…because I believe brands should only invest in marketing
communications through existing users of their brand

this last post from my IPA essay reaffirms what I have come to firmly believe: that we're too wasteful.  we're investing pound after pound in inefficient aqcuistion-based advertising that – at best – does nothing for exsiting customers, and at worst actively alienates them.

enough already.  conversations about our brands are happenning right now.  the tools exist to join that conversation and respond accordingly: by creating and deploying collatoral that adds value to the lives of our existing customers, and then thru using media to tell everyone what we're doing.  I do not believe that this is an add-on; but rather something that should lie at the heart of how any early 21st Century brand behaves…

The role of brands in the early 21st Century

Brands are stubborn things to pin down.  They have been described as metaphors, as
intangible assets, or as codes of conduct and rituals; as the ties that bind us
and the ideas that inspire us.

I believe the role for brands in the early twenty first century
is twofold; that brands give people reasons to be loyal to a product and
service, and that brands provide an affirmation of our purchase decisions.

I believe

I believe brands should only invest in marketing
communications through existing users of their brand.

I believe we will come to look back at our marketing efforts
at the turn of the twenty first century as excessively wasteful; where
marketing was divorced from the products and services to which it pertained.

But most of all I believe we will look back at how we
embraced change.  Not because consumer
behaviour forced us to, but because we collectively saw a better way to nurture
and grow the brands we held so temporarily in our care.

a pdf of my essay can be downloaded here:
Download I believe in existing customers – Chris Stephenson
please note that it is subject to creative commons.  thanks.

…because I believe brands should only invest in marketing
communications through existing users of their brand

Case Study – Relentless

Over the last two weeks Mediation has been outlining why it
thinks brands should only talk to existing customers.  This post takes this theory and applies it to
one particular brand. 

Dual challenges in a growing and competitive sector

Relentless, with its "Give and you shall receive. No
half measures." positioning, was developed by the Coca-Coca Company in
2006 to compete within the highly profitable and expanding energy drinks
market.  The sector has experienced rapid
growth over the last decade and is dominated by Lucozade and Redbull with 50%
and 30% market shares respectively (see note 1).

Competition for consumers is most fierce in the 500ml can
offering, in which Relentless operates. 
In November of 2007 Barr Soft Drinks signed a deal to distribute US
energy drink Rockstar in the UK (see note 2). 
Competition was further ramped up by the US-based Hansen Beverage
Company’s launch of Monster in early 2008 (see note 3).  Relentless faces the dual challenges of
stealing share from market-dominant brands whilst defending its share against
recent newcomers.

For a brand with relatively low penetration in a fast-growing
and competitive sector, the obvious route to growth is to advertise at
potential customers to create awareness and by doing so generate intention to
purchase.

If however we adopt the principles outlined in this essay,
Relentless should instead focus on the share of market it already has.  It should concentrate on identifying the most
relevant consumer touch points.  It
should then create and deploy at those touch points collateral for its existing
customers.

Making it happen (I): Creating collateral

As we identified previously, for a product consumed in the
short-term the four principal touch points are the creation of experiences,
branded retail environments, co-creation, and use of packaging.  Relentless should therefore aim to add value
for existing customers at these touch points.

The opportunity to add value through experiences is in the
creation of exclusive events and secret gigs; experiences that you can only
find out about by signing up to Relentless’ website (see note 4).  At these events Relentless could create
branded retail experiences with pop-up Relentless ‘Recharge Bars’.  Co-creation could take the form of customised
drinks available at the Recharge Bars, developed in association with
mixologists or sports and music artists.

Finally – in keeping with the brand’s ‘No half measures’ positioning
that emerged from the idea that true artists go further and sacrifice more for
their art – Relentless could commission exclusive pack designs by cutting-edge
and emerging artists, collateral that would only be available to existing
customers at events.

Much of this thinking has already been adopted by the
brand.  Relentless has a presence at
action and motor sports events, as well as music events – even hosting its own
‘Wakestock’ event last summer (see note 5). 
But adoption of the principles outlined in this essay would see
Relentless take a crucial step further.

Making it happen (II): Communicating the existence of collateral

It is not enough just to create collateral, Relentless must
communicate the existence of that collateral in broadcast channels to existing
drinkers.  Whilst this could be in the
form of ad space, it would be much more interesting to co-create content that
showcased the events, in the form of a TV show, YouTube channel, or magazine
advertorials.

The desired response from existing customers is “yeah I was
at that gig – it was awesome”.  But
crucially – because of the broadcast nature of the communications – there is an
inherent take out for non-drinkers: “hey that looks awesome – I want me some of
that!”

The perceived inefficiencies of broadcast communications are
eliminated.  Every impact is
relevant.  To existing Relentless
drinkers advertising becomes an extension of the brand – a tool to mitigate
defections and engender loyalty. 
Furthermore brand communications become a validation of existing customers’
decision to purchase.  Attitude follows
purchase behaviour; as opposed to (costly)
change-attitude-with-the-hope-of-funnelling-down-purchase-corridor approach.

Relentless is already investing heavily in the creation of a
broad range of collateral.  It next needs
to plan for Transactions – maximising the potential for word of mouth to both
grow share and defend against aggressive entrants into their market.

Relentless metrics

Relentless must measure the results of its efforts by
tracking the four metrics identified previously.

Firstly, development of customer database (through use of
the website in conjunction with panel data); and secondly, analysis of the
database to identify consumer touch points; marrying purchase patterns with
Relentless drinkers’ passion points (gigs, events, bars etc).

Thirdly, fusion of the customer database to a media
consumption survey (such as TGI or Touchpoints); identifying where the
existence of collateral is best broadcast.  Finally, tracking the advocacy and word of
mouth of Relentless drinkers – who are the most likely to grow the brand via
word of mouth and who within the database wield the most influence?

Notes

1. The Energy drinks sector has seen +85% per capita growth
between 2002-2007.  Source: Canadean, http://www.canadean.com/

2. Source: http://www.talkingretail.com/products/7094/American-energy-drink-Rockstar.ehtml

3. Source: http://www.brandrepublic.com/Marketing/News/765163/Monster-Energy-plots-war-Cokes-Relentless/

4. Indeed Relentless should start with its approach to its
website.  Rather than being a
business-orientated source of information it should instead be a
customer-orientated hub for existing drinkers. 
Energy drink consumers are generally late teen and twenty-somethings
with an active lifestyle and passion for sports and music – the site should
reflect this.

5. For details of Relentless’ Wakestock visit http://www.wakestock.co.uk/

in Monday's final installment: what talking to existing customers means for the
role of brands, and why we all need to embrace change

…because I believe brands should only invest in marketing
communications through existing users of their brand

Barriers to Scientific Measurement

Tim Ambler categorises five stages of sophistication in the
assessment of marketing; from Unaware to Scientific (see note 1).  Different corporations regard themselves as
being at different stages of this evolution (see note 2).  The ideal – based on a database of past and
current metrics, derivatives and diagnostics – is ‘Scientific’ (see note 3)
measurement, barriers to which are twofold.

Firstly, few companies have access to sufficient data, both
in terms of number of metrics but moreover in the consistency of any data over
time.  Secondly, the priorities of
organisations – and especially marketing departments – change over time, mitigating
consistent collection of metrics (see note 4).

The result of which is a further feeding for our collective
addiction for short-term acquisition gains as the primary metric of the result
of marketing effort.  Brands are
measuring and reporting acquisitions as a short-term proxy for longer-term
metrics that should be measured instead.

The right metrics

The creation and deployment of branded collateral to
existing customers and its subsequent communication to existing and potential
customers, requires a set of metrics to ensure success at several stages.

One, we need not just a database of current customers, but a
database capable of being cross-referenced across Ambler’s database of past and
current metrics, derivatives and diagnostics. 
This at its most basic permits us to know the value of our existing
customers; what’s the annual profit pattern and how long before they are likely
to defect? (They always will) (see note 5).

Understanding this is fundamental to addressing one of the
evaluation challenges necessitated by the adoption of the methods proposed in
this essay.  Most evaluation is centred
on acquisition.  To monitor retention you
have to gain an understanding of defection, but customers defect because of a
much broader and comparatively unpredictable set of reasons.

Two, we need to know which consumer touch points are most
relevant for and pertinent to existing customers; a playground for data
strategists with sufficient customer data. 
It is also important to understand the frequency of communication
required.  Every moment is an opportunity
for a customer to defect.  How
consistently or frequently should collateral be deployed?  This informs the brief for the creation of
collateral.

Three, understanding of media consumption; specifically how
it’s consumed by both existing and potential customers.  Cross-referencing of existing and potential
customer data with media consumption panels – both proprietary (see note 6) and
industry standard (namely Touchpoints) – informs the Transaction planning
component of the process.

Four; metrics for advocacy and more specifically for word of
mouth – the most oft cited is the Net Promoter Score (NPS) (see note 7).  Despite initially being widely embraced by
the business community as a simple and comparable measure of loyalty and word
of mouth – which also handily correlated to business growth (see note 8) – its
importance has since been challenged (see note 9).  The debate revolves not however around
whether or not the NPS is a useful metric per se, but rather whether or not it
is the absolute metric for Loyalty. 
Consensus remains more than comfortable with the former; “The NPS has
been added to successful brand trackers … certainly a good use of the metric,
especially if it is presented alongside other word of mouth-related scores,
such as brand reputation or online buzz” (see note 10).

The online conversation is now large enough to significantly
indicate the levels of conversation within the wider population.  Tools for measuring this ‘buzz’ track not
only the extent of the conversations but also their polarity (positive versus
negative) and the relative influence of the conversation points (see note 11).

Difficult is worth doing

Even the best and most appropriate metrics if used
disparately will fail to give as complete an understanding as possible of our
activities and – more crucially – their adherence to any model (see note 12)
against which we base our hypotheses and actions.

Our ambition must be for a new and more holistic model based
on integration of the three data sets of CRM, advocacy (through word of mouth)
and media metrics.  There’s a perception
that our existing – acquisition-based – models of understanding are getting
better.  They’re not.  It’s the data we put into them that has
become consistently better over the last twenty years.

James Northway comments that “moving to this type of model
is going to require people to be a lot braver, because the measurement and
evaluation models don’t yet fully exist. 
‘Let’s put 80% on TV’ has an established formula … measuring
‘Transactions’ necessitates a much more holistic model” (see note 13).

Metrics shouldn’t be an add-on to attribute numbers to what
we produce for the brands upon which we work. 
Rather they should be an ongoing measurement to aid better understanding
of the contribution our efforts and activities make to the brand equity at the
bottom line of the businesses with which we work.

It may sound like a not-insignificant mountain to climb, but
we have a key advantage.  One of the most
important data sets is the one brands are closest to – their existing
customers.  We know – or should know –
more about them than any conceptual demographically-defined group of potential
‘consumers’.  The world is moving in our
direction; as the digital paradigm takes hold, it is facilitating not only the
accumulation but the understanding of that customer data.  It is our choice whether or not we take
advantage of it.

Notes

1. The five stages outline the generalised process through
which most companies develop thinking about assessment of marketing, and are 1.
Unaware, 2. Financial, 3. Many Measures, 4. Market focus and 5. Scientific

2. Nestle regarded them selves as being at the ‘Financial’
stage.  In this stage marketing
assessment is made purely on financial grounds, as opposed to the next ‘Many
Measures’ stage, in which a diversity of additional measures – such as
customer-based metrics – are used. 
Centrica described their organisation as being at this ‘Many Measures’
stage.  Duracell claimed to be moving
from the ‘Many Measures’ stage to the fourth stage; ‘Market Focus’.  In this stage the range of financial and
non-financial measures are consolidated into fewer more meaningful metrics,
which are presented to and assessed by the board.

3. At Ambler’s ‘Scientific’ stage; a “database of past and
current metrics, derivatives and diagnostics is mathematically analysed to
provide the shortest list of sensitive and predictive metrics.  Source: Marketing and the Bottom Line – Tim
Ambler, p79

4. Both of which are suggested by Tim Ambler in Marketing
and the Bottom Line

5. Method for calculating value of existing customers as
outlined by Frederick F Reichheld.  The
Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value.

6. ævolve’s CCS Study routinely asks it’s panel if they have
given or sought advice across twenty eight product and service categories.

7. Justin Kirby & Alain Samson.  Customer advocacy metrics: the NPS theory in
practice.  Admap Magazine, February 2008,
Issue 491.  “The Net Promoter Score is
based on the question 'Would you recommend [Brand/Company X] to afriend or
colleague', answered on a scale between 0 (not at all likely) and 10 (extremely
likely).  The score is computed by
subtracting the percentage of detractors (those giving 0–6 answers) from
promoters (9–10s).  The middle section,
between 7 and 8, is so called passives.”

8. Dr Paul Marsden, Alain Samson, Neville Upton, all London
School of Economics.  Advocacy Drives
Growth: Customer Advocacy Drives UK Business Growth.  05 September 2005.  Research by Marsden et al replicated work by
Bain/Satmetrix (F Reichheld: The one number you need to grow. Harvard Business
Review, December 2003) that demonstrated a correlation between the NPS and
business growth.

9. Tim Keiningham. 
The Net Promoter debate.  Admap
Magazine.  May 2007, Issue 483.  Simply put, we found no support for the
assertions attributed to Net Promoter. 
Our research clearly shows that claims of its superiority in predicting
firm growth, or in predicting customers’ future loyalty behaviours, are false”.

10. Justin Kirby and Alain Samson.  Customer advocacy metrics: the NPS theory in
practice.  Admap Magazine, February 2008,
Issue 491.  They go on to comment that “it
also represents the compromise many companies seem to have reached about the
NPS, namely to consider it one important dimension of a more complex mix of
customer satisfaction or brand health indicators”.

11. For example ævolve’s propriatory ‘onalytica’ tool tracks
online buzz

12. Kuhn – The Structure of Scientific Revolutions.  “There is no such thing as research in the
absence of any paradigm”.

13. Interview with James Northway, Joint Managing Director
of ævolve, part of Aegis Media.

…because I believe brands should only invest in marketing
communications through existing users of their brand

Fragmented thinking: fragmented implementation

Planning for Transactions requires the alignment of three
distinct disciplines – CRM (including where appropriate DM channels), word of
mouth marketing and broadcast media – into one holistic channel plan.  And that requires a whole new force of
agency.

The last decade has seen the emergence of a whole new ball
game.  Media fragmentation; consumers
with less time, little attention and no patience; an infinite amount of
broadcast and on-demand content; digitisation rendering channels irrelevant
(see note 1); technology to control and filter demanded content (see note 2)…

The collective response of the communications industry has
been to diversify into a multitude of different and varied operations (see note
3).  It is this diversification that is
partly behind the lack of cohesion between word of mouth marketing and mass (or
broadcast) advertising (see note 4).

Agency silos generate silos of implementation.  In an interview for this essay a data planner
(see note 5) highlighted the current difficulty he was having aligning CRM and
broadcast timings (let alone the strategic development) for a campaign on which
he was working.  The planning of retention
(loyalty) and mass media are in concept as well as in implementation operating
in different worlds.

This division isn’t however limited to agencies.  Marketing departments within clients operate
in the vast majority of instances separately from their CRM counterparts.  The opinion of Andrew Wythes at Eurostar is
that “in theory, a lot of companies are bringing the two together, with CRM
becoming more aligned with marketing”. 
But he also observed that – for Eurostar – this is predominantly around
specific projects, for example Eurostar’s transfer in 2007 of international
rail operations from Waterloo to St Pancras. 
In that instance “marketing and CRM worked really well together … it is
the day to day where it’s less aligned; CRM needs to break out and do its own
thing over and above the loyalty scheme, and in doing so focus on what our
customers really want” (see note 6).

The Loyalty Agency

Transaction planning – as a solution to our new paradigm –
requires alignment of the three distinct disciplines of CRM, word of mouth and
broadcast media into one holistic channel plan. 
Developing such a plan necessitates the creation of a single agency
offering; an agency whose positioning isn’t articulated around
solution-orientated concepts such as Different, Pioneering, Ideas, or ROI – but
that is instead positioned around a business-orientated concept; the concept of
customer loyalty.  To do so, such an
agency would integrate three key functions.

Figure 4: the three core roles within the Loyalty Agency

• Function one: CRM and data strategists, working with brand
  CRM teams to mine customer databases for information on who customers are, as
  well as the identification of who’s leaving and who’s hanging around.  They’d develop customer retention (loyalty)
  strategies.
• Function two: word of mouth planners, identifying relevant
  consumer touch points and developing, as a result, appropriate collateral with
  which to deploy with the aim of mitigating defections ie, engendering loyalty.
• Function three: Channel neutral planning.  Working closely with the former two
  functions, their role is to develop strategies that use channels and
  specifically mass communication to convey the existence of collateral to
  existing consumers in such a way that it’s overheard by potential customers.

An important point to make on our proposed Loyalty agency is
that their output is first and foremost the creation and deployment of relevant
and equity-generating collateral for a business.  In doing
so it creates an extension of that business’ product or service.  For clients, working with such an agency
would mean working with an agency partner that encouraged marketing effort to be
a part of the business; rather than a signpost to it (see note 7).

Integration with other agencies

Despite the assertion that “Integrated Communications are
like weapons of mass destruction; everyone knows they exist but no one has ever
seen it done” (see note 8), coordination with other agencies will be key.  In particular the role of creative agencies
(see note 9) is fundamental to planning Transactions in two key ways (see
figure 5).  Firstly, along with PR and
other agencies, they’d work with word of mouth planners to help shape the
collateral that is developed.

Figure 5: Loyalty agency integration with clients and other
agencies

Some of the most forward thinking creative agencies are
already operating in this capacity; I’ve already mentioned Mother’s musical for
Pot Noodle.  Last August Bank Holiday
also saw Eurostar’s Ebbsfleet station host a drive-in movie for existing and
potential Eurostar customers (see note 10). 
The creative concept – as well as much of the infrastructure for the
event – was created by Fallon, working alongside experiential agency Space.

Secondly, creative agencies would continue to work to the
more conventional creative brief, but with a key difference.  Rather than communicate a branded product or
service proposition with the intention of recruiting – through awareness et al
– potential customers to that brand; they would instead work with a brief to
communicate the collateral developed earlier in the process.  Their communications would be developed with
the sole aim of communicating to existing customers (but overheard by potential
customers) the existence, use, or consequence of that loyalty-generating
collateral.

Notes

1. Once content is digitised, not only it can exist in any
digital channel, but move seamlessly across channels.  It is this intrinsic that led William Gibson
to first comment that “The remix is the very nature of digital” – ie
digitisation of data and content facilitates transformation – remixing – of
that content.

2. Example of on demand include RSS (Really Simple
Syndication) which automatically relays content deemed relevant to the
consumer, and IPTV (Internet Protocol Television) – TV via broadband, which is
currently seeing substantial investment by UK TV companies.  To quote Rob Norman in his speech Do
Different “In the final analysis the world has gone on demand.  That puts it beyond our control”.

3. And a lot of specialists there now are; WPP Group has 247
companies globally and 194 offices in the UK alone.  All companies relate to communications
services “Through our companies, WPP offers a comprehensive and, when
appropriate, integrated range of communications services”.  Source: http://www.wpp.com/WPP/About/

4. The many and varied agency operations are also behind
failure to join up the dots across a range of other disciplines – but this lies
beyond the scope of this essay.

5. Interview with Tim Noblett, Data Strategist at ævolve,
part of Aegis Media.

6. Interview with Andrew Wythes, Customer Relationship
Management, Eurostar.

7. In 2006 BBH launched Zag. 
Fully funded by the agency it aims to create and develop new brands,
which it will license or sell to third parties in return for a share of ongoing
sales revenue.  More recently New York
agency Anomaly is to open its doors for business in London.  The agency will be run on a model that
divides the agency’s revenue streams into part fees, part IP share.

8. David Jones writing in Contagious Magazine.  Is Your Work Spongeworthty?

9. It is the deliberate intention that creative agencies sit
outside the proposed Loyalty agency, for a very specific reason.  Given the close proximity in which the
Loyalty and Creative agency would work, it would seem logical to align the
operations into one agency.  This is the
move DraftFCB made when it aligned content creators with data analysis in its
2006 merger.  But uniting the silos into
one operation within the Loyalty agency would be a flawed move.

At the time of writing, Endemol is eyeing up a possible
takeover of ITV (Source: Financial Times. 
John de Mol commenting on ITV: “This one is an example of a combination
that could make sense, depending on the numbers.” Full story at: http://www.ft.com/cms/s/0/02d15dca-5110-11dd-b751-000077b07658.html)

Commenting in MediaWeek (19th August 2008; “Being the best
at what you’re best at is surely the best advice”) Richard Eyre observes that
“it’s a trap. … Successful content owners diversify their routes to
market.  Successful distributors source
the best content wherever it can be found. 
Both need a diversity of relationships to stay at the top of their
game”.

Similarly it would be a trap to align our Loyalty agency and
a Creative function into one operation; the former must be able to work with
any and every creative agency that appreciated the value of existing
customers.  Ultimately brands would be in
a better position to benefit from the diversity those creative agencies would
bring to the loyalty table.

10. For more information about Eurostar’s Ebbsfleet drive in
see: http://www.eurostar.com/UK/us/leisure/about_eurostar/press_release/eurostar_host_drive_in_cinema_at_ebbsfleet_international_station_over_august_bank_holiday_weekend.jsp

Tomorrow: a holistic approach to metrics
Friday: Making it happen… Relentless case study

…because I believe brands should only invest in marketing
communications through existing users of their brand

Collateral: Why building it is no guarantee they will come

One response to media abundance has been the creation and
deployment of a whole range of collateral designed to add value to
customers.  In their own right the
examples of collateral described above are largely designed to, and therefore
may very well function as, opportunities to mitigate defections (ie increase
loyalty).  In some instances they may
also function as pre-cursors for word of mouth. 
The creation of such collateral however is not enough.

Let me say that again. 
Creating the collateral is not enough.

Advocacy – through word of mouth – works when one individual
has knowledge or information about a branded product or service that someone
else doesn’t.  Even in the case of two
individuals being aware of the same brand or branded collateral, there is
increased incentive to discuss it if one person knows more about it than the
other.

For example two individuals may both be aware of Orange
Wednesdays; but only one knowing about a recent movie release creates the
incentive to discuss.  Or whilst both may
be aware of Orange Wednesdays, one may think that the number of tickets is
limited.  They are not.  The other would have the opportunity to
correct them.  Word of mouth is sparked
by a knowledge differential.

Currently brands largely and unwisely rely on the individual
with that knowledge or information to volunteer it to another individual.  By themselves.  With everything they’ve got going on in their
content-abundant time-poor lives.  Brands
at best encourage word of mouth on an individual basis and at worst just pray
that the positive experiences they create for their customers will be
shared. 

We’re relying solely on Gladwell’s law of the few; the
connectors, Mavens and Salespeople “with a particular and rare set of social
skills” (see note 1), to instigate word of mouth.  Instead, we should be creating the potential
for every existing customer to become an instigator.  Rather than limiting ourselves to Pareto’s
twenty percent (see note 2) we should be encouraging advocacy through word of
mouth amongst all one hundred percent of existing customers at our disposal.

And that is only addressing one side of the equation.  The other side of the equation are the
potential customers who aren’t given reasons to specifically ask their peers –
their influencers (see note 3) – about a brand, because brands and their
agencies don’t give them reasons to do so. 
Collateral, when it is deployed, is only delivered to existing
customers.  Potential customers remain
unaware of its existence.

Planning for Transactions

This is the final and most crucial element of the holistic
planning process being proposed in this paper. 
That it’s not enough to create and deploy collateral to existing
customers.  In addition to broadcasting
the existence of collateral to existing consumers, we must also deliberately
expose potential consumers to the existence of that same collateral.

I call it Transaction Planning; communicating to existing
customers – via mass media – the existence of collateral with the deliberate
intention that its existence is overheard by potential customers.  The result being that we create the conditions
within which existing customers are best placed to ‘transact’ with potential
customers.

Figure 3: Transaction Planning; communicating to existing
customers – via mass media – the existence of collateral with the deliberate
intention that its existence is overheard by potential customers

We turn the (perceived) inefficiency of broadcast media to
our advantage by using the same communication to publicise customer collateral
to existing customers (thereby reinforcing its existence and credibility) as
well as to potential customers (thereby communicating its existence).  Every impact we plan and buy becomes
valuable; as Sameer Modha put it when I discussed this theory with him “you’re
releasing media planners from the tyranny of CPTs” (see note 4).

In planning for Transactions; not only are existing
customers encouraged to discuss and advocate a brand, and not only are
potential customers encouraged to enquire about said brand; but communications
provide them with a common precursor and language to do so (see note 5).

Launching a brand

The principles outlined in this essay also support creation
of a brand from scratch.  Franzen
established that smaller brands are largely dependent on increasing their
penetration to drive growth (see note 6). 
The Loyalty approach would see creation of a small critical mass of
consumers – either via sampling or by partnering with a distributor – to which
we apply the collateral / communication paradigm.

In Microtrends Mark Penn argues that once you have one
percent you have enough of a base to “create new markets for a business, spark
a social movement, or produce political change” (see note 7).  It is possible, and I believe preferable, to
establish then grow a small audience; you just need to understand how.

Notes

1. Malcolm Gladwell. 
The Tipping Point. 

2. The Pareto principle (also known as the 80-20 rule, the
law of the vital few and the principle of factor sparsity) states that, for
many events, 80% of the effects come from 20% of the causes.  Source: http://en.wikipedia.org/wiki/Pareto_principle

3. The term given by Blades and Phillips to the individuals
to whom information about a branded product or service is sought.  Fiona Blades and Stephen Phillips.  Decision Watch UK.  MRS Conferences 2005

4. Sameer Modha, planner at Partners Andrews Aldridge – as
quoted in an interview for this essay.

5. In addition a significant leap we have to make is in how
as planners we categorise consumers. 
With Transaction Planning they are not an undifferentiated mass to which
we broadcast branded messages, but nor are they distinct segments of
like-minded individuals who will be most responsive to our message.  With Transaction Planning, people are a
channel in their own right.

6. Giep Franzen.  Brands
and Advertising: How advertising effectiveness influences brand equity.

7. Mark
Penn (Author), E.
Kinney Zalesne.  Microtrends: The
Small Forces Behind Tomorrow's Big Changes. 
Penn and Zalesne argue that the biggest trends in America are the
microtrends — the smaller trends that go unnoticed.

Tomorrow: the Transaction Planning agency
Thursday: A holistic approach to metrics

…because I believe brands should only invest in marketing
communications through existing users of their brand

From media scarcity to abundance

People don’t consume advertising.  They really don’t.  Sometimes an ad is great enough to attain the
position of demandable content; YouTube fame then beckons.  For a while. 
But all in all we don’t consume advertising.  We consume content; and to get to that
content, we consume media.

The most significant trend in our industry – a trend
discussed by Rory Sutherland during a presentation to an IPA Outdoor conference
in 2007 (see note 1) – is a shift from media (and therefore content) scarcity
to media (and therefore content) abundance. 
Media channel fragmentation, in conjunction with technology-driven
control over content creation, distribution and consumption has created a new
paradigm.

In his Excellence Diploma submission in 2007 Faris Yakob
described how this new paradigm is already here, “it’s just not evenly
distributed … young people today [as opposed to the ‘passive massive’] have
grown up with digital media, and so they have an intrinsically participatory
relationship with ideas” (see note 2); and by implication with brands.  Brands are, or should be, participatory.

The business of creating collateral that adds value to
brands, from top; Pot Noodle the Musical, Innocent Bobble Hats, Honda Live Ad,
Eurostar’s Somerstown and Nike’s Human Race

The importance of collateral

Creating a participatory relationship with brands is
encouraging brands to go play (see left). 
It’s why the BBC built the iPlayer. 
It’s why Mother created a musical for Pot Noodle (see note 3).  It’s why Innocent put bobble hats made by the
WI on their bottles.  It’s why Honda made
a live ad.  It’s why O2 branded a
dome.  It’s why Walkers are asking for
help creating a new flavour of crisp. 
It’s why Eurostar funded Somerstown (see note 4).  It’s why Ben and Jerry’s had a party on
Clapham Common.  It’s why Nike encouraged
to us run against the clock, then each other, then the world.  It’s why Contagious Magazine exists.

It’s also why clients demand big ideas and brand platforms;
and why agencies went media-neutral and 360 degree.  It’s why all of us look for new, interesting,
engaging and involving ways for the brands upon which we work to communicate.  We’re in the business of creating collateral
that adds value to brands; investing today to generate cash flows tomorrow
through the creation of brand equity (see note 5).

Ultimately we’re responding to a climate of media abundance
by encouraging consumers to participate in our brands’ ideas.  The incentive to do so comes in the form of
added value for customers; value which – as the examples above demonstrate –
comes in the form of ‘collateral’: ancillary items or experiences created
through the marketing function that add value to our consumption or
appreciation of a brand.

Distribution of brand categories across product vs service
axis and short vs long term consumption cycle axis.  Not all categories shown. 

A framework for collateral creation

Let’s return to our model of retention as a starting point;
with the aim of making existing customers not want to defect, but rather
generate word of mouth which in turn drives acquisition of new customers and
ultimately profits and growth.

How can we go about systematically creating collateral which
we can deploy to existing customers with the ultimate aim of growth?  We first need to appreciate that not all
products and therefore brands are created equal.  Where a brand is best placed to deploy
content – and therefore the most appropriate collateral to create – depends, I
believe, on two factors (see above and note 6). 
Firstly, whether you offer a product (generally tangible) or a service
(generally intangible), and secondly how often your brand is consumed (see note
7).

Short-term products

Products consumed in the short term (eg FMCG) typically have
less opportunity to create and maintain relationships through tangible customer
databases.  They rely instead on panel
data to monitor penetration rates and share of customer.

Collateral created for products consumed in the short-term (is
primarily deployed through consumer touch points such as packaging (eg
Radiohead’s packaging for it’s ‘In Rainbows’ album (see note 8), co-creation
(eg Nokia’s Concept Lounge – see note 9), branded retail environments (eg
Niketown or Glaceau vitamin water’s pop-up shop) as well as through experiences
(eg Innocent’s Fruitstock).

Short-term product collateral: From top; Innocent
Fruitstock, Radiohead’s ‘In Rainbows’ album, Nokia’s Concept Lounge and
Niketown

Long-term products

Products purchased and consumed over the longer term (eg
motors) have the double dilemma of being purchased infrequently and – because
no ongoing financial relationship exists – of not necessarily having sustained
contact with a customer once they do purchase. 
It’s for this reason that customer identification processes such as
product registration (eg in the case of many technology products) are often
prevalent.

The collateral primarily created for long-term products are
deployed therefore through consumer touch points such as clubs (especially in
high-interest categories eg Mini2.com – see note 10), branded retail
experiences (eg the Apple store), and product customisation (eg the Electrolux
DesignLab (see note 11).

Long-term product collateral: From top; The Apple Store and
Electrolux’s DesignLab

Short-term services

Short-term service-orientated brands (eg airlines) are, by
virtue of being in the service sector, often in the position to collect
substantial information about their customers. 
Online retailers know the purchase history and online behaviour of
customers and can make recommendations for future purchases accordingly.  Amazon’s accuracy in knowing what I may wish
to read next never ceases to amaze me. 
Google knows more about me than my mother does.

Collateral created for short-term services are primarily
therefore often in the form of ongoing transaction-based consumer touch points
of clubs (eg Tesco’s Clubcard), and rewards (eg British Airways’ Gold and other
cards).

Short-term service collateral: From top; Tesco Clubcard and
British Airways’ Executive Club

Long-term services

Long-term service brands which include – amongst many others
– mobile phone network operators (see note 12) and utilities have the duel
virtues of being a service with an ongoing financial relationship.  These brands are arguably the most
experienced in the creation and deployment of collateral for their customers
(see left).

Rewards (eg the previously mentioned O2 ‘World that revolves
around you’ campaign) and experiences (the mobile networks are all over this
with the O2 and Orange Wednesdays) are both opportunities keenly deployed to
minimise defections (increase loyalty) and ideally increase ARPU.

It is brands in this quadrant which are most likely to
benefit from shift-inertia.  We (half)
joke that it is more common to get divorced than change your bank account, but
its essence reinforces the central belief of this essay – that it makes no
logical sense to invest marketing time and money in a group who not only
generate zero profit for a brand now, but who are unlikely to switch to doing
so in the near future.

Long-term service collateral: From top; The O2 and Orange
Wednesdays

creating collatoral however isn't enough – once you have it you have to tell people about it…  more on that tomorrow…

Notes

1. Rory Sutherland. 
Adapted from notes taken at Delivering the Landmark Creative Campaign –
a speech to the IPA Outdoor’s Seeing Digital Conference.

2. Faris Yakob.  I
believe the children are the future. 
Essay submission for IPA Excellence Diploma class of 2007.

3. There’s a great report which includes interviews of some
of the people behind the development of musical at http://news.bbc.co.uk/1/hi/entertainment/7539377.stm

4. Interestingly the film was made without any overt
Eurostar branding, something Marketing Director Greg Nugent refers to as
‘Unbranded Content’ – for more see: http://www.brandrepublic.com/InDepth/Analysis/808432/Close-Up-Live-Issue—Mother-Eurostar-abandoned-branding-embrace-feature-film/

5. Peter Fisk in his book Marketing Genius defines Brand
Equity as “the sum of future cash flows driven by the investments of today”.

6. I find these two axes the best way to map consumer touch
points with the aim of identifying where the most appropriate points of for the
deployment of collateral.  Other axis
were explored – specifically an axis that differentiated between contractual
versus one-off transactions with a brand versus regular and occasional
consumption.  However being able to
separate regular versus occasional contractual relationships proved to be less
useful to me that a clean split of tangible products versus intangible
services.  This isn’t to say that there
are alternative ways to map the touch points, indeed many planners will wish to
play with alternatives depending on their own, or their agency’s, specific
point of view.

7. Note that aggregator brands (such as moneysupermarket or
uswitch) are ‘trending’ many brands left and down; left towards the
shorter-term – ie changing supplier more often (especially in the utilities
sector) and downwards through the commoditisation of historically service
brands (for example in the telecoms sector.

8. The addition of packaging (as opposed to download only)
increased the retail value of Radiohead’s recent ‘In Rainbows’ album more than
nine-fold…  When originally released in
October 2007 as download only – unpackaged – the value was determined by
consumers; they could choose their own purchase price – the average price
chosen to pay was £3.88 (source: http://www.whatpricedidyouchoose.com).  At the start of December 2007 the same
content was released in the form of a three-format discbox (source: http://www.inrainbows.com/Store/index3.htm).  The asking price for a product valued at
£3.88 with packaging?  …£40.00.  Value goes both ways.

9. For more on Nokia’s concept lounge see: http://www.thesedays.com/conceptlounge/

10. Mini2 is an online hub for all things Mini maintained by
its online members.  For more visit: http://www.mini2.com/

11. The Electrolux Design Lab is an annual global design
competition open to design students who are invited to present ideas for home
appliances.  For more visit: http://www.electrolux.com/designlab/

12. Note that I’m referring to contract only in this
instance, PAYG would be significantly shorter term and more product-focussed

tomorrow: transaction planning – because creating collatoral isn't enough
Wednesday: why we need a new force of agency

…because I believe brands should only invest in marketing
communications through existing users of their brand

The
increasing importance of word of mouth (so I’m told)

Advocacy
takes many forms.  The principal form
with which we’re interested for the purposes of this essay is word of mouth,
the power of which is increasing.  A
relevant word in the right ear can in a moment override all our accumulated
knowledge and opinion on a planned purchase (see note 1).  Intergration’s Market Contact Audit (MCA)
declared word of mouth to be “the form of consumer contact with the highest
capacity to create consumer engagement” (see note 2).  McKinsey estimate that word of mouth
influences two-thirds of US industries (see note 3).

Word
of mouth isn’t a modern phenomenon.  It
is, in many ways, the oldest form of communication.  What is very modern is the increased power
word of mouth has in a digital age. 
Technologies such as the internet, email, mobile phones, text messaging,
PDAs, instant messaging, and blogs have made sharing information and opinion
easier than ever before.  The combination
of these digital technologies and the fragmentation of media channels that has
instigated the waning of the disruption advertising model, mean that “in a
networked society … personal recommendations, and recriminations, have more
weight” (see note 4).  We make our
purchase decisions based on what people tell us.

Furthermore
as Paul Revere’s ride through New England to warn of the approaching English –
as recounted by Gladwell (see note 5) reminds us; not all word of mouth is
created equal.  Some individuals are more
powerful carriers of a message, some messages more contagious, and some advice
is more likely to come from one person rather than the next.  ævolve research demonstrates for example the
extent to which men are more likely to give advice about new technologies than
women (see note 6).

Herds
and tribes

Nor
is the effect of word of mouth limited to affecting changes in individual
behaviour, it also works at a group level. 
Our opinions and behaviours (and brand preferences) are very susceptible
to the opinions and behaviours of those around us.  “Most of us are only likely to change our
behaviour if there is evidence of a larger movement emerging” (see note 7);
evidence for which we increasingly gather in the form of word of mouth.

Mark
Earls goes further, and suggests that “when we in organisations think about
affecting mass behaviour in customers or staff, we tend to think … that it is
what we do that affects the way that our audience behaves … but this is misleading
… what really matters is what each of the individuals in the mass does to the
others” (see note 8).

In
his studies into the emergence of society’s modern tribes, Bernard Cova
proposed that people are less interested in objects of consumption than in the
social links and identities that come with them.  Demographically disparate but connected
individuals now have control over the brands they collectively choose to
consume; choices determined not by product or service intrinsics, but by a
shared and agreed understanding of what that brand represents and stands for
(see note 9)  Similarly Brownlie and
Elliott asserted that such tribes hold greater influencing power than the mass
audience (see note 10).

Word
of mouth is – in the majority of instances – the single most important
determinant that influences our individual and collective behaviour.  When we form opinions and make decisions it
is as part of an ongoing series of conversations with other people.

Advertising
and word of mouth

What
matters most then is what we communicate to each other about brands.  Yet our objectives and measurement remain
largely bound by proximal metrics – such as awareness, or ultimate metrics –
such as customer acquisition. 
Furthermore when brands attempt to engage consumers through word of
mouth programmes, efforts remain largely isolated into specific silos of
expertise.

We’re
not joining up the dots.  “There is often
a mistaken notion that word of mouth needs to stand in stark contrast to
traditional forms of advertising. But this is not the case … in many cases
traditional forms of media serve as conversation starters and are the basis for
people talking about a product or a service” (see note 11).  The sentiment is echoed by James Harrison;
“the reason why advertising works has always been because of word of mouth”
(see note 12).

Advertising
and word of mouth are inextricably linked. 
Those most likely to give advice about a product or service are proven
to be those most likely to seek out advertising in their given categories of
interest (see note 13).

Yet
we divorce advertising and word of mouth programmes into different silos.  We ignore not only the combined effect of
these disciplines but the opportunity it presents to engage our existing
customers – mitigating defections and stimulating positive word of mouth on
behalf of our brands – thereby generating acquisition of new customers.

a new engine brand growth places retention as the starting point for
marketing strategy

A
new model, as outlined in figure 1, presents itself:

• Place
  retention as a starting rather than an end point
• With
  the aim of making existing customers not want to   defect (ie be loyal)
• At
  the same time generating word of mouth
• Which
  subsequently drives acquisition of new customers

What
this model demands is a new way of thinking about marketing and communications
planning.  We need an approach that
combines customer relationship marketing (CRM), advertising and word of mouth
in a way that not only engages and empowers the existing consumers of our
brands, but communicates to potential customers just what they’re missing.  but more of that on Monday, have good weekends…

Notes

1.
Blades & Phillip.  Decision Watch
UK.  MRS Conferences 2005.  “The extraordinary power of word of mouth
became obvious, this unscientific sample of one vague acquaintance, whose
knowledge of cars Gary couldn’t even assess, put him off purchasing a car for
six months”.

2.
Laborie, Jean-Louis. "The Theory Behind Engagement and Integration's Early
Experience Across Media." Paper presented at ReThink: 52nd Annual
Advertising Research Foundation Annual Conference and Expo, March 20–22, 2006: http://mail.thearf.org/roymorgan/Engagement/2006.rethink.ARF.The%20Theory.pres.Laborie.pdf].

3.
Dye, Renee. "The Buzz on Buzz." Harvard Business Review, November
2000.  McKinsey & Company estimates
for the 1994 US Economy (note this is prior to the emergence of the mainstream
internet paradigm so likely to be conservative) – total equals $6 trillion.  Slightly more than two-thirds of the U.S.
economy has been influenced by buzz: 13% Largely Driven by Buzz (Toys, sporting
goods, motion pictures, broadcasting, amusement and recreation services,
fashion); 54% Partially Driven by Buzz (Finance (investment products), hotels
and lodging, electronics, printing and publishing, tobacco, automotive,
pharmaceuticals and health care, transportation, agriculture, food and drink);
33% Largely Immune to Buzz (Oil, gas, chemicals, railroads, insurance,
utilities).

4.
Wilmot & Nelson.  Complicated Lives:
sophisticated consumers, intricate lifestyles, simple solutions

5.
Malcolm Gladwell.  The Tipping Point

6.
Data from ævolve’s CCS study.  The survey
regularly asks its panel about advice given about various categories in last 3
months

7.
Caroline Whitehall.  Inertia is good

8.
Mark Earls.  Herd

9.
Cova, B. (1999), "From Marketing to Societing: When the Link is More
Important than the Thing", in Brownlie, D., Saren, M., Wensley, R. and
Whittington, R. (Eds) Rethinking Marketing, Towards Critical Marketing

10.
Elliott, R. (1999), "Symbolic Meaning and Postmodern Consumer
Culture", in Brownlie, D., Saren, M., Wensley, R. and Whittington, R.
(Eds) Rethinking Marketing, Towards Critical Marketing Accountings

11.
Ed Keller and Simon Chadwick.  Is word of
mouth Just a Buzz?  MRS Annual Conference,
2006

12.
James Harrison, Managing Partner at Fuel, Engine Group – as quoted in an
interview for this essay

13.
Data from ævolve’s CCS study.  The survey
quantifies the proves the propensity for people who give advice to be
‘ad-seekers’ within that category

on Monday and Tuesday: A new way of approaching communications
planning