, etc) and very little in building a deep understanding of new and existing customer segments and their relative value to the business. There are few franchises that would be able to tell you the approximate annual value of an avid fan. What PE investors see in this is the opportunity to do more and make more from the unique business advantages of the sports

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7 March, 2023 · 4:12 pm

Abusing the “F Word” in Business

Whenever anybody uses the F Word in a corporate setting, I cringe. The people who use it usually think it makes them seem more sincere, more inspiring and more passionate. But it is never appropriate and should never be used in a business setting. That word is “family.”

In its most innocent misuse, it’s meant to describe an environment that is supportive and inclusive. In its more sinister application, it’s used to create an artificial sense of commitment and loyalty in order to extract disproportionate value from employees. In either case, it misrepresents the honest and healthy relationship that should exist in a successful business organization. A successful company can’t be operated in the same way as a family. Framing a culture around family values ultimately harms the organization.

The model for a successful company culture is not a loving family, but that of a high-functioning team. That difference can sometimes blur because of a few shared characteristics between a strong family and a strong team. Both require a high degree of trust. And there are times when both call for an individual to put the group’s goals ahead of their personal goals. But at their best, families and teams are designed to serve quite different objectives. Teams exist to pursue tangible achievements: win a game, make a scientific advancement, discover a new part of the world. Philosophers can define the purpose of family, but I think most would agree it is not to secure a particular achievement, but to provide a place of mutual support and security independent of outcomes. Teams are all about outcomes. On a team, the members are in service to the mission. In a family, the members are the mission. Ideally, the support of a family is unconditional. The support of an effective team is, by definition, entirely conditional on success.

The following scenarios illustrate how family and team values fundamentally differ:

  • Parents of three loving well-adjusted adult children are drawing up a Will for their estate. They decide to allocate the estate based on how each child’s career and other activities have contributed to the public stature of the family.
  • A sales team had a very strong year in which they earned record growth. Most of the sales team had the same sales as last year, but two salespeople were each able to secure several new customers that drove all the growth for the company. The sales manager gives each salesperson an equal bonus.
  • A woman has dreamed all her life about visiting Japan but never had the financial means to afford the trip. A group of close friends chips in to buy her a trip to Tokyo for her birthday.
  • It’s the deciding game of the baseball World Series. With the scored tied in the last inning, the manager decides to start a veteran near the end of his career because he probably won’t get the chance to pitch in a World Series again.

The different ways we respond to what’s right or what’s fair in those scenarios reveal the incongruence in values. While invoking family values generally triggers positive feelings, most of us would characterize a business that truly ran as a family as dysfunctional. We want our good work to lead to expanded roles and compensation; we don’t want to put up with consistently underperforming co-workers; we want to see management looking for ways to constantly improve the company; we want to beat the competition. Those aren’t consistent with a family dynamic. We don’t expect parents to favor one child over another for example. What often happens in companies that proclaim a family culture is that they want the employees to behave as if it’s a family while they manage the company as if it’s a team. That kind of company reserves the right to reorganize for efficiency or separate from underperformers. But employees exploring competitive offers or asking for higher compensation are labelled as self-centered or a “poor fit”.

The problem for these companies and the people who work for them is that events inevitably occur that bring reality to light. A merger may call for eliminating duplicate roles, a promotion may elevate a better performer over a more tenured colleague, a new product may be scrapped because it’s not meeting market projections. When these team decisions are made, the family illusion is broken. This can cause resentment even from those who aren’t affected. It can shatter the foundations of a corporate culture that has taken years to build. Start-ups are especially prone to a moment of truth when business imperatives force them to make a decision that violates the family ideal they organized around at their creation. The effect can be devasting. In my experience, companies recover far better from business setbacks than they do from disillusionment.

A pseudo family culture can hurt a company in less drastic but equally damaging ways. It can lead to poor employee management and bad management decisions. A family culture resists investing more in high-performers.  It can discourage tracking and monitoring the timeliness and quality of deliverables. It can create a misguided “we’re all in this together” mantra that overlooks the need for corective feedback for employees falling short of standards . It can also lead to lazy management. A team leader should be constantly looking for opportunities to improve the team. A family mindset tends to accept the status quo, and not look as aggressively for opportunities to improve. If a basketball team drafts a new player who is better than a current player, that current player would see her playing time reduced or a lower salary offer come contract renewal time. We wouldn’t expect the arrival of a new family member to push out an existing one. Managers working with a family mindset may unintentionally undermine the team’s success by not fulfilling their obligation to make the team as strong as it can be.

If you’re considering working for a company that claims to be a family, exercise due caution. They are either naive or disingenuous, and neither of those is a point of strength. At the very least, you should understand that any company that describes itself in familial terms is misguided. If you’re a leader, avoid falling into the trap of using family language and metaphors to shape your culture. You can still bring out the positive human values you want for your organization without falling into dishonest tropes. Think of what you’re really trying to instill in your culture and find the ways to articulate them with more honesty, accuracy and mutuality. Consider these examples of framing a culture with a team mentality:

Family Value FallacyClarifying the IntentTeam Value Framing
LoyaltyThis often devolves into a one-way street that only applies to the employee. The right intention is to foster an employer-employee relationship based on more than short-term exchange: a payment for a fixed set of deliverables. In an ideal relationship, the company will provide resources and opportunities that expand their employees’ skillsets. This increases their value to the company and the company’s value in the marketplace. If employees share in that value creation, they won’t stay out of familial duty, but because the opportunity to grow and benefit from that growth increases with their tenure.  Shared growth
SupportFamily also appeals to our sense of security. We don’t have to be at our best at every moment to keep our place. A company should never claim that their support of an employee is unconditional, because it isn’t. But growth depends on taking risks that don’t always pay off so it’s important that companies create comfort around responsible risk-taking. Strong companies embrace failure that isn’t due to lack of effort or incompetence by channeling its lessons into future efforts.Learning organization
DedicationDedication in corporate jargon is often a euphemism for the willingness to work harder or longer. The fallacy of that perspective has been borne out in the hand-wringing over” “quiet quitting” and “the great resignation.” As a business leader, what you should really want isn’t more hours, but people who care about their work. Organizations instill caring by sharing the mission of the company and helping employees recognize their role in it.Clarity of mission

One of the reasons otherwise thoughtful leaders default to language around family is because they’re reaching for an emotional connection. They rightfully know that we are influenced more by emotions than rational thoughts when making decisions or forming opinions. Family-like language provides a shortcut to creating an emotional appeal. Leaders should resist that shortcut for two reasons. One is that people are also inherently drawn to truth over falsehood. The truth of an organizational culture will always come out, and a promise of family is one that can never be fulfilled. The second is that there is plenty of emotion to be tapped into from teams as well. As any casual observer of sports could see, overcoming defeats and celebrating wins creates emotional connections as powerful as any human experience. There’s no need to use the F Word.

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30 September, 2019 · 7:30 am

The Omnichannel Trap

Related image[as originally appeared in Marketing Insider)

No word falls more trippingly off the tongue in marketing circles than “omnichannel.” It’s the stated ambition of many a marketer, and taken as a given among the conferences, summits, and pundits beckoning to marketers. The need for brands to take an omnichannel approach is unquestioned, although there’s much to question about it.

That’s because an omnichannel strategy is overly ambitious and lazy at the same time. It’s overly ambitious because it injects complexity and strain into marketing systems that already require far more layers of infrastructure and effort than they did 10 years ago. On a purely practical basis, an omnichannel mindset is a game that can never be won. The new marketing ecosystem generates a constant introduction of new channels and sub-channels. If marketers try to keep a hand in them all, resources will be stretched to the point of ineffectiveness. It’s lazy because it neglects the strategic effort required to understand what combination of channels are most essential to the audience, objectives and advantages of the brand. It takes work to understand the ways people come to a brand, and to prioritize where to excel, where to participate, and where not to play at all. So savvy marketers should think about their communications channels the same way they think about their new products. Nobody would seriously propose an “omniproduct” strategy.

In that light, it’s clear that omnichannel starts at the wrong end of a strategic marketing process. It’s like collecting as many tools as possible and then figuring out what to build from them. Strategy is deciding what you want to build, and then assembling the tools most critical to its construction. It’s true that consumers insist on more immediacy and more control of their brand interactions. But the answer to that demand cannot be to attempt to be everywhere the consumer could possibly be. Rather, the challenge is to be where you can most impact a positive customer experience. Being in more places won’t help if it comes at the cost of strong execution and integration.

Several have tried coining the term “optichannel” to replace “omnichannel.” To the extent buzzwords are useful, optichannel at least implies the need for making strategic choices. It requires finding the balance between what a customer wants, what the brand delivers, and what your budget can afford.

Consider these useful questions to develop more strategic channel choices:

  1. How well defined is my audience? Is it mass or niche? Is it easy to identify by demographic, behavior or location?
    • To gauge how much additional value you can derive from an addressable audience vs. a mass audience.
  1. What are the key elements of your customer Journey? Is it a high consideration purchase? How often is the customer in market?
    • To weigh the relative importance of creating deep highly integrated experiences vs a breadth of highly visible touchpoints.
  1. Are there common triggers to purchase? (e.g., a life event, a problem, a seasonal need, a cultural cue)
    • To identify the times and places most conducive to a brand interaction.
  1. What are the key incentives and barriers to brand consideration? (e.g., understanding how it works, knowing what others think of it, seeing what it looks like, being easy to purchase)
    • To understand the channels that are best equipped to drive your strategic marketing challenges
  1. What’s the value of a new customer? How frequently is your product/service purchased and what’s the retention/loyalty rate?
    • To prioritize the channel spend based on expected return on investment
  1. What emotional reward are people expecting from the brand? (e.g., empowerment, connection, status, escape, etc.)
    • To align with the channel environments most appropriate to the brand.

It’s reasonable to suspect that the fervor for the omnichannel gospel comes less from marketers and more from those striving for the marketer’s budget. Omnichannel thinking drives a FOMO mentality that drives spending. More channels, after all, means more to buy: more media, more technology, and more services to execute across them all. The omnichannel trap is rooted in the notion that doing more things does better. The optichannel approach posits that doing things better does more.

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26 September, 2019 · 7:30 am

How Brand Purpose Lost its Way

[as appeared in Advertising Age]

Image result for guruThere’s a rampant belief among today’s marketers that a successful brand requires an overarching brand purpose. But there’s scant evidence to support that belief. What exactly is brand purpose? By aligning a company with a role in contributing to a better world, it allows a company to aspire to a higher standard than a brand mission or brand positioning. Among the most cited examples are:

Dove: Achieving real beauty, building self-esteem

Coca-Cola: To inspire moments of optimism and happiness

Apple: To empower creative exploration and self-expression

Proponents of brand purpose often illustrate their point with a Ted Talk by Simon Sinek about starting with the “why” behind the brand. That talk opens by comparing the Wright brothers to Samuel Langley. As presented, Langley had all the financing, credentials and official support while the Wright brothers had only their inspiring vision. Langley wanted to build an airplane, while the Wright brothers wanted to change the world through flight. Their deeper “why” won out over Langley’s shallow “what.”

It’s a stirring presentation with a significant flaw: Sinek obviously couldn’t speak with the parties involved, and the documentary evidence of a higher calling is thin. The correspondence the Wrights left behind offers the same generalities about human flight that many people of the time used, and dealt mostly with engineering issues. There is as little evidence to support that the passionate “why” fueled the Wright brothers’ success, as there is to support that purpose-driven brands outperform peers. There are at least three flaws to the most common claims.

First, they speak to correlation not cause. As Nate Silver notes, ice cream sales are positively correlated with—but don’t cause—forest fires.

Second, determining which brands have a purpose and which don’t is subjective. So it’s easy to skew the data intentionally or unintentionally.

Third, because brand purpose is a relatively new trend, it’s statistically more likely that younger, higher-growth companies have them.

This doesn’t mean brands shouldn’t have a higher-order, strategic objective or that companies don’t have an obligation to be good corporate citizens. Brand purpose adherents go beyond this, insisting that every brand must have a social goal in order to grow. But a quick examination of the core tenets behind this assertion don’t stand up to scrutiny.

As strategic guide

In a Harvard Business Review article, one CMO said that “purpose streamlines decision-making.” But most brand purpose statements are so lofty they lack any useful applicability. Coca-Cola’s purpose is to inspire moments of optimism and happiness. How would that guide new product development? Anything that tastes good, feels good or looks good would qualify. It allows for comfy sweaters, pets and movies with happy endings. Generalities are poor tools for strategic direction.

As core values

Brand purpose is meant to serve as an internal driver of company values. Facebook’s purpose is to “give people the power to build community and bring the world closer together.” However, Facebook and other forms of social media are more often cited as a source of cultural and political divisiveness. Many would argue that Facebook has prospered by defying the values inherent in its purpose rather than fulfilling them.

As brand story

We all like brand stories, be it Levi’s jeans born in the Old West or a French widow creating Veuve Clicquot champagnes. That a product or service came to be just because people were willing to pay for it is dismissed as uninteresting. Crafting a brand purpose statement onto an existing brand undercuts the authenticity marketers are trying to obtain.

Marketers need to embrace the less sexy but more proven path to brand success by developing the three constants that drive successful brands: relevance, value and differentiation. Brand purpose is one way to bring differentiation to a brand, but it is not the only way.

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3 September, 2019 · 1:55 pm

Alexa, What’s My Marketing Strategy For Voice?

Image result for voice activated[As appeared in Media Post’s Marketing Insider]

The architect Louis Sullivan coined the maxim that “form follows function.” In the case of marketing channels, you could reverse that to say function follows form. How you use an axe differs from how you use a shovel because of what the form allows you to do. Similarly, the best use of a billboard is different from the best use of a banner ad because of what the form allows you to do. In order for brands to find success with voice, they have to consider the strengths and constraints of the form.

It may disappoint some marketers to learn that “receive promotions and special offers” is not a popular use case for people interacting with voice-enabled tech. In fact, according to Nielsen’s “Total Audience Report: Q1 2019,” top responses for how smart speaker owners use their devices include searching for real-time information, getting the latest news, making calls and sending messages. If you observe how most people interact with voice channels, it’s initiated as a request or command. This form leads away from using voice for marketing-as-promotion and toward marketing-as-a-service. It’s a medium better built for informing, supporting and responding rather than advertising. With that strategic perspective, brand leaders should look past their advertising teams for inspiration and instead tap into the insights gleaned from service-centric programs like customer service and customer loyalty groups. 

Tapping into the service aspects of marketing will suggest the most likely opportunities to shape positive experiences via voice. There’s a lot of information there that can point to effective brand applications for voice. For example:

  • Does my product/service require set-up?  Can voice instructions walk customers through it?
  • What are my most frequent complaints/issues?  Can voice provide an easier way to resolve them?
  • How, where and when are people using the product/service?  Does that context suggest ways voice could enhance/extend those use situations?

Once you find where voice can add value, it’s imperative that customers know what’s available to them. Brands can enable access to voice-enabled devices through existing communication methods. Product packaging, owner’s manuals, brand apps, and welcome emails are all channels through which companies can promote that they are “voice-friendly.” If done effectively, it should be apparent to consumers where to go and what to say to take advantage of a brand’s voice features.

The new reality is that brand-driven monologues are quickly being replaced by customer-initiated dialogues. Voice can best drive brand value by expanding ways to serve and enhance the customer experience. Those who try to shoehorn this technology into an existing promotional strategy might find silence on the other end.

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12 September, 2018 · 8:14 am

The Rise and Fall of Media: The False Choice of the Channel Wars

Image result for battleIt seems anachronistic to ponder the role of traditional communications in the current marketing environment. What benefit can there be in direct mail, in-store marketing, and outdoor advertising in a world of mobile apps,  digital voice assistants, and addressable television? It’s hard for marketers to even mention traditional channels for fear of appearing hopelessly behind. There’s only way to reasonably consider these old standbys. You have to believe in harnessing every tool at your disposal to shape a better experience for customers. For at least the next decade, until the feared robot uprising, those customers are exclusively fellow human beings. And we human beings live in a world that blends the digital and physical environments. So the best marketers will create the best experiences by blending what each brings to that experience. Digital formats provide critical elements like timeliness, motion and interactivity. Physical formats bring texture, dimension and focus. It’s hard to beat the efficiency of email, but it’s hard to beat the response rates of direct mail. The direct mail household response rate is 5.1%, compared to 0.6% for email, and 0.2% for online display. We can deliver a more timely message via mobile, but people are more likely to recall information from a printed page. Some studies say brand recall is as much as 70% higher from a printed message than from a digital message.

But setting physical and digital channels in opposition like that is a trap for marketers.  Imagine asking a professional singer,  who’s trying to build a fan base, to choose between live concerts and studio releases. Anyone from Tony Bennett to Cardi B would say they need both. The job of good marketing is not to take sides between one channels, but to get on the side of the customer.  What combination of channels is going to create the best brand experience for the intended audience? The answer is inevitably a thoughtful connection of traditional and digital communications. Good examples include a website for a resort property that triggers an immersive direct mail piece when visitors show a high level of engagement. Another is a follow-up email to a printed charitable solicitation that reminds recipients of the importance of their mission.  These types of cases have shown time and again that the best result comes from bridging channels rather than relying exclusively on one or the other. One of the most respected prognosticators of the future of marketing, Rishad Tobaccowala, once noted that “while we are surrounded by algorithms that are data driven, digital and operated on silicon chips, we should never forget that people are analog, carbon based and feeling driven.” That means we need to be guided by the full spectrum of the human experience if we’re to create an effective consumer experience. It’s deep in our bones to want something right away. That’s why the power of digital will be ever more vital to any marketing program. It’s also deep in us to want something we can run our hands and eyes over. That’s why the persuasive power of traditional media will never go away. You could say it’s imprinted in us.

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11 October, 2017 · 4:19 pm

The Biggest Agency Gap? Surprise, It’s Not Digital

(This article was originally published in HuffPost and AW360)

The refrain for digital transformation is as necessary as it is clichéd. For all the talk of our digital present and future, marketers still have a lot of road to travel to move from systems developed to deliver broad-based campaigns to systems built to deliver millions of individual communications in real-time.

But there’s an even larger gap than that to fill for marketers, and particularly for the agencies that serve them. That’s the gap between marketing and marketing communications. Agencies tend to conflate the two to the extent that they don’t know the difference. But marketing is far more than messaging. The traditional 4P’s of Marketing have been updated with more letters since they were coined in the 1960s, but even the original version has 3 more Ps than Promotion.

As agencies build their data capabilities, they almost exclusively focus on how to better deliver messaging. That includes better targeting of the message, more effective media channel selections, and more compelling message content. But that data should be applied to more than messaging. It should be informing pricing decisions. It should uncover shopping preferences. It should indicate product opportunities or shortcomings. The data is there to inform those decisions, but the framework is not.

It’s not surprising of course, because that’s not where agencies are used to playing. Pricing, distribution and product development aren’t part of their historical job description. The Cannes and One Show award categories have expanded to embrace all kinds of new media forms, but I don’t recall anyone being celebrated for best dynamic pricing implementation.

Agencies need to provide this more holistic marketing perspective to their clients. The barrage of studies related to shorter CMO tenure indicate that their clients are too often seen as lacking the internal credibility to impact the foundational business of the company. Agencies reinforce this CMO shortcoming by pushing to add experts or tools focused on improved messaging. Agencies could be a far greater asset to their senior clients by tying these resources to other critical parts of the full marketing mix. A true Marketing partner looks at questions differently than a Communications partner. For example,

 

 

Marketing is more than communications, and agencies should be about more than messaging.

#AgencyVoices

Photo © iStock, taken from original post

 

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21 July, 2017 · 12:36 pm

The Fall of the Titans: Why GAFA is Not Here to Stay

Article originally appeared in Advertising Week

Fall of the TitansIt’s beyond ironic that the companies most celebrated for dethroning the former titans of business are now themselves considered indestructible. There’s a belief that GAFA (Google, Amazon, Facebook, Apple) are now so dominant, that they’ll never be unseated.  It’s hard to picture a world where they’re not dominant, but it was once hard to picture the same of AT&T, GM, IBM and Microsoft. The tides that swept GAFA into their positions of leadership have not ebbed. There are several scenarios and trends that could erode what seems like their unassailable position.

New Technologies

The Silicon Valley credo is Disruption, so why should any of its denizens be exempt? As Clayton Christensen famously explained, established companies don’t get disrupted because they’re stupid, near-sighted and unimaginative. They get disrupted because the business demands of a successful established company don’t permit them “to focus resources on proposals that customers reject, that offer lower profit, that underperform existing technologies and can only be sold in insignificant markets.” GAFA is clearly now among the established ranks, and there are several technologies that offer the potential to disrupt them:

Ad Blocking

People are increasingly rebelling against the interruptive nature of online advertising. If a significant amount of the population employs the means to opt out of advertising, that undermines a cornerstone of the Google and Facebook business model. The initial scare seems to have abated for now, but the storm has far from passed. In the nuisance scenario, it’s easy to see an escalating arms race of blocking and anti-blocking technology. At the more severe scenario, ad blocking could significantly reduce the eyeballs that are critical to their financial models.

AI

While the GAFA are all racing to embrace AI, at least part of that embrace is driven by fear. The shopping feature of Alexa is naturally tied to Amazon, but that same technology can be applied to direct you to whoever had the best price, was the closest for pick up, and who most aligned with your social values. AI has the potential to bypass the aggregator function played by Amazon in commerce, Google in Search, and Facebook in social content. For example, I could ask my personal assistant “what are my friends up to?” and it could scan their social feeds, blog posts, and give me a synopsis. I wouldn’t have to go to central site, nor would I care where it came from. Facebook could block access, but one you start battling human behavior instead of feeding it, the gig is up. Apple is even more susceptible to being depositioned by AI. Amazon, Google and Facebook all have vast sources of native data that could drive proprietary AI applications. Apple has far less. What has made them champions for some privacy advocates makes them especially vulnerable in a data-driven world.

The Immersion

In the long-term, a loose connected thread in the growth of AI, blockchains, IoT, and the Cloud Is the expansion and de-centralization of computing activity. As the ubiquity of computing grows, everything becomes a computer – clothes, appliances, cars, even body parts. The shift from desktop to mobile led to the rise and fall of many companies. What happens when the world shifts from mobile to…everything? When everything is a computer, nothing is. That is, when we’re immersed in an ever-present layer of computing, there is no single thing, database or place that channels our interaction with cyberspace. This would lead to new behaviors that eschew having a few personal objects for connecting (Apple), a preferred source for searching (Google), a primary marketplace for buying (Amazon), and a common arena for interacting (Facebook).

Financial Pressure

While none of these companies are hurting for cash flow, each has potential financial vulnerabilities. Apple, Google and Facebook share a dependence on a fairly specific revenue source. Gary Bourgeault does a nice analysis of this dilemma. The most dependent is Apple, who’s current growth is almost entirely tied to the iPhone. Most companies dream about a similar asset, but it’s deep and narrow. The Apple watch has seen steady but slow growth, many of its services have ceded prominence to other competitors (e.g., Apple Music to Spotify), and they’re late to the AI assistant world. So as new sources of penetration dry up for iPhones, Apple requires another huge hit that’s not clearly lurking in their current portfolio.

For all its range of wonderful products, Google is subsidized almost entirely by its search and display advertising revenue. While the Search business made the deft switch from desktop to mobile, the broader vulnerability of the business model remains. As discussed above, AI has the potential to disrupt the Search model. Facebook made a more impressive switch to mobile which preserved their business model and their growth. They’ve also been quick to identify future competitors and co-opt or acquire them. For all that foresight, their business model still depends mostly on the interruptive ad model of traditional media – forcing people to see ads on their way to what they really want to see. While their targeting provides the promise of more relevant commercial messages, the same behavioral and cultural changes that threaten the efficacy of the traditional ad model threaten Facebook as well.

Amazon doesn’t suffer from a narrow revenue source. Amazon has grown an impressively diverse revenue base, but it’s been involved in a confidence game for its entire existence. The company has consistently been valued on how it’s positioned itself for the long term. That’s made it an aggressive pioneer in logistics, cloud services, and AI to name just an impressive few. But Amazon has been valued on their future payoff for over 20 years. At what point will investors want to see the pot of gold at the end of the rainbow? It seems investors continue to be satisfied as long as they see revenue growth. And it may be that when revenues start to level out, it’ll be able to turn on the earnings lever. But it seems equally likely that it will find itself living in the low-margin world it created and forced to compete among the mortals whose valuations are based on measurable profit growth.

Regulatory Action

Google’s recent EU fine wakes a dormant vulnerability for all of GAFA. At some point, governments may decide each of them has just grown too big. Historical cases against IBM and Microsoft showed the halting effect of government litigation even without a technical legal victory. IBM and Microsoft were hamstrung by the drawn-out multi-year anti-trust litigation that forced them to pull back on their most aggressive initiatives while the action was ongoing to avoid providing additional fodder for the regulators case.

New privacy rules would also significantly affect all their business models, though those of Apple to a lesser extent. The US has allowed a relatively free rein, but actions in the rest of the world point to stricter requirements on how personal data is collected, stored and used. If that data became less available or costlier to use, that would significantly affect the existing business models which generally rely on the free use of personal data. Google and Facebook are especially dependent on ad revenue that’s tied to their targeting ability. If that targeting is hampered by privacy regulations, their inventory could become less attractive or more expensive.

Still other regulatory pressures are surfacing in the increased scrutiny of Facebook and other social media companies. Their long-standing argument that they should be treated as aggregators rather than publishers is losing sway as negative publicity piles up around online bullying, hate speech and fake news. A new law in Germany requires all social media companies to remove illegal content within 24 hours of notification. The cost of compliance would be felt in various ways, from operations to partnerships.

The legal threats in all these areas are closely tied to the political, and that does not bode well for the current titans. Changes in regulations follow changes in popular sentiment, and that is shifting as the former Davids have become the new Goliaths. Marketers dislike the duopoly of Google and Facebook who together represent 60% of US digital spend. When Facebook was found to have misreported engagement times on video ads, they essentially shrugged it off. Marketers have little of the leverage they’re used to having over media owners. Similarly, Amazon is now seen as a competitor to most every retailer. The popular culture that used to celebrate these companies as champions of the people are now as likely to paint them as stiflers of innovation and corporate bullies. So there is a steady accumulation of parties actively rooting against them.

It’s difficult to predict a single factor that would prove their Achilles heel. Yet the GAFA gang would have to defy economic history to maintain their current market position. That’s not to say they’ll go away. Many of their predecessors remain as successful businesses despite no longer being the undisputed dominator of their industries. That continued success is even more likely when you consider how brilliant current leadership has proved in anticipating new opportunities and threats. But to continue in their current positions would require an unprecedented combination of reduced level competition, a slower pace of technological innovation, and relaxed government intervention. None of this is likely.

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7 July, 2017 · 1:24 pm

Cannes: A Hater’s Guide

rose wine[A version of this article originally appeared in Advertising Age]

It’s easy to mock the Cannes Lions Festival of Creativity. The name alone does a lot of the work for you. Truth be told, I’m usually among those mockers. While there are many things to deeply love about our business, its need for self-congratulations is not among them. There’s no place where this need is expressed more strongly than at Cannes. My favorite complaints when joining the detractors include:

  1. You travel thousands of miles to meet with companies who would happily come to your home office tomorrow if you just asked nicely
  2. You stand a better chance of winning a Lion if you do a good job promoting a noble cause people naturally care deeply about than if you do a good job prompting a common product people naturally care little about. The latter requires 1000 times more creative juice and is the core task of our business, yet it’s scarcely represented among the “the best work.”
  3. As we face ever greater obligations for being responsible stewards of our clients’ marketing investments, we revel in rosé-soaked meetings on yachts in the South of France.

Yet before joining me in a collective eye roll, remember Oscar Wilde’s remark about cynics: they know the price of everything and the value of nothing. So while it’s easy to poke fun at the false glamor of the posers who cavort along the Croisette, it risks overlooking its fundamental substance. Here are the suggested strategies for finding the substance of Cannes:

Cross Some Borders – Because it’s roughly equidistant between Asia and the Americas, Cannes is one of the few places where the industry comes together on a global level. Despite the efforts of Brexit and Trump to stem the tides, our economic and cultural waves increasingly splash across borders. That makes Cannes a critical place for assessing the cross currents of ideas.  It’s a shame how many people run about without studying the work on display in the Palais. Don’t be one of those people. Take time to see the work on display. Even better, use one of the kiosks that allow for more efficient searching. I particularly recommend exploring work from the Nordics, Singapore, and India for ideas, as their audiences and markets tend to inspire fresh perspectives.

Stretch Out – While Cannes has been an industry mainstay for several decades, it has changed considerably in the last few years. The Festival has pushed the industry to move beyond “the ad” as the pre-eminent expression of our craft. They deserve credit for expanding the awards into interesting new categories. Its influence is in the right direction even if sometimes done in a faddish way. The specific categories to watch either in person or online are:

Creative Data

Cyber

Innovation

Product Design

Audition Your Next Partner – Much has been made in previous years of Ad Tech’s rise in the Cannes hierarchy. The names on the beachfront properties have changed, but it’s less about figuring out who’s on top than understanding how all the pieces fit together. Because marketing is becoming less about pure communications and more about the full customer experience, it requires a richer partner network to pull it all off.  The Cannes community embraces a broad diversity of players across content, media, data, and technology. To be clear, it’s nowhere near as broad as the CES start-up roster, but that’s the point. These are companies squarely focused on marketers. To get a sense of the type of partners you should start thinking about, visit the Discovery Zone in Lion Innovations.

The common theme through all these suggestions is to use Cannes to plug yourself into a broader network than you encounter in your day-to-day world. At least this cynic would have to admit that it’s impossible to leave the Festival without the impression that the business of creativity is not an isolated pursuit, but fueled by the competition and collaboration that Cannes puts on full and gaudy display.

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