The following post by Karl Heiselman was initially published as a contribution to The Wharton Future of Advertising Program.
By 2020, advertising as we know it will no longer be the primary marketing vehicle used to build brands. Advertising will instead focus on driving transactions. Rather than a tool of marketing, advertising will predominantly become a tool of sales.
Replacing the role of advertising in brand building will be a slow process, but by 2020, the way we build brands will have transformed significantly. Instead of relying on advertising to drive extrinsic perceptions, brands will be focused on new methods designed to create more powerful intrinsic value.
Why Advertising Will Become A Transactional Tool
Automated, digital, transactions-driven advertising will be the single biggest advertising growth arena of the next ten years. The combination of big data (including social data) with ubiquitous smartphone usage and an intense focus on advertising ROI will create a hyper-aggressive, transactions-focused battlefield.
By 2020, smart devices and high-speed connectivity will have become pervasive among almost all consumer groups. Media consumption will have continued to fragment, turning today’s remaining mass audiences into a set of smaller, more atomized and more on-demand groups. And while this new environment will bring significant threat, it will also provide significant opportunity. For in this digital environment, consumers will continue trading their personal information for free access to services, providing more detailed, deeper data sets than we can imagine today.
What will not have changed is the pressure on businesses to deliver results, hit sales targets, and deliver growth. By 2020, these pressures will be intense. Product cycles will have shortened still further, competition become fiercer, markets more volatile and consumers more informed and empowered than before. In this environment, making the sale will be imperative.
As a result, an understandable desire for ROI will be manifest in tomorrow’s advertising solutions. Tracking which advertisements drive the most sales to which people, when.
By 2020, the winning advertising methods will be those that compress the time between the advertising impression and the transaction being made, and do it in a highly measurable and predictable way.
We will see advertising that is contextual to our actions and designed to encourage a specific transaction. Searching for a lawnmower? Here’s a deal for that. Eating at the same restaurant regularly? Here’s a deal for the one next door. Friends who like a certain store? Here’s a discount for you to try it too.
Contextual, automated, transactional advertising will be the perfect tool for the discounter but less so for the brand builder. An unintended consequence of the ROI imperative being that the coming era of advertising will act to compress prices, displace brand loyalty and reduce brand premiums.
In this new landscape, businesses will make a concerted effort to shift the risk profile of their advertising spend. As focus shifts toward measurable sales effectiveness, a new set of advertising players will emerge that are paid not by % of media spent, but instead by % of sales generated. They will be accountable to the sales team, data driven and more interested in efficiency of sales than creative excellence.
The New Brand Building Reality
While advertising is likely to become highly transactional, brand builders have much to be confident about. Just as technological and social shifts will provide new opportunities for the deals-driven discounter, they will also provide significant opportunities for the brand builder. Businesses that are focused on building and sustaining a brand’s premium will find themselves enabled by a new and more sophisticated set of tools with which to engage their customers.
By 2020, those same technologies that are driving discount advertising will be giving marketers and business leaders a more sophisticated understanding of their customers. They will be able to parse vast volumes of customer data, and monitor and hold significant social media-based relationships. The knowledge and insights thus generated turning marketers into key actors in the delivery of innovation and the creation of new layers of brand value.
In specific terms, we believe that by 2020 we will see three major areas of brand building innovation take over the role that advertising plays today.
1. Total Experience Management
Much as Total Quality Management transformed manufacturing in the 1980’s, Total Experience Management will transform brands in the 2010’s. Today’s brand experiences are highly fragmented and as a result are a significant source of competitive weakness (as any trawl of social media will demonstrate). By 2020, this will have changed considerably. Instead of focusing on individual touch points, brands will instead be considering the rich ecosystem of experiences they create. They will look at the integration of their brand ecosystem under a common “operating system” as a means of enhancing customer value. By thinking of the total experience, and usefulness, of the brand from the customer’s point of view, brands will create superior experiences across not just a single touch point but across the entirety of the branded experience. The beginnings of this transformation are already apparent in the way that technology brands such as Apple, Google and Microsoft are connecting their branded ecosystems together under a common user experience framework.
2. Marketing Products
Marketing products are products designed to deliver a marketing benefit, rather than something you intend to charge people money for. They exist to expand the ability of a brand to create utility, and value, around its core offer. For many brands, the core offer is often quite commoditized and as such unlikely to change significantly moving forwards. Under these circumstances, a marketing product seeks to create additional layers of value and utility that can ‘lock’ customers in to your brand rather than have them switch to a competitor. Tied directly into the brand experience ecosystem, by 2020, marketers will be using their social monitoring of customers to find new areas of value that can be built up around the core product or service offered by the brand.
A today’s world example is Nike+, which effectively uses technology to connect a community of running enthusiasts together, and in the process lock these runners into the Nike brand ecosystem. The innovation happening around the shoe, rather than directly within the shoe itself.
3. The Content Ecosystem
By 2020, the simple reality is that every brand will be a media brand, requiring everyone to consider how they produce, distribute and manage their content ecosystems. In tandem with brand experience and marketing products, brands will be focused on the overlap between content that informs a customer about products, services or propositions, content that educates them in its use or in the things they can do, and content that entertains them around the core proposition of the brand.
Often this content will be socially, or third-party driven, necessitating new skills in curation, editing and presentation.
Increasingly by 2020, informing, educating and entertaining audiences will happen through channels that are controlled by the brands themselves, rather than channels they pay to advertise on, and where customers have chosen to actively seek the emotional benefits that brands provide.
In Summary
By 2020, advertising will have become a major driver of transactional sales. It will be automated, data driven, contextual and ubiquitous. A disciplined focus on effectiveness will have created new models of advertising agency.
This advertising will be ubiquitous and hard to opt-out of. Instead, brands will be built through new tools built through Total Experience Management, marketing products and content. The brands that do this will increasingly become opt-in, controlling their own channels to the consumer. Customers will go to these channels, actively seeking the emotional benefits these brands provide.
Karl Heiselman is CEO of Wolff Olins. Paul Worthington, strategic advisor/former head of strategy at Wolff Olins also contributed to this piece.
Image via http://disturber.net/