2016: A Year in Review

2016 has been a big year, filled with a lot of unforeseen changes from Brexit to Beyoncé dropping Lemonade. The events and business decisions from this past year have affected everything, including our own little world of media.

As the final issue of Rocket for 2016, we wanted to compile the reflections and predictions of  those around the network, each one reflecting a unique background and point of view.

It’s been (sur)real; see you on the other side.


 

The year we gained a little more balance

Kate Williams, Executive Producer, Carat APAC

“The fucking debate is all over” was one memorable 2016 industry headline for me. The katemad man behind the statement resigned and the global industry discussions that followed evidenced how wrong his claim regarding gender bias was. Our reality is gender bias is one element of our wonky advertising industry. Advertising is in-balanced in many aspects; gender, ethnicity, age. Due partly to out of date agency models and legacy leadership hiring and promoting people who remind them of themselves.

What is brilliant about our industry though is the overwhelming need for us to cultivate diversity, and the actions smart businesses take to foster this.

Our creative business, Carat Content has been designed from day one to be nothing like legacy creative agency models. Our approach means we strengthen our team with people who are not like ourselves. We unite team members with different perspectives, backgrounds and skills. 2017 is a year of significant growth so I am excited we will continue to sharpen our edges, building even more diverse, challenging and stronger teams. As a result, we are more reflective of society, and collectively we produce the most creative, successful work.


 

The year AI broke into our consciousness

Ben Milne, Head of Innovation, Client Services, Posterscope

This year I hired a PA, Amy. She is now a regular feature of my day, autonomously emailingben colleagues arranging our meetings and putting invites into our calendars.

Amy is an AI bot. She only does one thing, but she does it brilliantly. So well in fact that a number of my colleagues have invited Amy to lunch so they can meet her in person! There is potential for improvement though, when I asked her what the weather was, I got a stock “I’m sorry Dave I can’t do that” type reply, something that Siri, Cortana or Google Now can all do with ease.

2016 was the year Artificial Intelligence (AI) broke into our consciousness at scale. In the future AI will become more ubiquitous and interconnected. We will become more familiar and comfortable with its presence and begin delegating more of our tasks and decision-making to them.

From a marketing perspective, we already know a lot of content and advertising that consumers discover and consume is being curated and created by the AI code powering ad tech platforms the world over. In 2017 I expect that the advances in the way AI mediates human lives will necessitate a greater focus on marketing to bots not people.


 

The year we realized how important it is to break out of our bubbles

HyoJae An, Strategy Associate  Director, Carat APAC

November 9th hit me to the core personally, I was so sure like all the other liberals out there that Hilary would win, and that only the minority of uneducated racist people voted for someone like Trump. Since the shock win there have been numerous articles that have been written about the “bubble” that the Democratsscannable-document-on-29-nov-2016-5_18_26-pm lived in and criticisms soon followed on how they failed to really listen to the white working classes.

This hit a chord with me on how we and marketers today approach our job. How much do WE really listen and empathise with different types of consumers today? Are we living in our own marketing bubble?  We get in the habit of generalising a whole group of consumers, because of course ALL Gen Z’s have an attention span of a goldfish and need a distraction ALL the time, oh and they also take in information instantaneously apparently.

Trump’s campaign had 40,000-50,000 different Facebook ad variants that were constantly A/B tested, a process which made the messages more meaningful and personal to the individual voter. He also understood the rural voters much better than Clinton, as marketers and media specialists I wonder how much we skew our communication from our urban lifestyle POV, forgetting to understand the different media landscape and motivations of rural consumers.

Development of technology allows us as marketers to make our communications that much more relevant and targeted.   There is no excuse anymore to generalise a whole generation of consumers, we need to start being more empathetic, curious and most of all listen if we want to come out as winners.


 

The year FMCG brands didn’t grow

Jonathan Rudd, Head of Digital Strategy, Carat APAC

‘Big brand’ FMCG in is facing real challenges. 90% of the top 100 FMCG brands didn’t grow last year. For the majority, jonathandoing things the same way they’ve always been done clearly isn’t the path to growth in the digital economy.

The problem is brands are too often guided by their defined ‘category’ which is often dictated by retailers. This dependency on existing customers and networks is a root cause of the innovators dilemma and one of the core reasons so many well-known brands are in decline.

By looking beyond a brand’s traditional category and understanding the broader Consumer Activity Cycle, it is possible to redefine what value a brand can create for people and unlock tremendous growth opportunities. This involves understanding how people behave (how they go about getting jobs done) and creating value such as saving time or money, or providing entertainment or social worth during the activity cycle. Typically addressed via a tech solution(s), it also helps accelerate digital competency and promotes innovation whilst opening up new opportunities around data collection, targeting and commerce.


 

The year people created their own truths

Reuben Png, Director of Experience Design, Carat APAC

Everybody knows that the dice are loaded reuben
Everybody rolls with their fingers crossed

Everybody knows, everybody knows
That’s how it goes
Everybody knows

Leonard Cohen (1934-2016) was not referring to the fake news sites covering the recent US elections that received more engagements on Facebook than mainstream news sites. Neither was he singing about the average ability to discern between fact and fiction in this era of clickbait, scams and misleading thumbnails. Perhaps times were simpler in 1988 when he wrote the song.

What is certain today however, is that anyone can be presented with varying versions of information according to what topics they are usually interested in, who they regularly connect with and where they access the information from. The truth, it seems, depends on what the beholder chooses to perceive (and what the data source provides).

Data in its most common form is one-dimensional. The chief responsibility of those who gather and interpret data is not simply to deliver it, but to also understand and provide the context to which the findings are true. It takes bravery to test your findings against datasets that are outside your comfort zone, but the end result is insightful information that is robust and trustworthy. This not only maintains our credibility, but also builds long-lasting business value for those whom we advise and design for.


 

The last year we should care about clicks

Ed Wilson, Regional Digital Manager, Carat APAC

2016 saw many changes, both good and bad. But there was one thing that didn’t evolve as much as it should have. In all but a few cases digital measurement is still being done the same was as ever and it’s getting increasingly more wrong. The reliance of clicks continues to cloud the most important measurement of marketing: who was reached, how did it affect them.

If I asked a marketer to give me $0.50 and in return I would click their ad – what would they say? They should say no – because clicks only tell marketers how good they were at getting clicks – and who cares about that?  What they do care about is how their brand/campaign is perceived and sales.scannable-document-on-1-dec-2016-11_33_39-am

For the upcoming year I think that there are a couple of glimmers of hope to look forwards to:

Atlas, although suffering a rocky resurgence is going into full measurement mode. This means we’ll be able to use Facebook ID data to see where interactions happen across their many devices and better understand how they fall down the ‘funnel.’ Advertisers with no conversion point need to be asking their account teams to ensure that brand tracking is implemented – that is to ask the question to the intended audience “what do you think of my ad?”

For advertisers in South East Asia there is a Nielsen integration with Google’s DCM coming so we should be able to activate that ever too neglected brand tracking with a simple flick of a switch.. OK so setting these things up is never that easy but at least some complexity is being removed!

Finally solutions such as Google Consumer Surveys can give both pre and post campaign insight. The ability to ask people what they thought of the campaign and to then get answers back in a matter of minutes. These have been little utilised since launch, as they incur additional costs – but these are answers worth paying for.

I’d like to see at least one of these on each plan in 2017. Then we can talk about clicks.


 

The year that felt like a serious blast from the past

Jasper Distel, Regional Associate Director of Strategy, Carat

There is only one clear superstar this year. It created an overnight phenomenon, gotjasper people killed and even had governments all over the world introduce official legislation. And no, I’m not talking about the latest synthetic homemade drug—I’m talking about Pokémon GO. Actually, not just about Pokémon GO itself, but more about the ‘secret ingredient’ that catapulted it to immediate success.

Little over 20 years ago, there was a Japanese fellow called Satoshi Tajiri who created the Pokémon franchise. Nintendo quickly spotted its massive potential and decided to jump on board. It then reached and moved millions of teenagers all around the globe during the 90’s.

The most interesting part?! These teenagers who grew up with Pokémon are now the group silly media peeps often refer to as ‘millennials.’ Guess which group were the quickest to adopt the game? Yep, same same but a little older.

And it didn’t end there. Stranger Things—a show heavy on 80’s nostalgia—broke all records when it was released by Netflix and even kicked Narcos and House of Cards’ ass. In your face Pablo. But wait, there’s more… Nintendo just relaunched the most iconic game console EVER. It brought back the NES and sold out within a matter of minutes. The secret ingredient behind all these successes? Embrace nostalgia and marry it up with modern tools and trends.

I’m already looking forward to 2030 when iPhones, Musical.ly and Snapchat Lenses potentially make their comeback.


 

The year we got even closer to becoming a sci-fi film

Kim Doan, Regional Digital Manager, Carat

Remember back in the 90’s and early 2000’s, sci-fi films such Total Recall and Minority kimReport would be so mind-boggling? Not only because of the story plot, but how imaginative and forward-thinking technology was portrayed in these movies; as if it would be a lifetime before these advancements would exist.

A memorable scene is when Jon Anderton (Tom Cruise) enters the GAP store and a hologram message was targeted directly at him – or rather since he replaced his eyeballs – targeted at Mr. Yakimoto. This story was set in year 2054 and it doesn’t seem like the prediction from this film about “predictive analysis” is that far off.

We’ve had industry leaders going into 2016 saying “By 2020, 50B devices will be connected” (since revised to ~21B devices) – to put into context, our global population is recorded at 7.4B. Internet of Things (IoT) continued to be a huge topic this year with developing news of Google Smart Lens and the launch of Uber and Volvo’s self-driving cars in Pittsburgh.

Marketers are diving further into a space where internet connection can come in many forms, making our media channel choices and consumer journeys more complex as every action feeds into a matrix of data. Ultimately, our channel choices will be difficult and as important as being asked whether to take the blue pill or red pill.


 

The last year we should start a communication plan with a TV ad

Jonathan Rudd, Head of Digital Strategy, Carat APAC

Many brands in APAC are still a long way off reflecting how people consume media. Whether it’s salary men in Tokyo or Gen Z in

rudd Jakarta, the majority of people are watching a lot less linear TV and spending a lot more time on their phones. However, media agencies are repeatedly briefed to distribute TVCs on digital platforms, the majority of which are simply not fit for purpose.

Consumption behaviour in digital, particularly on newsfeeds, is totally different. Many marketers in the region still start their communication planning process with a TV ad or a TV script. Instead, it should begin with a creative idea that can be effectively amplified across platforms and screens where people spend their time. This also means customising content to reflect platform consumption habits as the user experience on Snapchat, LINE, Facebook, YouTube and many others varies significantly and users are now much more empowered as to whether to stop and watch or swipe/tap away content that doesn’t stand out or resonate.


 

The Year of Open Source and Collaboration

Clay Schouest, Chief Strategy Officer, Carat APAC

Three things come to mind in terms of notable changes I’ve witnessed for the industry in 2016.

Firstly, there’s been a real shift toward more claycollaboration and development of solutions on open-source platforms and APIs. Whereas previously brand ecosystems used to be closed to competition, 2016 was a shift toward opening up to allow enhancement and development. Facebook comes to mind in terms of API plug-ins. We’ll see more of that to come as brands realise they can’t do it alone and that the benefits of collaboration result in far better consumer experiences.

Which brings me to my second observation: the increasing usability of Big Data. There seems to have been a steep uptake on pulling multiple data sets and an increase in ability to combine and use them.

Lastly, my third observation is about the growing emphasis towards context-driven marketing and how it enhances mental availability for consumers and thus brand relationships, à la the huge popularity of Laws of Growth.

I think 2017 will be about how we continue with the above to further enhance consumer experience within the communication ecosystem. I hope the new year will also bring about a shift towards how to inject more creativity into our work.


 

The year Snapchat became a media force

Tam Le, Senior Strategy Manager, Carat APAC

This year, the social media account I placed above all else was Michelle Obama’s Snapchat. In a year plagued by copy-and-paste features tam(Instagram Stories and disappearing photos, Facebook Live), Snapchat felt surprisingly fresh. Always one to go against conventional wisdom—temporal content, vertical videos, little to no user instruction—Snapchat continued to do its own thing in 2016.

During this year’s SXSW, I watched Mashable founder Pete Cashmore state that Snapchat will be the new cable TV. And it’s clear from the app’s redesign in June to combine publisher-created Discover channels from companies like CNN, Hearst, etc. with user-generated Live Stories from your friends or celebrities that Snapchat aims to be more than a social media company. In fact, with the introduction of Spectacles (sunglasses that can shoot videos for Snapchat) and the rename to Snap Inc., the company aims to be more than Snapchat alone.

Snapchat is an important channel for marketers to watch as they continue to introduce more ad products and tools for advertisers. And don’t underestimate its growing user base: this year, Snapchat surpassed Twitter in daily users and it’s only a matter of time before it takes over Asia as well.


 

The year we had to scrap everything we know…again

Jude Koh, Regional Associate Strategy Manager, Carat APAC

In 2016, amid the numerous celebrity deaths, earthquakes and shocking election results, the media and tech industry

judealso went through a year of turmoil. We saw Pokémon GO which finally led us to seriously advocate or doubt AR (again). Instagram is slowly taking all of Snapchat’s features. The new Apple TV combined social, news and actual television programming all into one screen. IBM Watson proved predictive analytic and neural learning could be the smart assistant we need for media buying and planning.

Although all these developments seem like just headlines, they pave the way for even bigger changes in our industry. These changes are natural given the increasingly fast progress of technology and rise of competition. 4 years ago, I started my career as an intern in a digital agency. Everything I learnt then has since been disrupted or flipped. Today, Atlas isn’t so bad anymore, mobile is all the rage, and video became cool.

So what do all these changes (or disruptions) mean for us? It means that what we know (or think we know) today has a high chance of being obsolete tomorrow, but what will not change anytime soon are basic human behaviors. People still love cat videos. People still love looking at themselves—whether it’s in the reflection of a pond, a commissioned oil painting portrait, a Polaroid picture, a duck-faced selfie, or a puppy-filtered snap. Media is just an amplification of these human behaviors and the better we understand them, the better we can navigate these changes. Here’s to the changes! Cheers to a turmoil year! Here’s to more AR selfies and may the lonely hearts always get a swipe right.


 

Enjoyed this? Feel free to share with clients or with friends. Want to contribute yourself? Awesome! We want this platform to be as collaborative as possible.

If you have a thought piece you’d like to share, a project you want to showcase, an idea for an entry, a question you’d like to ask—whatever—please email rocket.apac@carat.com.

We look forward to opening your email.


 

Illustrations by Tam Le, Senior Strategy Manager, Carat APAC.

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False Memories & What It Means to be Human

Tam Le is the Regional Strategy Senior Manager for Carat APAC.

To paraphrase neuroscientist and philosopher Sam Harris, allow me to describe a hypothetical situation that is both terrifying and likely to occur: implanting false memories for therapy. With the proliferation of VR, this seemingly sci-fi concept is quickly approaching reality.

5 – 7 minute read
10 minute existential reflection


We, as humans and as media professionals, have the ability to shape the future and create a world that we can come to terms with—one that is both virtual and real.

There are documented cases from the past few decades of therapists manipulating their patients’ memories in order to overcome psychological obstacles [1], but with the increasing quality and spread of virtual reality (VR), our ability to create realistic, false memories is greater than ever. “When you look at your brain under an fMRI, remembering and experiencing look very similar [2],” announced Google VR vice president Clay Bavor at Cannes this year, “You’ll be able to have an experience that’s so convincing, at times you won’t be able to tell whether you’re in virtual reality or real reality [3].”

With the increasing quality and spread of virtual reality (VR), our ability to create realistic, false memories is greater than ever.

 

Memory capture is currently one of the greater ambitions of VR; Bavor has experimented with creating a prototype camera for recording memories to replay in VR. “You can remember someone you love who might be far away or who you’ve lost,” he goes on to say, I’ve recorded…little fleeting moments: sitting with my grandmother in her home, having breakfast with my son. Here’s the thing: a few years from now, when my grandmother is gone, I’ll be able to sit with her. Twenty years from now, when my son is an adult, I’ll be able to put on some goggles and sit across the breakfast table from him as a little boy [2].”

“Twenty years from now, when my son is an adult, I’ll be able to put on some goggles and sit across the breakfast table from him as a little boy.”

-Google Virtual Reality Vice President Clay Bavor

 

Now what if those recorded memories were slightly altered?

What if we could replace your grandmother’s criticism of your wife with a compliment or insert a resolution to that fight you had with your son at the breakfast table? A reverse-Eternal Sunshine of the Spotless Mind of sorts where instead of removing memories for therapeutic purposes, they are constructed or modified.

Etermal Sunshine.JPG

Our susceptibility to false memories and the effect they have on our subsequent actions have long been proven by scientists. In a study, researchers falsely suggested to half of their subjects that, in their childhoods, they became sick after eating spoiled peach yogurt. Two weeks later in a seemingly unrelated follow-up study that consisted of sampling various foods, those who were given the false memory ate about 25% less peach yogurt than the control group. This avoidance of peach yogurt was especially pronounced among the participants who now claimed that they could “remember” eating the spoiled yogurt as a child [1].

Similar to how we’ve always had the ability to get from point A to B, and cars just help get us to our destination faster, we’ve always had the ability to implant false memories into others, and now VR can help get us there faster.

 

Taking it one step further

But what if we were to take it one step further? What if we were to push the boundaries of ethics even more? Now this is where my thought experiment begins: what if we were to introduce brands?

coke

How many brands do you use out of familiarity or because of association with positive memories? Do you drink Coke because it tastes better than Pepsi or do you drink it because you grew up drinking it and just seeing a red can takes you back to hot afternoons at the pool and late night pizzas with friends? What are brands willing to pay for nostalgia?

I imagine that, like all current forms of therapy, implanting false memories through VR simulations will not come cheap. What if brands were to subsidize the cost of memory therapy through “sponsorships”? Today freemium services are a way of life. Consumers understand that in exchange for free music streaming service from Spotify, they will have to listen to sponsored ads. If they choose to pay for a Spotify Premium subscription, the ads will disappear. What if this model could be applied to VR memories?

What are brands willing to pay for nostalgia?

 

Why does this make you feel uncomfortable?

At this point, you are probably feeling thoroughly uncomfortable and possibly slightly disgusted by my suggestions. I know I was when I first conceived it. I think this is because the idea of implanting false memories, even with the aim of improving lives, messes with our belief of what it means to be human. Our identities are based on our memories and experiences, but what will it mean if those memories and experiences are false?

Our identities are based on our memories and experiences, but what will it mean if those memories and experiences are false?

But then this brings us into the philosophical debate of what is true and what is false. Are all non-physical experiences not considered “real”? Are the emotions you’ve felt while reading novels not “real” because the story is fictional? Are the lessons you’ve learnt from watching movies not “real” because you did not physically experience them? Are all our digital memories imaginary? Does reading a hurtful comment about ourselves online hurt any less because it was not to our face, but on Facebook? Or does this feeling of uneasiness come from the deceit of a VR experience passing off as a memory of a physical encounter?

Are all non-physical experiences not considered “real”?

As we move into even more non-physical forms of communication and increased exposure to VR, we are going to have more memories of non-physical experiences—there’s no denying this. And regardless of whether we believe those to be true or false, we will retain memories of them and they will impact our future beliefs, attitudes, and actions. After all, our reality is merely our own personal construct of it. The question is now, how will society shift once everyone is walking around with heads full of fictional memories?

We are going to have more memories of non-physical experiences—there’s no denying this.

 

The scenarios written here raise a lot of questions, one of them being: why did I write this?  I created this thought experiment because this is an impending situation and we should consider the ethics of it before it is realized. VR is here. It will bring about unimaginable cases, the consequences of which we cannot predict from where we stand today. But we can begin to anticipate some emerging circumstances based on what we are already witnessing.

It has been proven that VR can affect or manipulate people’s experiences for days or years after they remove their headsets [4]. VR is already being tested to alleviate pain, phobia and depression. Memory alteration for therapeutic purposes already exists. So do brand sponsorships, integrations and product placement. It is only a matter of time before these worlds merge, and before that happens, we, as humans and as media professionals, have the ability to shape the future and create a world that we can come to terms with—one that is both virtual and real.

keanu-reeves

 

  1. Would it be ethical to implant false memories in therapy | BBC http://www.bbc.com/future/story/20161003-would-it-be-ethical-to-implant-false-memories-in-therapy
  2. Is virtual reality for our own memories such a great idea | The Daily Beast http://www.thedailybeast.com/articles/2016/07/05/is-virtual-reality-for-our-own-memories-really-such-a-great-idea.html
  3. Google at Cannes 2016- Adventures in virtual reality | JWT http://www.jwt.com/blog/opinion/google-at-cannes-2016-adventures-in-virtual-reality
  4. Misled Memories | Mashable http://mashable.com/2014/06/26/virtual-reality-memory

The Myth of the Lone Hero

A collaboration between Jude Koh and Tam Le.
Jude Koh is the Regional Strategy Associate Manager for Carat APAC.
Tam Le is the Regional Strategy Senior Manager for Carat APAC.

Forget everything you believe about the lone, genius inventor—more often than not innovative ideas are a result of a collaborative, cross-functional team. We can apply this insight to transform the way we work with our teammates, other DAN brands, our media partners and even our industry competitors.

5 – 7 minute read


Innovation is, more often than not, accomplished by a “dream team” rather than a “lone hero.”

There is just something so gratifying about watching the Avengers: the way individual superheroes come together, united by a common goal, to defeat a singular villain. In Captain America: Civil War, we saw how the combination of Hawkeye’s precision with an arrow and Ant Man’s miniscule size came together to short-circuit Iron Man’s suit. This is a great metaphor for the collaborative approach needed for innovating: combining different, specialized strengths to achieve greatness unachievable alone. Innovation is, more often than not, accomplished by a “dream team” rather than a “lone hero.”

ant-man-hawkeye

There never was a lone hero.

Yet in our narratives about innovation, it’s often about a sole genius, a visionary so brilliant and ahead of their time: Elon Musk, Steve Jobs, Alexander Graham Bell and one of the most revered of all time—Thomas Edison. The man credited with inventing the phonograph, the motion picture camera and the light bulb actually surrounded himself with a team of strikingly diverse specialists (both in terms of professional expertise and nationality): a British mechanic, a Swiss machinist, an American physicist and mathematician, and about a dozen other draftsmen, chemists, and metalworkers. Together they formed a large-scale industrial research lab in Menlo Park, New Jersey nicknamed “the invention factory.”  As great of an inventor as Edison was, he recognized the greater power of a collaborative, cross-functional team [1].

Why should we care if Edison invented the lightbulb on his own or with the help of others? If we unmask the myth of the lone hero and instead recognize that innovation comes from a collaborative network, it affects how we cultivate ideas as a society: less rigid patent laws, cross-disciplinary teams, employee participation in stock plans, etc.

As great of an inventor as Edison was, he recognized the greater power of a collaborative, cross-functional team.


Today’s world of innovation is full of partnerships, even among competitors.

Today, we can see the effects of Edison’s Menlo Park; their organizational structure marked the beginning of cross-disciplinary teams and collaboration between different specialists. For example the early iPhone utilized the power of Google Search and Google Maps to create a truly superior mobile device. Recently, Facebook and Shopify collaborated to create an e-commerce service on Facebook Messenger, giving small businesses tools that were previously inaccessible. Similarly, Volvo and Uber are joining forces to develop driverless cars. This past September, tech giants Amazon, Facebook, Google, IBM and Microsoft came together to form Partnership on AI with the goal “to benefit people and society.”  These otherwise fierce rivals will regularly meet to conduct research and promote best practices. Outside the tech world, Joe Biden’s Cancer Moonshot is a multi-national collaboration of scientists and charities from both the public and private sector. These collaborations show an obvious need for companies and NGOs to offset their own weakness by leveraging the strength of others.

shopify

Collaboration in companies lead to real business results.

Innovation arises from collaborations, not only between companies, but within companies as well. In a Deloitte study among Australian companies [2], those that prioritize collaboration are twice as likely to be profitable and outgrow competitors. Collaboration actually increased work completion rate by 15%. Not to mention, 73% of the employees do better work and 56% are more satisfied when they get the opportunity to work together. Most importantly, 60% of employees are more innovative when collaborating. Clearly, working together towards a shared goal has a direct and measurable impact for both the business and its employees.

Companies that prioritize collaboration are twice as likely to be profitable and outgrow competitors.

For our own work, collaboration can come in many different forms.

Collaborate with Fellow Carat Members: When innovating, we should create teams of people with different strengths, skillsets, backgrounds and perspectives, instead of relying on a “lone hero” to come up with the ideas. In Carat APAC’s Regional Product team, we have specialists in the field of insights, strategy, digital and content. Like the Avengers, we work best as a team when each “superhero” keeps their ego in check and their minds open to new ways of working.

Collaborate with Other DAN Brands: Beyond Carat, the Dentsu Aegis Network (DAN) is comprised of specialist brands, all potential partners that we can leverage because of our one P&L model. When pitching for new business, our ability to seamlessly integrate capabilities from throughout the DAN network provides a competitive advantage over other agencies.

Collaborate with Our Media Partners: Furthermore, by continuously collaborating with our media partners, we have the opportunity to present our clients with some truly innovative options. A great example of this is the joint partnership between Carat China, Mondelēz and Tencent, China’s internet media giant with vast resources in IM, WeChat, gaming, mobile, music and video. This strategic partnership enables Carat’s client Mondelēz to fully leverage exclusive and beta products across Tencent’s ecosystem [3]. By collaborating with media partners, we can deliver business value and live up to our claim of “redefining media”.

Collaborate with Our Competitors: Additionally, taking a cue from Amazon, Facebook, Google, IBM and Microsoft’s Partnership on AI, there is an opportunity to set aside our self-pride and rivalry and work with other media agencies with the aim of bettering the industry.

We work best as a team when each “superhero” keeps their ego in check and their minds open to new ways of working.

By recognizing the strength of others, we face endless opportunities to collaborate, and in turn innovate, as that is a responsibility that does not rest on any one person’s shoulders alone.

  1. How We Got to Now: Six Innovations that Made the Modern World by Steven Johnson
  2. The Collaborative Economy | Deloitte. https://www2.deloitte.com/content/dam/Deloitte/au/Documents/Economics/deloitte-au-economics-collaborative-economy-google-170614.pdf
  3. Mondelez, Carat and Tencent form joint business partnership in China | Campaign http://www.campaignlive.co.uk/article/mondelez-carat-tencent-form-joint-business-partnership-china/1371610

Shopify Facebook Messenger image courtesy of TechCrunch.

Marketing Myth: Loyalty Programs Lead to Large Revenue Growth

Tam Le is the Regional Strategy Senior Manager for Carat APAC.

The following article is the second in a series of what we’re calling “Marketing Myths.” There are a lot of misconceptions and “rules of marketing” out there that have been disproven over time by research. Each article in the series will focus on one marketing misconception, drawing largely on the work of Byron Sharp and the book How Brands Grow. Through the series, we hope to help you avoid these marketing myth pitfalls and make you stronger media professionals.

3 – 5 minute read


Since moving to Asia, I was proud to sign up for a Singapore Airlines KrisFlyer number. I couldn’t wait to be rewarded for my loyalty! But looking through my flight history, this sentiment feels like déjà vu. While in the U.S., it seems I’ve declared my loyalty for many airlines within the past two years alone. In no particular order, I am also a member of the following “loyalty” programs: United MileagePlus, American Airlines AAdvantage, Delta SkyMiles, Southwest Rapid Rewards, JetBlue TrueBlue, and even Spirit Airline’s FREE SPIRIT. What’s more, this list only covers the frequent flyer programs I’m enrolled in; it doesn’t even begin to cover all the carriers and airline alliances I’ve flown. It appears that I’m a philandering polygamist!

THE FOUR TYPES OF BUYERS

Chart.JPG

Of course, I’m not the only unfaithful consumer out there. In fact, consumers like me, heavy buyers of a category with low brand loyalty, are the most desirable consumers for loyalty programs. As high buyers of a category, we have more loyalty to give, and if a loyalty program could convince us to shift our spending, then the brand has much to gain. However, keep in mind, motivation for the consumer to be loyal to just one brand isn’t high as we will probably accumulate similar rewards with competitors.

Heavy buyers of a category with low brand loyalty, are the most desirable consumers for loyalty programs.

The remaining categories of consumers are unlikely to contribute to revenue growth for a company through loyalty programs:

Light Buyers of a Category, Low Level of Loyalty

A majority of consumers fall into this category—remember the amended 50-20 rule from last month’s Marketing Myth where it was found that the heaviest 20% of buyers contribute to about 50% of sales volume? Introducing a loyalty program will capture some of these consumers (because there are so many of them) and hopefully convert some of them into more loyal buyers of the brand.

However, it is difficult to change a consumer’s category purchase rate from low to high, and as low category buyers, they will most likely fail to accumulate enough points for rewards and eventually forget the program. For example, I have a membership card with the drugstore Watsons, so I try to purchase from them versus their competitors whenever I need to get something from the drugstore; however, there are only so many times in a month that I need to go to a drugstore. I’m not going to increase my purchases within the category just because I am enrolled in their loyalty program.

So even if a brand’s loyalty program wins over light buyers of a category, they are still light buyers. Therefore the value of this consumer segment comes from their sheer number which balances out their low purchasing rates.

Even if a brand’s loyalty program wins over light buyers of a category, they are still light buyers.

Light and Heavy Buyers of a Category, High Level of Loyalty

Consumers already-loyal to a brand are the ones who will most likely sign up for a loyalty program. First, they come into contact with the brand more often, so will have more opportunities to find out about a loyalty program. Second, because they purchase from the brand so often, they see their high likelihood of receiving rewards from such a loyalty program.

For consumers who are already brand loyal, there’s not much change that a loyalty program will evoke. These consumers can’t really purchase the brand any more than they already do, and they don’t need to change their behaviour in order to earn rewards. As a result, implementing a loyalty program will only reward already-loyal consumers without receiving increased revenues in return.

Implementing a loyalty program will only reward already-loyal consumers without receiving increased revenues in return.

SO DO LOYALTY PROGRAMS WORK?

Given the previous paragraphs, I think you would be surprised to hear that the Ehrenberg-Bass Institute actually found that loyalty programs result in a positive effect on loyalty—although it is a very small and weak effect. Despite this loyalty effect, it is too small to noticeably drive revenue growth, and given the costs of a loyalty program, the effect on profits is presumably negative.

The loyalty effect is too small to noticeably drive revenue growth, and given the costs of a loyalty program, the effect on profits is presumably negative.

THEN WHAT ARE THEY GOOD FOR?

After all of this, you may be wondering why any business would continue the costly endeavour of maintaining a loyalty program.

Firstly, these types of programs are tricky for a company to exit from. Consumers with lots of points do not take kindly to them being taken away.

Secondly, if used to their full advantage, loyalty programs can be used to build consumer databases. A robust database that charts consumers’ purchase history can be a powerful tool for personalized direct marketing. And once the database collects enough purchase history data of enough consumers, the data can be mined for insights like the infamous diapers and beer correlation.

Bottom line: if companies don’t expect their loyalty programs to drastically increase loyalty for their brand or stimulate any revenue growth, and instead viewed them as a method to build databases, then they won’t be disappointed by unrealistic expectations.

To read more Marketing Myths: https://rocketapac.wordpress.com/category/media-musings/marketing-myths.
Frequent Flyer credit card image courtesy of
http://www.laptopmag.com/images/wp/purch-api/incontent/2011/03/april_410_frequentflyer_sf.jpg.

You Don’t Have to Play the Game to Win It

Jude Koh is the Regional Associate Strategy Manager for CARAT APAC.

Advertisers are often engaged in highly competitive and bloody bidding wars for the “best” TV spot or search term. But are these costly slots actually a good investment? By more deeply understanding our audience and applying our knowledge of statistical distribution, we can more efficiently reach our target consumers and leave our competitors in the dust.

7 – 10 minute read


 

NO REWARD IN GUNNING FOR THE TOP

When Joseph Schooling won Singapore’s first Olympic gold medal this past summer, brands raced to Singaporean airwaves and television sets to be the first to congratulate him before announcing their own promotional Olympics offer [1]. However, in this race, there are no winners except for the media owners who received a sudden demand for their ad space.

schoolingpromosImage from Vulcan Post

Ad space can suddenly become a prized commodity during popular events. Speaking of the Olympics, this past summer, the most coveted spot went for $2 million in Australia [2]. And TV spots during the Super Bowl in the U.S. are notorious for their unbelievably high price tag: sometimes costing upwards of $5 million to air a 30-second commercial (remember that this doesn’t include agency or production costs) [3]. Singapore’s leading TV station, MediaCorp, charges a basic rate of $1,000 for a 30second ad which is compounded by a multiplier factor based on the popularity of the show, the ad position, and seasonality loading [4], sometimes reaching an upwards of $10,000 [5].

Events like the Olympics or primetime TV promise a huge reach which creates intense competition among brands: each trying to outspend the other in order to get the “best” spot. The same can be observed in paid social and paid search; brands are all competing for the same top audience on Facebook or top position in AdWords.

But are there tangible returns for such a huge investment? Not for McDonald’s. The fast food franchise made a huge investment in a spot during the 2015 Super Bowl. Following the event, their store sales went down by 4% that month and 2.6% for the entire first quarter of the year [6]. A separate study across 13 brands in different industries found that well-established brands did not actually benefit from any form of Super Bowl advertising [7].

Clearly, the high price of chasing massive reach does not necessarily pay off for brands. This highly competitive habit of outspending the competition to gain the most coveted spot is like a red ocean of sharks gutting each other over the same prey.

This experience of sharks fighting over the same prey is also similar to ads fighting for our attention by cluttering our screens.

In one hour of primetime TV, on average 15 minutes are actually dedicated to emotional ads about shampoo, cars, and insurance. There is also no relief when we turn to our phones as ads bombard our Facebook and Instagram feeds. On YouTube, we are forced to endure one minute of an unskippable ad before we can watch a 30-second Marvel movie trailer. Instead of informing us, ads are suffocating us and using up our precious data limit.

 

AVOID THE CROWD; FIND A PARTY

I do not intend to buy a car in the foreseeable future, yet I am constantly served car ads. There is a huge disparity between the consumer and the brand which is the reason for low returns on high media investments. The message falls short of what the consumers want.

Nike recognised this and decided not to be a part of the 1996 Atlanta Olympics clutter of ads [8]. Instead, they sponsored runner Michael Johnson by providing him with a $30,000 pair of gold-coloured racing spikes. After he won, Johnson appeared on the cover of Time Magazine with the same pair of golden shoes strung around his neck. His nickname, “The Man with the Golden Shoes”, cemented Nike’s role in his achievement [9]. The brand showcased their product’s performance to a massive audience without spending the $50 million Reebok did to be an official Olympics sponsor that year.

1101960812_400

Image from Time Magazine

Again Nike created an uncontested marketspace during the 2010 World Cup using a similar principle [10]. Because Adidas was the official sponsor, Nike had to get creative—they found different ways and different channels to engage their audience. The brand understood that the beauty of football lies in its unpredictability, a topic that leads to much social conversation. So they created an emotional three-minute video called “Write the Future” which captured how quickly a game can swing between exhilaration and devastation for a team and its fans. The video was released on Facebook and Nike’s followers doubled in less than a week, all driven by the desire to see and share the ad. Furthermore, Nike created engagement opportunities by allowing fans to edit the ad and write their own versions of the future. The brand drove even more engagement by taking popular headlines written by fans on Twitter and Facebook and showcasing them in a massive LED lightshow on Johannesburg’s fourth largest building. The lightshow was visible from 2.5 kilometres away, gathering massive hype around the surrounding area. Although they could not advertise during the televised games because Adidas was the official sponsor, Nike went around the competition by running spots on shows airing at the same time and on soccer matches prior to the start of the World Cup. Their deep understanding of consumers and avoidance of the competition led to massive results: “Write the Future” was viewed by over 20 million people online within five weeks of its debut and Nike enjoyed more than double the share of World Cup buzz than Adidas. Success came from removing oneself from a highly competitive arena and instead, creating engagement opportunities with fans through a passionate narrative.

nike-wc2010-2-87

Image from football-marketing.com

After realising the low returns on investing in the 2015 Super Bowl, McDonald’s pulled out the following year [6]. Instead, they focused on creating meaningful conversations with consumers. Social media served as a platform for consumers’ feedback and news about their latest, revamped menu. This revenue-generating tactic helped McDonald’s overturn a bad quarter and achieve their best annual earnings yet. By avoiding the competition and engaging potential consumers, McDonald’s rebounded from a bad quarter and performed better than ever.

Nike and McDonald’s had created their own blue oceans—uncontested market spaces. A blue ocean strategy is about finding opportunities and creating and capturing new demand. Nike and McDonald’s, though they sell products with mass appeal and achieved high reach, communicated in a personal way that appealed to a diverse set of consumers.

 

THE LONG TAIL IS A GOLD MINE OF OPPORTUNITY

The long tail is a statistical term used to describe the type of distribution seen below:

long-tail-distribution

Let’s say this long tail distribution is being applied to SEO; similar to what we saw in the fight for primetime television slots, there is high competition for popular key search terms in the head, creating a red ocean. However, when we look at the long tail, we see a blue ocean: overall, there is a sizeable amount of search volume with lower competition and higher conversion rates. And today, technology makes it easier to cater to the long tail.

This advantage was fully made used of by Obama’s campaign team during 2 of his elections.  They are known of running a highly sophisticated digital campaign and by precise targeting of undecided voters [11]. Finding these undecided voters was challenging, so they used statistical analytics supported by technology to go beyond traditional demographic based targeting based, and instead microtargeted voters [12]. This technique involves sampling a group of undecided voters through surveys, layered on data mined from digital platforms to create statistical models. These models predicted different types of voters and their individual hot button issues.

Microtargeting helped the campaign team refine their targeting of the undecided voters and serve messages that pulled at their heartstrings. For example, the campaign team discovered that there were some female voters who agreed with most Republican stances except when it came to the issues of equal pay and women’s health. However, those voters were only 20-40% likely to vote for Obama. To win them over, the team tailored their message to inform these women about Obama’s proposed policies on equal pay and women’s health [11].

114815701_obama_347210c

Image from girltalkhq.com

The campaign team became more efficient in their communication efforts with microtargeting. Specific messages were broadcasted on niche TV networks and programs, avoiding the big networks and primetime slots [13]. They identified the cost per dollar of persuading a voter by building models that marry detailed information about a voter’s viewing habits and their political leanings. This superb efficiency helped Obama beat an extremely well-financed opposition in the 2012 election.

Nike, McDonald’s, and Obama’s campaign team understood the need to move away from the overcrowded red ocean and focus on new opportunities in their own blue ocean. Nike shied away from the obvious mass reach sponsorship tactic, and instead, created meaningful stories across different touchpoints. McDonald’s built relationships with their consumers by listening to them on social media.

Targeting the long tail is about becoming more relevant to the vast majority who are more varied in interest and preference, otherwise not reached by an approach tailored for the “head”. Technology enables us to do this with greater efficiency and accuracy, as seen in the Obama campaign’s use of statistical models to microtarget. To fully take advantage of this, brands need to know the nuances of who they want and how to reach them.

 

AIM FOR A LONG TERM PRIZE

Competing in the red ocean is an exhausting, vicious cycle of winning and losing. Creating a blue ocean allows for more sustainability. The long tail will provide an almost infinite opportunity for brands. With developments in analytics, it is now easier to understand these consumers with precision. Advances in technology also creates more ways to reach consumers. There is no longer a need for us to compete over the top ad spot just to gain mass reach. We can now target more efficiently by creating models of potential consumers, engaging them with relevant messages through different platforms, measuring the outcome, and optimising for future campaigns—all with scale and precision.

 

Footnotes:

  1. Companies race to honour Joseph Schooling | Straits Times
  2. Local brands spend millions on ad campaigns during the great Aussie medal hunt | News.com.au
  3. Why Some Top Companies Decided Super Bowl Ads Aren’t Worth It | The Huffington Post
  4. Mediacorp 2016 Advertising Rate Book for Channel 5, Channel 8, and Channel U
  5. Based on internal survey of media planners and buyer in Carat Singapore
  6. Not Advertising In The Super Bowl…McBrilliant | Forbes
  7. Russell, M. G., & Et Al (2003). Brand Perceptions of TV Commercials During Super Bowl XXXVIII. ResearchGate
  8. How Nike Brilliantly Ruined Olympic Marketing Forever | ADWEEK
  9. Michael Johnson’s legendary gold Nike shoes at Atlanta 96 almost never existed | Dailymail UK
  10. The World Cup Brand Winner: Adidas or Nike? | HBR
  11. How Obama’s Team Used Big Data to Rally Voters | Technology Review
  12. They Know Who You’re Voting For: How Big Data Redefines Political Campaigns’ Microtargeting | Data Informed
  13. Secret of the Obama Victory? Rerun Watchers, for One Thing | New York Times

I’d Tap That

Tam Le is the regional strategy senior manager for Carat APAC.

5 – 7 minute read


“Southeast Asia is the new frontier for e-commerce.”
The Wall Street Journal

Today commerce (I hesitate to even say e-commerce because in a few years there will no longer be a distinction) is moving so fast that the Amazon Dash button, launched last March, is already old news. Every day we’re seeing more and more brands innovating ways to remove friction from the buying process.

For example, utilising their plane’s new Wi-Fi service, Cathay Pacific partnered with NET-A-PORTER to let travellers shop from their seats and have their purchases delivered straight to their hotel room [1]. Meanwhile, on a less glamorous front, Papa John’s launched a new app for Apple TV which allows you to order a pizza and pay from your TV [2].

And if things are moving fast globally, they’re moving at lightning speed in Southeast Asia. To quote a report by Bain & Company “No place on Earth matches this region in digital adoption.” Filipinos text more and the citizens of Jakarta tweet more than anyone in the world [3].

From these stats we can see that, as with many emerging markets, consumers here are leapfrogging technology. Many have bypassed PCs for internet via their phones. A StatCounter report estimated that in 2015, more than 70% of Indonesia’s internet traffic originated from mobile devices [4]. But what does this really mean for brands?

GO TO WHERE YOUR CONSUMERS ARE

Among digital consumers, over 80% use social media to research products or connect with sellers. It’s to the point that such social sales make up to 30% of all transactions [3]. Understandably, social media companies and messaging apps are rapidly expanding their services to attract consumers.

For example, LINE (a popular mobile messaging app in Japan, Thailand, Indonesia, and Taiwan), building off its corporate mission of “Closing the Distance”, aims to “close the distance” between consumers and businesses through its business platform, which launched this past March.  It provides businesses with the ability to create an online store, loyalty reward cards, and coupons, all housed within the messaging app. LINE has also expanded its ad distribution platform to allow for targeting by demographics based on consumers’ “activity in LINE family apps, such as LINE NEWS, LINE MUSIC, and LINE Manga, their engagement with brand and celebrity official accounts, and their sticker purchase history” [5]. And in Thailand, its second-largest market outside of Japan, LINE has expanded its payment options and started free next-day delivery of groceries [3].

biz03

But these mobile commerce adaptations are not just limited to social media. One of Indonesia’s hottest start-ups, Go-Jek, started as a mobile app that allows consumers to hire a motorcycle taxi (ojek in Indonesian) without the stress of haggling. Today Go-Jek’s mission has grown to solving the problems of everyday life. To date, it has become a transport, courier, shopping, massage, and beauty service, all rolled into one. To have groceries, concert tickets, or a manicurist arrive at their door within an hour, all consumers have to do is tap [6].

gojek system.png

In the past, CPG brands have participated with Go-Jek’s Go-Mart in different ways. The brands Sprite and Oreo have both made an appearance in a Go-Jek’s blog post about recipes for International Ice Cream Day. This past August, Suntory’s MYTEA launched a 2-month pop-up store within Go-Mart. The pop-up store features discounted packages of MYTEA and free delivery to entice new customers.  Currently Unilever Indonesia is offering a Go-Pay cashback balance of Rp 10,000 for spending over Rp 50,000 on Unilever products such as Buavita juice or TRESemme shampoo. From content integration to PR-worthy price promotions, there are many ways to work with mobile apps and have your brand stand out.

By partnering with popular local apps, such as LINE and Go-Jek, brands can place themselves right where consumers already are spending their time and money.

 

DEVELOP TRULY MOBILE PLATFORMS

Given the high rate of smartphone adoption, brands that want to develop their own e-commerce portal need to develop truly mobile-first platforms that specifically target the mobile user and consider the mobile interface instead of simply shrinking a desktop platform.

taplens-68316677.gifThe interface should be informed entirely by phones and engineered to reflect how we actually use them. Taking a step away from e-commerce, consider Pokémon Go and Snapchat. Mobile-first platforms like them keep scrolling to a minimum because it isn’t perfectly suited to mobile use. Scrolling is an inheritance from desktop, and it’s not always ideal for smartphone technology. In another way, Pokémon Go and Snapchat are also excellent examples of native experiences because they’ve taken full advantage of the smartphone’s camera. Today, your phone’s camera does more than just take pictures: it detects our friends’ faces, records the location of each photo, reads our credit card information and uses the information to save us time on filling out forms. Snapchat’s Lenses and  Pokémon Go’s augmented reality takes advantage of the smartphone camera’s multifunctionality and as a result, have won over consumers’ fingers [7].  Additionally, their vertical displays reflect how consumers actually use their phones. By genuinely putting the device first, native experiences are intuitive because they are designed to be—and that’s why consumers take to them.

 

In order to win over the Southeast Asian consumer, mobile must sit at the heart of the commerce strategy.

 “No place on Earth matches this region in digital adoption.”
Bain & Company

 

CONSIDER THE WHOLE JOURNEY

Despite the rate of high mobile commerce in some markets like Indonesia, the entire Southeast Asian region only has 3% online retail penetration (China and the U.S. sit at 14% penetration). Only one in four consumers over the age of 16 has ever made a purchase online [3].

However, although online retail penetration is currently low, consumers are already highly influenced by digital content. For example, penetration is only 1.2% in the Philippines, but 34% of those online consumers reported that they were influenced by online content prior to making their purchase [3]. This is why social media and messaging apps, as mentioned earlier, are so critical in building the consumer journey and converting potential purchases to actual sales.

Regarding digital content, Southeast Asia’s digital consumers are increasingly turning to videos to learn about products, particularly how-to videos such as cooking recipes and make-up tutorials. This has proven implications for a brand’s content strategy. For example, one major FMCG company created two different videos to promote a hair styling product in Indonesia. One was a typical ad featuring a celebrity, similar to a television commercial, and the other was a how-to video by a vlogger, lasting nearly six-times-longer. In the end, the tutorial garnered about 40% more smartphone views than the usual celebrity promotion. These results validated the company’s engagement strategy for beauty content [3].

YouTube Tutorial.PNG

When building a commerce strategy, it is important not only to consider the actual purchase phase, but to also engage consumers every step of the way.

REACH RURAL CONSUMERS

The growing ubiquity of the internet, thanks to the rise of smartphones, brings the market to places previously not physically accessible by companies.

In Thailand, 85% of consumers not living in large cities use mobile devices for online purchases [3]. In Indonesia, over a third of the popular, local online retailer BliBli’s customers live in rural areas where smartphones often provide the only source of internet and orders are made almost exclusively off mobile platforms [4].

Technology has given many in rural and semi-rural areas access to CPGs previously unavailable due to a lack of infrastructure supporting retail construction.

 

CONCLUSION

Every day the lines between the digital and physical world cross over and become more blurred. Friction is continuously being removed from the buying process and that presents advertisers with new opportunities to decrease the gap between consumers and brands.

Opportunities such as partnering with locally popular mobile apps that already know our consumers and their interests and behaviours. However, if brands are to build their own commerce platform, it should be approached with a mobile-first strategy to address the needs of those whose sole access to the internet is through a smartphone. But the work shouldn’t stop there, even if consumers aren’t making purchases online yet, many of them are researching brands through online content (especially videos) on social media apps.

This will not be an easy process by any means. Southeast Asia is filled with many challenges, such as a lack of infrastructure; however, instead of seeing these challenges as problems, agencies and their clients should reframe them as opportunities to reach new audiences and address their ecosystem’s unique needs.

 

REFERENCE

[1] http://www.lifestyleasia.com/477202/net-a-porter-and-mr-porter-partner-with-cathay-pacific-for-in-flight-shopping
[2] https://techcrunch.com/2016/08/30/you-can-now-order-pizza-from-your-apple-tv
[3] http://www.bain.com/publications/articles/can-se-asia-live-up-to-its-ecommerce-potential.aspx
[4] https://techcrunch.com/2016/07/29/indonesia-will-be-asias-next-biggest-e-commerce-market
[5] https://linecorp.com/en/pr/news/en/2016/1294
[6] http://www.demystifyasia.com/what-is-a-gojek
[7] http://www.psfk.com/2016/09/digital-design-expert-mobile-first-is-dead-think-mobile-native.html

LINE screenshots courtesy of https://linecorp.com.
Go-Jek image courtesy of https://www.go-jek.com.
Snapchat Lens gif courtesy of https://support.snapchat.com.
YouTube image courtesy of https://www.youtube.com/watch?v=BPynMoOO47g.

 

Marketing Myth: 80% of Sales Come from the Top 20% of Brand Buyers

Tam Le is the regional strategy senior manager for Carat APAC.

The following article is the first in a series of what we’re calling “Marketing Myths.” There are a lot of misconceptions and “rules of marketing” out there that have been disproven over time by research. Each article in the series will focus on one marketing misconception, drawing largely on the work of Byron Sharp and the book How Brands Grow. Through the series, we hope to help you avoid these marketing myth pitfalls and make you stronger media professionals.

3 – 5 minute read


Over the years, I’m sure you’ve come across Pareto’s Law: the heaviest 20% of a brand’s customers deliver at least 80% of its sales. Although there are definitely extreme buyers, a small percentage of customers who purchase the brand very frequently, the ratio is rarely as extreme as 80/20.

pareto-law-colour-01Pareto’s law is often used to justify a marketing strategy that targets the heaviest buyers versus a mass marketing strategy that targets all category buyers. The buyers are worth more, so the brand’s marketing team can justify spending more per buyer and ignoring the 80% of lighter buyers who only contribute to 20% of sales.

However, in Sharp and Romaniuk’s 2007 study of buyers in Australia and South Africa, they saw that from shampoo to cat food, the heaviest 20% of buyers rarely contributed more than 65% of sales volumes and sometimes as low as 35%. On average, the top 20% only contributed about 50%; so the ratio is more like 50/20. With that new ratio, it becomes much harder for marketers to justify ignoring the other 80% of lighter buyers who actually contribute to about half of sales.

To further undermine the strategy of targeting the brand’s heaviest buyers, is Sharp’s “law of buyer moderation.” It points out the fallacy of assuming a buyer’s purchase behaviour in a past year will predict their future buying behaviour. For example, let’s say Buyer A bought 5 boxes of pasta in 2015 and was categorized as a heavy buyer, whereas Buyer B bought 0 boxes of pasta in 2015 and was categorized as a non-buyer. But in 2016, Buyer A only bought 3 boxes of pasta and Buyer B bought 1 box. Our heavy buyer became a more moderate buyer, and our non-buyer became a light buyer.

This is consistent with Anschuetz’s 2002 findings which studied the sales data of a leading brand of tomato sauce in America using IRI and AC Nielsen panel data. The analysis showed that the non-buyers in Year 1 of the study went from accounting for 0% of sales volume to 14% of sales volume in Year 2, and the heavy buyers went from accounting for 43% of sales volume in Year 1 to 34% in Year 2. Conclusion: Non-buyers and light buyers are heavier buyers than you think, and heavy buyers are lighter.

 

What can we as media professionals take away from these studies? First and foremost, a marketing strategy that aims to increase sales by only targeting the heavier buyers is unlikely to succeed. And conversely, targeting the large amount of lighter buyers and non-buyers has a far greater chance of success.

As unsexy and outdated as mass marketing sounds, reaching all buyers of a category is vital, especially because the light, occasional buyers make up a greater percentage of sales volume than previously assumed.  However, mass marketing doesn’t have to be unsophisticated. With constant digital advertising evolution, there are new opportunities to reach consumers in different ways and different times to be more relevant and fit better into their lives. We have the opportunity to create sophisticated strategies for mass marketing that will yield high reach and high relevancy.

 

To read more Marketing Myths: https://rocketapac.wordpress.com/category/media-musings/marketing-myths.
Pareto’s Law image courtesy of http://www.warrenknight.co.uk