Marketers should set production budgets or pay the consequences
May 23, 2013
This post is by Clive Duncan a Senior Consultant at TrinityP3. As a Director and DOP he has an appreciation for the value of great creative and outstanding production values, while also recognising the importance of delivering value for money solutions to the advertiser.
So you are filling out your comms campaign brief to the agency (and TV is your medium of choice). So when you get to the bit in the brief that says how much your production budget is, what do you put in the blank field? This is a point of contention for many marketers, with some feeling it is better to provide the budget and others not.
Why set an advertising production budget?
When you think of professional services, and especially commercial creative services, negotiating or agreeing the budget upfront is important. After all, there is no point briefing an architect to design a building without indicating the budget for the construction.
Likewise in advertising, it is very important to set a budget as it will indicate to the agency your financial expectations and the agency can apply their creative talents within these parameters. This is a good thing, clever creative is just that, clever, it does not have to be expensive.
Setting a budget will ensure is that you will be more likely to end up with a great piece of creative work and enough media budget to make sure enough people will see it to hopefully ensure it delivers its full efficacy.
What happens if you do not set a production budget?
Some marketers are worried that providing the budget will simply have the agency spend it. The fact is that without the budget they will most likely end up spending more money than they need. That is why in setting the budget it should be based on what the production is worth to the organisation based on the task at hand.
If you do not set a budget you are wasting everyone’s time as they are working without understanding the framework they are working within and this will lead to having to be reigned in (creatively or financially or both) somewhere along the line. A big production idea without a big budget is an embarrassment to all. Where a big creative idea is delivered bang on the money, it is a winner for all.
How to set a budget
The easiest thing is to just add a few percentage points to last year’s budget, so your spend is based upon historical trends. The problem with this is you could be simply compounding past inefficiencies and inequities.
So how do you draw a line in the sand? How do you set production budgets?
It’s easy (and the concept has been around for years)! All you do is set a percentage of your media spend as a production budget. The media spend is usually the biggest single expenditure in the advertising budget. The media budget is based upon the task, the strategic importance of the project, the demographic targeted, the reach and frequency required and the value to the organisation and the marketing strategy.
To calculate your production spend the next bit is simple, you decide what category your campaign fits into and apply the appropriate percentage to the initial media budget and this becomes your production budget. e.g. A retail TVC (this is a TVC with a price point included no matter what the product) should have a production spend of 10%, so if you are spending $2 million on media you should be spending $200,000 on production.
Over the past 13 years we have been tracking media to production ratios and can provide these guidelines by advertiser category:
- Service industries (Financial and Telco) – the percentage is between 10% and 15%
- FMCG or Consumer Goods brands – the percentage is between 15% and 20%
- Luxury goods (big ticket items or services) – the percentage can be up to 30%
But these are simply the starting point. The secret is to set the budget also taking into consideration criteria like:
- the total media investment (in the first year)
- the strategic importance of the campaign
- the potential for on-going use
For a reality check it is always wise to consult a senior member of your marketing team or an independent specialist.
The production budget is a guideline
From these benchmarks you could say that any percentage over 35% means you are potentially in the “I am seriously wasting money” zone. But here is the thing, these percentages are guidelines. They are the starting point against which the production cost is referenced. The agency should deliver concepts to this budget to answer the brief, but it should not prohibit the agency from presenting more expensive concepts as well.
If Steve Jobs had religiously followed these guidelines, then the 1984 commercial above to launch the MacIntosh would never have been made. Legend has it that the cost of production was so high that there was only enough media money for the spot to run once during the Super Bowl. Now that takes a fairly courageous marketer to follow this strategy (luckily he was the CEO).
The point is that these would be developed at the agency’s expense and presented with a clear indication of the cost to deliver at the time of presentation. This gives the brand team the opportunity to assess the value of the additional cost above and beyond the budget.
How to keep the agency within budget
If you can’t afford the media spend to reach your target demographic with significant frequency then a big production spend is not always the answer.
Your agency may say there is a strong possibility that the TVC will go viral on the internet / YouTube because it is such a brilliant piece of creative and worth the investment, ask them to guarantee it and watch their faces.
First of all, never let yourself be up-sold (you know the scenario). The agency pushes a few ideas across the table, they go through the motions of trying to sell them to you. And when that’s over they all smile broadly and say,
“But we also have this idea. It’s a beauty, unfortunately it’s a little over your budget”.
This is the line in the sand that you cross at your own risk.
- You can either just put up your hand and say “Well we don’t want to see it, go back to the drawing board and come up with a ‘beauty’ that is within our budget”. Do this twice and the agency will get the idea that you are serious, and (if they are up to it) start producing clever work that is within your budget.
- Or you can review the ‘beauty’ and if you believe it has merit, ask the agency to prepare a ballpark quote that they can guarantee accurate within 10%. (Any agency producer worth their salt can do this) and then review if you can afford this increased level of investment without decimating your media budget.
This is a decision that must be made at the time the concepts are presented. The most responsible and the safest approach is the first one. The second is a higher risk strategy and definitely one not taken lightly.
But either way you are making an informed decision and not being placed in a position of being forced to over commit budget funds simply because the on-air date is too close.
I would be interested to hear some of your experiences in this area. Please leave a comment with your thoughts.
Online shopping trends: The death of a merchant
May 21, 2013
This post is by Chris Sewell, Business Director at TrinityP3. Chris has a wide ranging knowledge of all areas of the advertising and procurement world and specializes in helping companies understand the environmental impact of their marketing spend.
Today the retail supply chain is undergoing a game changing transition that will remove a number of established businesses that sit in the middle of any purchase. The raise of on-line trading will leave these businesses with eroded brand values or worse, be road-kill on the side of the technology highway.
The origins of today’s modern marketplace can be traced back thousands of years. The opening up of distant trade routes led to multiple money making opportunities and a proliferation of middle men and women along the way.
The commercialization of the Internet in the 1990’s was a major game changer for the traditional retail model. Up until then the purchase of that ‘little black dress’ involved the gainful employment of numerous pairs of hands from farmers to shop assistants. While remote areas were serviced by catalogue shopping via direct mail the majority of goods followed the tried and tested route.
New financial vehicles have been deployed up and down the supply chain to help grease the wheels of business. Improvements to shipping, legal frameworks, marketing, local transport providers, warehouses, merchandisers as well as the removal of trade barriers have all had a hand to play in the endless pursuit of that perfect little black dress.
But nothing fundamentally challenged this well trodden business model like the arrival of the Internet.
Avoiding a mauling in the Mall
So what’s changing to cause this extinction of the merchant; the whole-hearted acceptance of purchasing on-line?
Gone is the fear of buying without trying first, now that the returns process has been simplified.
With one of the key purchasing demographic groups glued to their iPhones the need to visit the shop is fast losing its fascination.
The on-line shopping experience is today at least comparable with a visit to the Mall. This has been driven by better merchant facilities plus secure and dynamic websites. Fast and cost efficient inventory and shopping cart software like Magento and the maturing of complex shipping aggregation engines like Temando have all vastly improved the buyer’s experience.
Now we have the means to supply most goods straight to the door with a casual swipe of a finger. So what is going to become of that long list of traditional handlers in the middle?
Let’s take that LBD once more.
The Net-a-Porter model clearly demonstrates the changes taking place causing the elimination of the middle merchants. Previously an Australian purchase could be manufactured in Asia, shipped to the UK, then final delivery back to Sydney. Now with the opening of their Hong Kong hub the need for the UK warehouse and pick and pack facilities, the shipping of around an extra 20,000 km is not required. Today you can sit in the comfort of your lounge room on a Sunday night and order that must have LBD and be trying it on in the comfort of your own Sydney home by lunch time on Monday.
The rise of the Merchant of Suzhou
Ask yourself do we really need multiple warehouses and movements before that LBD finds its rightful place in the wardrobe. By removing the layers of warehouses and the physical shop costs the shutters will come down on a lot of businesses. Also, a contraction of unnecessary movements will also reduce the carbon footprint of these necessary commercial ventures. Re-zoning of empty shopping centres will clear the way for high density housing in all capital cities. But this is just one future scenario.
Naturally there will be major resistance by anyone within this middle layer of enterprise. ‘Adding value’, ‘ease of supply chains’ and ‘tried and tested business models’ will be rolled off the silver tongues to help shore up the interest of the vested.
The speed of understanding, deployment of new technology and the reconfiguration of existing logistics businesses, will dictate the timing of this streamlined delivery chain.
One of the major business risks holding back this transition of maker to door would have been the ability to ensure that the quality controls are in place to replicate the existing service levels.
Quality control requires special attention but in the garment industry this already occurs in the manufacturing industry therefore these learnings are already available at a local level.
Again with technology solutions it is now easier for the manufacture to deliver the goods directly to the customer. Companies like Temando take care of the processes, carrier relationships and customs paperwork to simplify the transition. Centralized distribution or drop shipping points will either be managed by tech savvy third party logistics companies at the point of manufacture or point of entry into any given market.
Streamlined inventory controls will also reduce the need to warehouse stock. Order-make-delivery to wardrobe within a matter of days will cut costs, dramatically reduce stock obsolescence and again, soften the carbon footprint on the planet.
What this means for Marketers
Marketers have moved at varying speeds to realize the opportunities that await them in this changing market place. If you are historically wedded to profit from an existing business model it is sometimes hard to convince the powers that be to alter course.
Online shops such as Net-a-Porter, ASOS and The Iconic have already captured the hearts and minds of fashion shoppers with price and service models that are superior to traditional bricks and mortar ventures.
These are all online shopping centres that promote other brands within their brand. Today are these more valuable than the traditional shops of Myer, DJ’s and shopping centres like Westfield?
The challenge for marketers is to understand and communicate internally the value of the brand and then position it in a highly dynamic digital marketplace. The ability to be able to reach out to customers who are now comfortable with not having to touch and feel the goods before they buy is now a truly one on one relationship. The world of social media means you will be praised and gossiped about so partner with businesses that truly understand the brave new world not just pay lip service to it.
While the marketplace changes goes through radical change the selection of your marketing partners also needs to change as well. It is not about a creative award winning graphically rich website. What a retailer needs is the equivalent of online merchandisers or window dressers. They need to understand the needs of the customer and make the sales process simple and fast.
Disclosure: Chris Sewell is the CEO of The Gaia Partnership whose marketing communications CO2counter has been deployed in the Temando offset to measure carbon in transport and supply carbon offsets.
Procurement process: get all agencies in for a pitch Q&A?
May 19, 2013
This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
Here is a procurement practice that I will never understand. When managing the tender process at some point they get all of the agencies into a room for a question and answer session.
The idea is that this ensures a level playing field and ensures that no agency has an unfair advantage over any other. The problem is I have never actually seen this achieve anything except to have the procurement team tick off a step in their procurement process.
This is particularly popular in government procurement processes, where I am told it is mandated by the procurement policy of government to ensure due diligence and governance in the process.
Now I understand if the sessions are just to provide information to the suppliers participating in the tender process, but considering it is a meeting of competitors, I think it is naive to expect competitors to ask questions that could reveal their competitive strategy.
The best way to demonstrate this is with an actual example of where this process went wrong. In this particular case, the tender was not a government tender, but a pharma-company who were undertaking a creative agency tender.
The tender process was similar to the ‘traditional’ and rather ‘old fashioned’ creative pitch, with a Q&A process around the RFP, where the team shared questions and answers with all respondents and then those responding with creative concepts were all asked to attend a single briefing session.
So having received the extensive RFP documentation, the agencies were given two days to review the paper work and submit their questions to clarify the requirements and the process.
The process issues and questions were fairly straight forward, but the procurement team were concerned that there were many more process questions than there were questions about the requirements.
When you looked at the questions, they were fairly prosaic in regards to process, but the agencies asked very few questions on requirements because the agencies knew that all questions and the answers would be shared with all the other agencies.
So it would be counterproductive to ask questions that would reveal the agency’s strengths by using the questions to probe the desirability of those strengths through the Q&A process.
e.g. With a requirement in the RFP for data analytics the agency my explore the desirability of econometric modelling, but in doing so they will then remind all agencies participating to offer econometric modelling, effectively eliminating their potential competitive advantage.
The more strategic the process being evaluated, the greater the impact of this open process. At the time of providing the brief to the agencies, the response against which they will be judged successful or not has commenced. Even at the time of reading the brief any good agency is already exploring possible strategic directions and creative territories.
Yet when the agency is in the open forum of the briefing session, they are expected to ask questions to explore these strategic and creative directions in front of their competitors. It is not going to happen. So the whole process gets reduced to at best a point scoring exercise on trivial issues or a total waste of time.
In some cases I have seen agencies spend significant amounts of time actually formulating misleading questions to ask in the briefing session to try and throw the other agencies off their strategy.
Focus on what you are evaluating
If you are selecting a media, creative or digital agency, then you are really wanting to select them for their strategic and creative thinking. So why would you use a process that diminishes their competitive advantage by sharing their strategic and creative thinking with their competitors?
I know this may not be immediately obvious, but sharing questions and undertaking open briefing sessions is effectively sharing the agency’s thinking with their competition.
So with the desire to keep the process “open” and “fair”, to comply with guidelines and provide the level of due diligence, the process actually works against the evaluation of the very criteria that is central to selecting a suitable agency.
The frustration is that I have had this conversation many times with many different procurement people. In almost every case they agree with the logic of the argument. But they always fall back on the fact that these are in the guidelines that they need to comply with.
It reminds me of the definition of insanity – “Doing the same thing over and over again and hoping for a different outcome”. Is it any wonder there are so many complaints about these processes and yet nothing ever changes. Is it just procurement insanity?
What do you think?
How engagement agreements improve your agency interactions
May 16, 2013
This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
I remember about 10 years ago, being engaged by a marketing team to work with a well known management consulting firm who had been brought in by senior management to restructure and improve the marketing process. The interesting observation was that rather then customising the structure and process to the strategic requirements, the management firm had a six-sigma developed process that they tried to impose on the marketing team in the interest of best practice.
What I also observed was there was little commitment from the marketing team to the process. The problem appeared to be there was little or no recognition that the current process was obviously functional. The team were not consulted to assist in determining the best way to improve the process of engagement between the internal team and marketing.
It was around this time that we developed the Engagement Agreement process.
The role of SLAs and KPIs in process
Around the time we commenced in using the Engagement Agreement process, I was also reviewing a large number of agency services agreements, that all contained either SLAs (Service Level Agreements) or KPIs (Key Performance Indicators). Many of the marketing and procurement people we were talking with seemed to believe that these contract clauses would assist in managing and improving agency process and performance.
There are two things that are misguided about this belief:
- Most SLAs and KPIs are based on the assumption that the performance of the agency is simply due to the agency alone. But this fails to recognise that the strategic and creative components are co-created and that the performance of the agency is directly impacted by the performance of the marketer.
- Many of the KPIs and SLA clauses I have reviewed do not go to the core of the process purpose and are often superficial and inconsequential and therefore have little or no impact on process or performance improvement.
Even as recently as last year a major corporation procurement team wanted me to sign a contract that would financially penalise us if we did not return phone calls within 2 hours 99.5% of the time. I was curious to see if the clause would be reciprocal (NO), wondered who would be monitoring the time lag between the call and the response time (NO ANSWER) and what impact on project performance did they expect from the KPI (NO IDEA).
KPIs and SLAs are great for places like call centres (where they were first used) but in complex relationships based on interactions and contributions from multiple parties to deliver the outcome they are far too 2-dimensional.
The Engagement Agreement Process
The Engagement Agreement process is a facilitated workshop involving all of the key stakeholders involved in the process. The workshop is a collaborative process that is facilitated to achieve three key outcomes:
- Identify the core areas of interaction and engagement and prioritise these
- Map the current processes and allocate roles and responsibilities at each step
- Collectively review the current process to identify bottlenecks, duplications and inefficiencies
It is the collective and collaborative process that aligns the participants in defining the current process and diagnosing the issues. Participation in the process leads to a high level of commitment and commences the movement of the alignment process to deliverable.
The process has been used and developed by Sally Webster, Lecturer in PR and Marketing at Victoria University, who has been recognised with a National Citation for her work with Engagement Agreements.
An example of the benefits
Several months after a pitch we managed, I was contacted by the marketing team who asked if we could help sort out tension that had developed very quickly between the brand team and the new agency.
One of the issues was that, like many marketers post the appointment of the new agency, the marketing team simply leaped back into executing the marketing plan without actually engaging the agency in their expectations or agreeing on how to engage. (We had offered to undertake the Engagement Agreement but both the agency and marketers felt it was not needed.)
The Engagement Agreement process defined the areas of regular interaction including annual planning, campaign development and the like, but someone highlighted that the most tension was caused by the day to day interactions between the brand team, who were under high levels of pressure, and the agency.
In the workshop discussion it was discovered that because of time pressure the marketing team would regularly resort to email. And because the client was in the outer suburbs, face to face meetings were kept to a minimum. And as everyone was so busy it was almost impossible to find time for telephone discussions.
In discussions between the marketing team and the new creative agency it was found that this is where many of the tensions were rising. Emails were often misinterpreted leaving the agency confused.
The result of the workshop was that collectively they designed some basic rules of communication including the use of email, phone discussions and face to face meetings.
The result of this simple innovation was dramatic.
Just as Sally Webster saw an application of the Engagement Agreement process with her students, can you see anywhere in your business where this approach could give you better engagement with those you work with, either internally or externally?
Let me know by leaving a comment here.
Advertising Climate Change – solving the square peg, round hole dilemma
May 14, 2013
Jon Bradshaw is the director of brand traction, a marketing consultancy for the modern age. He has over 20 years of experience in marketing and brand building. None of which is of any use any more. There are 24 metaphors in this article. Jon recognises he has a problem.
How to re-engage with your audience in the new marketing landscape
In the first half of this diatribe, I explained my view that the changes in the media landscape are reducing and may even remove our ability to interrupt the audience with our brand messages. This led to the conclusion that advertising has to evolve into something that people actually want or need in their lives in order to survive. Something they will pull into their world, rather than have us push it. I believe that as well as working out what the brand wants to say and where it wants to say it, we need to answer a third question; why would the audience want to engage with it? In part two I will explore this idea of why in more detail.
My view is that marketing has developed and evolved into four different approaches or nodes. And that one of the key issues with managing audiences and engagement today is that people don’t recognise the existence of these four approaches and the inherent differences between them in terms of how and why consumers engage. We end up trying to fit square peg advertising into round media holes. In so doing we risk losing the audience and consequently our livelihoods.
These four nodes or approaches to doing the job of advertising in my view are;
• story telling
• relationship building
• system building
I’ll explain each one briefly, as in isolation I hope they’re fairly easy to understand. Crucially I will give a view on WHY consumers might choose to engage with this node. I’ll discuss how ‘new’ media affects the approach in good and bad ways. I’ll then talk about what I think we can conclude from this seemingly trite observation.
Story Telling must be entertaining
Historically marketing has used a ‘story telling’ approach. Brands create stories (or ads) about themselves. Consumers have engaged when it’s been informative and entertaining. The best ads work when we create entertaining, unexpected stories people can relate to. This is the mechanism most under threat from the decline of interruption as an option. The only reason for the audience to choose to engage is if the advertising is entertaining. That’s why as an industry we prize creativity so much. Why when we actually do the hard work on analysing effectiveness we find that ads that win creative awards are also often more effective. The more entertaining the ad is, the more people will choose to engage with it, beyond the forced intrusion of the ad into their schedule.
The issue is that this form is reliant on the push mechanism. I can count the number of ads people will actually choose to seek out and sacrifice their leisure time to watch on the fingers of one hand. One hand that’s lost a few fingers. We might like to kid ourselves that our ads are so highly creative that they are genuine entertainment. I certainly have. Given that places like HBO spend hundreds of millions of dollars trying to be entertaining and don’t always succeed, I think we might be somewhat delusional.
Integrated branded content is one solution to the issue. Can we make the brand part or all of the broadcast show? Networks and media owners are starting to grapple with this issue. I’m a fan of this approach when done well. When the brand has a real reason to be part of the show. When the show genuinely reflects what the brand wants to say. Some of the Masterchef integration has been first class. Some of it clunky and intrusive. Shows like Iconoclasts and the amazing stuff from Red Bull Media house show it is possible to do long form brand content, worthy of a place in a commercial schedule.
‘Digital’ media also offers up some real opportunities to counteract some of these issues. In recent years we’ve see the rise of a more participatory approach to story telling, like the “Share a Coke” and “Best Job in the World” campaigns. I think this more cognitive, behavioural approach to marketing has huge potential. If the audience is shrinking, how do we have a deeper impact with a smaller group of people? Or encourage sharing and ‘virality’? The maths works. It is, however much more complex than the old ‘make ad, air ad’ approach. Nothing strikes more fear into the heart of the marketer than the agency saying, “don’t worry this one will go viral!”
There’s also a real risk that in the search for an engaging participatory approach we lose sight of the brand proposition. In the rush to be interactive we often forget that we are still in story-telling mode and that the story we are telling is the carefully constructed one of what the brand wants to say. Or we lose sight of how hard it actually is to get consumers to participate. Clicking ‘like’ is hardly a huge step on from passive media consumption. In some cases, we lose sight of the plot all-together. A tasty iSnack 2.0 anyone? All too often the mechanism cart gets so far in front of the brand horse, the brand is all but lost.
The owned media space also gives us a great platform to develop brand owned content and be ‘always on’. Can we command an audience through regularly producing and airing great content on our owned digital channel or site? Brand as publisher and ‘content marketing’ are certainly hot topics right now and rightly so.
Always on content, however, is hard, uncharted territory, many of us are unprepared for. Brands and agencies are not set up to deliver the sheer volume of content required to fill an ‘owned’ channel. Being genuinely entertaining, week in week out, to secure regular traffic to your owned space, is far from easy. Look how well some of our broadcast channels aren’t doing at this very game. At another time I’ll also outline my view that there is no such thing as a free media lunch. I believe there’s a cost to securing an audience, through whatever channel. Owned media audiences aren’t free. Look at the millions Foxtel, Nine, Seven and Ten spend promoting their own channels if you need indicative evidence.
Once you’re not entertaining in your owned space, however, you’re dead. The old approach of careful crafting between client and creative, of ad testing, high cost production and rock star directors cannot survive this world. Adam Ferrier recently asked in Encore magazine, if the days of big production budgets were over and if that was a loss? I wonder if instead of spending $1 million on one precisely constructed ad we might see brands spending the same money but getting 100 three-minute pieces of content that fills their channel.
The risks here are all the same. In all this proliferating and additional complexity, in this additive world, the job didn’t change. We still have to powerfully communicate what it is the brand has to say. It cannot be a balancing act between being entertaining and being ‘on brand’. It has to be both or nothing. This has always been a creative tension. Not always a healthy one. Certainly not one that has always been resolved. I refer you to any boring ad you ever saw. Or the raft of ads you like, but cannot remember what on earth they are selling or saying.
Nothing exacerbates my marketing OCD more than people talking about their latest ad as a ‘film’. I don’t make films, sadly, I make ads. The distinction is crucial and commercial. The pressure to be genuinely entertaining enough to command an audience can only make this tension even more difficult. As the need to be entertaining in our story telling rises, as the media in which we broadcast them gets complex, so the need for razor sharp brand strategy also rises or we risk forgetting why advertising exists in the first place. Being creative, being entertaining is an executional necessity, but it’s not a raison d’etre.
Relationship Management must deliver a reward
The second ‘marketing node’ is relationship management. Service businesses in particular have long used a relationship management approach and rewarded consumers in order to drive retention. They have developed quite a science and an infrastructure behind it. As well as a raft of specialist agencies servicing the need. What many brands who have tried to operate in this space have failed to recognise is that the audience, in return for agreeing to a relationship with you, demands some type of reward. If you want to ping me messages every week, I want something back from you. That’s probably not just a link to the YouTube clip of your latest ad, or a happy birthday on my birthday. To truly build relationships with consumers there has to be a value exchange. We are no longer in the entertainment space. We are in the realm of reward. That changes everything.
Technology has obviously had a profound impact in this space, allowing the data to drive apparently tailored personalised messaging, hence hopefully deeper engagement. A bit like content marketing, ‘big data’ is a hot topic, but knowing who I am, where I am and what I like isn’t good enough. You still need to use it to give me stuff I want!
It’s much easier to do data-driven relationship marketing when you own the billing and transaction relationship. Banks, telcos and other service businesses automatically own rafts of data upon which to base their relationship campaigns and offers. Most FMCG brands don’t have that luxury. Hence they haven’t really developed deep expertise in this field.
As the big data providers gain traction however, this becomes a much more real option for product marketers. Having worked in both service and consumer goods it has always struck me how poorly developed the story telling skills of many service brands are and conversely how appalling product brands are at retaining those consumers they have through relationship management and the delivery of reward.
What’s really interesting to me is seeing some major product brands getting into this space. Coke have developed a portfolio driven, multi brand loyalty space in Coke rewards. I think this is great, ground-breaking stuff, however simple it may look if you’re a bank marketer. I know just how hard it is to pull off portfolio-led initiatives in brand led business. To do that in the relationship / reward space is even harder. It may be an acorn right now, but it’s really no surprise that one of the world’s most creative and innovative product brands is leading the charge on product relationship marketing.
System Building must create utility
Mobility and the rise of the ‘app’ in particular have driven real growth in a new marketing ‘approach’. This is the third node or the notion of system building or software development as marketing. Nick Law of R/GA talks far more authoritatively than I ever will about the rise of software as media and how that fundamentally changes the nature of the marketing that flows through this channel. I subscribe to Nick’s view of the world and believe this new approach of all of them has the greatest potential to change what we do. In my opinion, getting this ‘channel’, if we can call it that, right relies squarely on the notion of utility. If you want me to use your marketing rather than consume it you better make it useful, or you will be deleted. Commonwealth Bank have been doing some nice work in this space with their Effie winning Investorville campaign and their Property Guide app. Real usefulness that also delivers real brand messages.
Now some of you might be muttering the word gamification into your developer’s or hipster’s beard right now. Surely Investorville is a game? Obviously there are elements of gaming inherent in the design. They make it fun and engaging. But in my opinion gaming is not why this campaign works. It works, I believe, because it’s useful. Try selling Investorville as a product for people to play on their Xbox and you’ll see just how good a game it isn’t.
Gamification for me is mostly just another modern aspect of interactive story telling. If it isn’t entertaining it won’t succeed. Again, like HBO make content, EA make games. They are the new competition for consumer attention, not the agency down the road. Done badly, brand apps are just another form of lack-lustre story telling with no real reason for the consumer to engage, gamified or not. Done well however, brand apps and software create genuinely (often socially) useful applications that consumers will choose to pull into their lives.
In his article for Wharton’s ‘Future of Advertising’ program, “11 big trends that will reshape advertising in 2012 and beyond”, Max Kalehoff argues that a key trend is that ‘successful advertising will be about service.’ I think he’s right. This is a whole brave new world of marketing we have yet to master.
eCommerce must make transaction easier
The final node, which really needs little explanation is e-commerce. This space is currently dominated by the B2C brands that are increasingly using e-retail as a means of vertical integration by proxy. The likes of the big retailers bemoan the competition issues created by a globally connected shopping environment, but it is the new reality. A bit like the changing media landscape and the warming planet, we have to accept it, deal with it and move on. In my opinion, the harder Coles and Woolies push the FMCG suppliers on margin, the more and more likely it becomes that the product brands join in the e-commerce transformation. Sure the barriers and logistics are hard, but they are removable, if the incentive is high enough. The stakes rise daily. In the UK last month, my alma mater Diageo launched its first real online ecommerce site. Selling direct to consumer, bypassing the powerful supermarket chains and effectively vertically integrating its business. Another small acorn, but the way ahead seems clear.
The WHY is different at each node
Each of the four nodes then works in a very different way. And is perhaps best suited to a different marketing ‘job’.
Story telling MUST be entertaining in order to acquire new consumers. Relationship management MUST be rewarding to keep consumers loyal. System building MUST create utility in order to deepen relationships with existing consumers. E-commerce HAS to make transacting simple, easy and convenient.
Hyper Connected Advertising
Those of you who work as specialists in some of these disciplines may be looking curiously at the egg I am teaching you to suck, but there’s one further step that I think makes this approach genuinely interesting. That’s what happens if we connect it all together. I’m going to call this, with my tongue firmly in my cheek I might add, ‘the hyper-connected advertising system’. Here’s what happens if we start to think systemically about the whole rather than the parts. Let’s follow a hypothetical advertising development journey in our new hyper-connected systemic world.
We start with a story-telling approach, not radically different to what many brands are doing today. But we make it two way, interactive, telescopic and always on. We begin to collect the most basic data about who the consumer is, as they click onto our owned media channel to see more of our content. We add to this our relationship approach, inviting our consumer to receive rewards for telling us more about themselves. We collect more data. We use that data to push more relevant, entertaining content and stories into their feed. A mutually sustaining system.
Now we know a fair bit about our end users, so we build and get them to use our brand utility app. This transforms the amount of data we have about the base and further deepens and enhances our entertainment and reward strategies. Finally we take the last step and begin to transact with the base directly. Our data infrastructure is now substantial.
In building the ecosystem, we’ve attracted new consumers, made them loyal, kept them active and secured direct access to their wallet. Along the way we’ve also reduced our reliance on paid media as a channel and third parties for retail and distribution. Sure we’ve spent a lot on data management and software development, but we are spending less on production, media and trading terms. We’ve changed the business model, but most importantly we’ve retained the audience and they, if you remember, are ALL that counts.
The consequences of this for brands, agencies and media owners are transformational. This is advertising climate change. At a later date, I will explore what some responses to this new world might be, but for now the key observation is that unless we start to wrestle with the challenge of why consumers should bother to listen to what we want to say, they might just stop listening all together. Dramatically reducing the amount of fossil fuel we consume is not easy in an oil-driven economy. Dramatically reducing our reliance on interruption is pretty difficult with our current levels of thought leadership and a fragmented brand and agency model. Change will require a level of systemized, integrated thought that is currently beyond many brands and agencies. Only the best will survive, but change we must.
If this all sounds a little theoretic and hard to grasp, I’d leave you with a final thought. The best brands in the world today are already doing this. God I hope they don’t call it ‘hyper connected advertising’, but my model is based on observation and admiration of what the best in class in our business are doing. Not drowning in the rising tides of marketing climate change, but waving, thriving and growing. Brands like Nike, Nespresso, Gatorade and Apple are all moving rapidly towards this approach. It’s not just possible, it’s happening.
Unless all of us accept the new complexity and try and make advertising that consumers will actually be happy to pull into their lives, our business and our profession may well sink under the rising waters of technological advancement and the on demand media revolution.
Like finding the solutions to climate change, we cannot solve these problems with yesterday’s thinking, or through small step incrementalism. We need radical wholesale change. It starts with us all accepting we have got a problem. Interestingly one of the key symptoms of that problem, is the over reliance on metaphor and analogy. I am on the road to recovery. Are you?