Five key priorities for delivering effective advertising

WARC today releases ‘Anatomy of Effectiveness: 2022 Edition’, a white paper giving brand marketers, advertising agencies and media owners a fresh perspective on the five key building blocks of effectiveness.

Why it matters

Much has changed since WARC published the first Anatomy of Effectiveness in 2019, David Tiltman, SVP Content, WARC, observes: “We’ve had a pandemic that saw budgets switch out of brand investment into performance marketing; we’ve seen the rise of ‘retail media’ platforms that are reshaping the media landscape; and with the impending death of the cookie we see a growing lack of confidence in advertising and media measurement.

“This updated edition of our white paper draws on new thinking and the latest evidence to present the key building blocks required to deliver commercial impact today.”

Five priorities

• Invest for growth

Understanding how factors such as brand size, campaign investment and category dynamics will determine effectiveness are key first steps when it comes to setting budgets and agreeing on objectives. Getting the right framework for investment is crucial if a campaign is to meet its potential.

• Balance your spend

Set the right framework for investment to ensure sustainable success. Whether it is long-term effects vs short-term sales impact, brand-building vs performance marketing, broad reach vs active in-market buyers or upper funnel vs lower-funnel, plan for effectiveness across different timeframes, messaging, audience types and buyer journeys to deliver maximum growth.

• Plan for reach

Campaign reach is becoming harder to achieve as media consumption fragments. This is forcing marketers to reconsider long-held assumptions about reach and frequency management. Factors to be considered include brand objectives, media selection and consumer purchase habits.

• Be creative

Creativity makes a difference and is the most powerful weapon under the marketer’s control. There is widespread evidence that creativity delivers increased effectiveness when it is distinctive, engaging, emotional and has some longevity. Recent research cited in LIONS’ State of Creativity 2022 study claims only 8% of agencies feel confident in convincing clients to invest in high-quality creativity and 12% of clients feel confident in convincing the CFO to invest in high quality creative.

• Plan for recognition

Advertising must be associated with the brand behind it, if it is to work. Planning for recognition involves creating shortcuts in consumers’ minds that make brands more memorable, impactful and easy to recall. Failure to brand communications properly is a common pitfall. Investing in and nurturing distinctive assets will enable quick recognition.

The white paper, launched in conjunction with WARC's Anatomy of Effectiveness hub, features new case studies, expert opinions and over 20 'Evidence' decks. WARC clients can read the full report here. A sample edition is available for all.

Highlights from the white paper will be presented to Cannes Lions attendees today as part of a full week’s worth of content curated by WARC, together with the world’s leading effectiveness experts, covering strategy, media, creative and digital commerce. For more details on WARC x Cannes Lions, click here. 

Alibaba targets DaaS market with Lingyang

China tech giant Alibaba is eyeing up the data-as-a-service (DaaS) market with the creation of a new subsidiary, Lingyang Intelligent Service Company, which it says will offer “enterprise digital intelligence services”.

Why it matters

Lingyang, which will offer solutions to enterprises that were initially developed for Alibaba, could potentially compete with the likes of Microsoft, Oracle, SAP and others in the business intelligence space, TechRadar reports.

It’s a growing market: as the amount of data held by businesses expands, so too does the need for services to manage and analyse it. A recent report says the DaaS sector grew 47% last year and will grow at a CAGR of 39% between 2020 and 2025, bringing incremental growth of almost $30bn over that period.

What it will do

• Alibaba CEO Zhang Yong explained that Lingyang will undertake “the important task of transforming the digital capabilities accumulated by Alibaba Group in the fields of consumption into intelligent products and services”.
• That includes a focus on the customer perspective and help for enterprises in driving efficient decision-making and promoting growth through data intelligence in multi-platform operations.
• Peng Xinyu, CEO of the new entity, stressed that it is “not software-as-a-service (SaaS), but data-as-a-service (DaaS)” – most SaaS solutions are aimed at solving “single point problems” and “are limited to workflow transformation”, he said. 
• Lingyang’s five major product lines include Analysis Cloud, Marketing Cloud, Production and Sales Cloud, Customer Service Cloud and Development Cloud. 

Final thought 

Alibaba has more than one billion customers around the world, so already has plenty of data ready to leverage.

Sourced from TechRadar, Technavio

What next for China’s livestreaming sector?

When the Beijing government last week published a new code of conduct for livestreamers in China, it was the latest in a lengthening list of interventions in the digital ecosystem and one that will reshape a livestreaming sector that now accounts for around 15% of all internet retailing. 

The code includes a list of things livestreamers should and should not do and imposes a requirement for professional qualifications if they broadcast content of a specialist nature, such as medicine, law, education or financial advice.

Context 

The pandemic and lockdowns boosted what was an already growing sector. There are now millions of livestreamers and almost half the country’s online users have bought from them. 

The most popular livestreamers command huge followings and can shift mountains of product. Brands of all sorts have noted that reach and sales ability and have partnered with these livestreamers, who have earned huge sums of money in the process.

Why it matters

Being able to talk to a camera for hours on end is a particular skill, but these livestreamers generally lack sector or product knowledge which carries risks for brands – and consumers. Additionally, they have demanded commissions and discounts at a level that now makes little financial sense for brands. 

“These retail gatekeepers wielded too much power, hurting brands, consumers, e-commerce platforms and smaller influencers,” consultant Jacob Cooke wrote in the South China Morning Post. 

What may happen next

"One effect of the new guidelines will be healthier competition within the industry,” retired law professor Jason Yao told Shanghai Daily. “The law-abiding sites with good-quality content will prevail."

Cooke, meanwhile, expects live-streaming content to diversify over the coming year, not least as brands bypass influencers and invest more in self-produced live streams. “More consumers will buy more from these live streams, and live-stream sales as a portion of overall retail in China should continue to grow.” 

Sourced from South China Morning Post, Shanghai Daily, Global Times

Brand in action: How Zero Waste Malaysia champions climate literacy

Consumers and corporations need to increase climate literacy and brands need to take up opportunities to work with advocacy groups, Zero Waste Malaysia’s Sue Yee Khor tells WARC.

Key insights

• Overcoming the language barrier and translating technical terms are the biggest challenge in a multiracial country like Malaysia with a diverse group of people.
• The aim is not total zero waste, a concept that alarms businesses and consumers alike: humans are bound to consume, so zero is just the goal.
• Equip employees with basic sustainability knowledge so that when they become managers, they know how to make decisions not just for profit but also for the environment.

Key quote

“Things that really scare people seem to be what works for our crowd, probably because a lot of them want a reality check. So we try and come in from a perspective where we also tell them how they can do better” – Sue Yee Khor, co-founder of non-profit organisation Zero Waste Malaysia.

Wellbeing sentiment shifts towards 'betterment'

Ongoing research from Horizon Media’s WHY Group has uncovered an evolution in wellness to the concept of betterment, which concerns how people actively approach all aspects of wellbeing.

Why it matters

For brands, understanding how consumers approach their wellbeing is central to being able to respond to this core part of how people go about their lives.

Takeaways

• People’s betterment needs shift constantly based on how they manage their natural energy rhythms, and feelings of control over those rhythms affect the choices people make, with some people feeling In-Sync and others feeling Out-of-Sync.
• Constant fluctuations in bandwidth for taking on life’s challenges have been exacerbated during the pandemic.
• How much control people feel over their energy state dictates their betterment behaviors; when brands understand this, they can connect with consumers in ways that can lead to adoption and a stronger, more emotionally-based connection.

The big idea

Brands can benefit from knowing the relevant complexities and nuances of their audiences’ energy states by understanding how they are, how in control they are feeling, and by offering ways to help.

Rainbow Shops is using SMS for effective brand personalization

SMS (short message service) can serve as effective personalization with customers while remaining in accordance with digital privacy laws, according to a presentation by women’s retail brand Rainbow Shops at CommerceNext 2022.

Why it matters

In an increasingly privacy-focused online advertising sphere, SMS has emerged as a viable channel for communicating with customers directly, building brand loyalty, and serving as a space to further understand customers’ individual needs.

Tone is essential

• SMS messages should comply with the more conversational tone associated with texting, according to David Cost, vp/e-commerce and marketing at Rainbow Shops, in a presentation titled “Preparing Your Tech Stack for the Era of Conversational Commerce”.
• Cost says consumers often respond to automated SMS messages as if they are speaking with a live sales representative. As such, brands should endeavor to meet consumers at their level, by adopting a more conversational tone in their messaging, and straying away from generic promotional scripts.
• For example, using customers’ first names and avoiding long expository paragraphs is key.

Takeaways

• In 2022, roughly 70% of marketers are using SMS for “retention and re-engagement,” a ten percentage point increase from 2021, said Elizabeth Ray, vp/client strategy at SMS platform Attentive. Ray also reported that customers spend, on average, 50% more when directed from SMS.
• SMS should be used as a tool for precise personalization – not, as Cost phrases it, “false personalization,” or messaging that gets customers’ individual attributes wrong, thus targeting them ineffectively. “If we have a plus-sized customer and we send her junior-sized messaging, that’s a loss,” he said. “We’re gonna lose her.”
• Brands can acquire first-person data by asking consumers direct questions over SMS about the products and services they are looking for. This will ensure targeting accuracy later in the sales journey.
• SMS messaging can also be used to guide customers along the purchase funnel – if they have items waiting in checkout, a message might be the difference between inertia and action.

The big idea

“Clearly we need to pick up on those daily touchpoints that are happening,” said Cost of the everyday occurrence of SMS messaging among consumers.

The video market will end in tiers

As the video market enters a new period of hybrid models, many SVOD and BVOD services are moving to both ad-free and ad-supported tiers, a development that brings a fresh set of challenges for both broadcasters and advertisers, says a new report from Kantar.

The Future Viewing Experience appraises the near-term future of the TV and video landscape in which the smart TV set has become the primary driver of increased usage of connected streaming services.

Why it matters

For media owners, the era of set-top boxes is coming to an end and the battle is now on for control of the main video delivery gateway into the home: the connected TV screen itself.  

Brands, meanwhile, are facing the prospect of a two-tier advertising ecosystem in which those who can afford ad-free environments may become ever harder to reach.  

Takeaways 

• Significant steps towards vertical integration will define the long-term as global media owners seek to control the entire chain, from production of content to delivery into the home. The trend could signify a slowdown in content availability.  
• Media companies are seeking a return on their significant investments in intellectual property by promoting franchises and capitalising on global and local fanbases. The internationalisation of culture and younger audiences’ love of sub-titles is ushering in an era in which local content can go global.  

• Critical mass for a global service will be beyond all but a handful of players with valuable and extensive intellectual property. Independent production will remain significant with smaller and niche players finding value in collaborating with others to compete effectively.   
• Streaming services are taking a more broadcaster-inspired sequential release approach to flagship originals, so helping drive buzz and prolong subscriptions. There will be less box-set bingeing in future.  
• If the complexity of the video distribution ecosystem can be effectively tackled, Smart TVs can enable true addressability, offering transformative opportunities and facilitating new forms of advertising.  

  Sourced from Kantar   

CMOs look for the ‘why’ on Web3.0

The opportunity of the metaverse and Web3.0 requires careful consideration, according to a panel of leading CMOs, and brands shouldn’t jump on the bandwagon for the sake of it.

Why it matters

While the metaverse and Web3.0 is getting a lot of hype in the marketing industry, brands are doing themselves a disservice by not examining their motivations for entering the space and whether it is truly the right fit for the brand. Missteps can be costly. 

What to consider 

“When you talk about Web3.0 … you need to ask yourself a few questions,” said Mathilde Delhoume, Chief Brand Officer at LVMH, speaking at the Cannes Lions International Festival of Creativity. 

In Delhoume’s view, brands need to consider:

• the longer term benefits of being in the metaverse or Web3.0;
• who exactly they are targeting, and what type of customers they want to attract to the brand;
• the added value that Web3.0 will offer to customers, if at all;
• how any activation improves the desirability of the brand, or not;
• whether an additional touchpoint will benefit or dilute the brand.

Wait and see

Tamara Rogers, Global Chief Marketing Officer at GSK agrees that brands need to make sure they have a thoughtful strategy when it comes to the metaverse and Web3.0. As a consumer health company, the metaverse isn’t in their current plans, although Rogers is looking to see how Web3.0 develops in the near future. 

“We do think there’s a big opportunity because Web3.0 offers so many possibilities around connection and community,” Rogers said. “We want to find ways to help people take better care of themselves,” 

Dara Treseder, Head of Global Marketing and Communications at fitness company Peloton, is resistant to the hype for now, although she is optimistic about the future: “I don’t feel any pressure… what I’m trying to do is understand what I think is the next iteration of the meshing the physical world and the virtual world.”

A.H.

Unilever’s plastic problem in Asia

Unilever has long trumpeted its environmental and social agenda, but a Reuters report highlights how the FMCG giant has been working to undermine laws aimed at ending the use of single-serve plastic sachets in at least three Asian countries.

Context 

Not so long ago, shops across Asia would measure out small amounts of products like sugar or coffee into containers people brought with them. But that began to change back in the 1980s with the advent of plastic sachets, which big brands were able to use to develop and build brand loyalty.

855 billion plastic sachets are now sold every year industry-wide, but their multilayered design of plastic and aluminium means they can’t be recycled and they have no real value. Meanwhile, they are a major source of environmental pollution, killing everything from fish to elephants. Back in 2020, CEO Alan Jope was clear: “We have to get rid of them,” he told an online plastic sustainability event.

What’s happened?

When, in 2020, Sri Lanka proposed ending the use of plastic sachets, Unilever first sought to dissuade officials, arguing that “sachets are a poor man’s commodity”, according to Anil Jasinghe, secretary of Sri Lanka’s Environment Ministry. And when a ban on sachets sized 20 ml or smaller was implemented, Unilever continued to sell 6 ml single-portion sachets of shampoo and hair conditioner, using a labelling sleight of hand that attempted to retail them in four-packs as one 24 ml unit.

“Unilever tried to deceive us,” Jasinghe told Reuters, although he added that, following a threat of legal action, Unilever subsequently stopped selling 6 ml sachets.

Reuters further reports that the company lobbied against proposed bans on plastic sachets in India and the Philippines. These have been dropped, but Reuters adds that it “could not determine if Unilever’s lobbying influenced the outcome”. The cleanup efforts that have replaced possible bans include the option of burning sachets as fuel, so releasing carbon dioxide and toxins into the air. 

Unilever says 

Ending the use of multilayered plastic sachets is “a complex technical challenge, with no quick fixes”, according to Unilever. A spokesperson says the firm is “phasing out” such sachets by using a variety of potential fixes, including product refill systems, new recycling technology and packaging material that’s easier to recycle.

Sourced from Reuters

Olaplex uses AI in place of a chatbot to personalize transactions

Haircare brand Olaplex is using its AI mascot Kai – a physically representative humanoid collage of the company’s demographic makeup – to personalize the customer experience.

Why it matters

For marketers looking to personalize business transactions without using chatbots, AI could bridge the connection between customer and brand, while decreasing pressure on customer service representatives to respond to questions in real-time.

Takeaways

• Olaplex’s CEO, JuE Wong, explained in a presentation at CommerceNext 2022 that Kai is intended to serve as a kind of “virtual team member”, who can answer questions and provide relevant information to consumers.
• “Kai is really going to be a scalable social media mouthpiece for us,” Wong said. The AI is a virtual synthesis of the company’s team members, 77% of which are women, and roughly 16% of which are ethnic minorities.
• Kai will also prevent the company from using a “cut-and-paste” strategy for answering customer questions, which could come across as impersonal; rather, the AI will have the capacity to add personalized, detail-oriented assistance for customers seeking information.
• Wong added that Kai will function in place of a chatbot. “Instead of using an impersonal chatbot,” Wong asserted, “you can have Kai answering questions for you on your shipping, if you don’t like the shipment of your products. Because Kai is a reflection and a synthesis of all of us, you know that a piece of us, one 240th of us, is actually addressing you.”
• Olaplex hopes that the company’s use of AI will relieve the pressure of live customer service interactions, allowing customers to have unique experiences that aid more effectively in their transactions.

The big idea

“When it comes to consumer products, it’s all about servicing, rather than transacting” – JuE Wong, CEO/ Olaplex.

Come for the race, stay for the ride

As the Tour de France gears up for Le Grand Départ in Copenhagen, broadcasters and sponsors have been addressing issues around engagement and sustainability.

Why it matters

Some 3.5 billion people in 190 countries watch over the three weeks of the Tour, while another 12 million will catch it stood by roadsides across France. That’s a huge reach for the event’s many partners and supporters – and a huge opportunity to build closer relationships with fans and customers. 

Engaging fans 

Discovery Sports is using augmented reality analysis tools and unique virtual backdrops to “enhance” the viewing experience even further, while an “inclinometer” feature seeks to help viewers better visualise the gradients faced by the peloton. (Eurosport has previously used biometric measurement to better understand viewer engagement and inform its coverage.)

Meanwhile, Netflix, which already has a large portfolio of sporting documentaries, is working on an eight-part series in which it will be following several teams at this year’s Tour.

Fitness tracking app Strava, with a new three-year partnership under its belt, has created a content hub within the app which will tell the story of the riders through their daily activity uploads and photos (many riders already upload their data).

Separately, indoor training app Zwift, which ran a virtual Tour de France in 2020, has partnered with the Tour de France Femmes to bring together the virtual and real worlds by creating opportunities to do recovery and warm-up rides with the pros. “It’s a big, big moment for brand awareness,” Kate Veronneau, Zwift’s director of content and women’s strategy, told SportsPro.

Going green 

With sustainability on everyone’s agenda, tour organiser ASO has committed to offsetting the emissions pumped out by the hundreds of team cars, support vehicles and publicity trucks. 

Car brand ŠKODA, which is supporting the Tour for the 19th time, is providing 250 vehicles to the race organisers and race management, as well as service and support vehicles. At least some of these will be all-electric or hybrid models (the logistics of the Tour, which visits small towns and villages mean it’s not currently possible to run an all-electric fleet). And tyres for the electric vehicles, supplied by fellow sponsor Continental, include carcass material consisting entirely of recycled PET bottles.

If there’s still a long way to go on eliminating emissions, more immediate action has been taken on litter and the publicity caravan – the 150 or so vehicles that precede the riders on each stage throwing out all manner of sponsors’ freebies to people at the side of the road. Single-use plastic packaging is now forbidden, although there remain issues with a bottled water brand like Vittel.

Sourced from Amaury Sport Organisation, Eurosport, Velo News, Sports Pro, Škoda

^{[Image: ASO/Pauline Ballet]}

Cutting budgets in a recession hurts long-term ROI

Brands that cut their marketing budgets during a recession leave themselves at a long-term disadvantage, according to research by Analytic Partners, the data and analytics consultancy.

Why it matters

Marketers are often tempted to abandon established best practices, whether that involves spending levels or brand-building strategies, in periods of fiscal stress. Staying the course, however, offers much greater rewards.

Courageous marketers are rewarded

Looking back to the last recession in a session held by WARC at the Cannes Lions International Festival of Creativity 2022, Analytic Partners identified several insights that buttress the case for maintaining, or increasing, marketing budgets in a downturn:

• 54% of these brands saw return on investment (ROI) improve;
• 60% of marketers that raised their outlay realized a better ROI;
• 52% of brands recorded an ROI uptick over a two-year window.

Increased media spend pays off

Turning to media spend, the firm’s analysis showed:

• brands that boosted their investment logged a 17% expansion in incremental sales;
• on average, brands that cut back witnessed an 18% contraction on this measure;
• two-thirds of losses in incremental sales resulted from lower investment, not a drop in ROI.

Move over shrinkflation, here comes skimpflation

If shrinkflation is a manufacturing sleight of hand, reducing pack sizes while maintaining the price, at least consumers are still getting the real deal; with skimpflation, that’s not the case, as lower quality ingredients and materials are used or service levels are cut, even as prices stay the same.

Why it matters

It’s a new name for an old practice – coined by NPR in the US – but there are very real implications for brand equity. And consumers do notice. According to the chief executive of the UK’s Institute of Customer Service, “The number of customers experiencing a problem with an organisation is at its highest ever level.” 

Its most recent data shows 16% of customers had experienced a problem with a brand’s service in the previous six months, with quality issues or items being out of stock the most common complaints.

Examples of skimpflation

• Slower delivery times, whether that’s pizzas or furniture. “That loss of timeliness is a quality downgrade,” economist Alan Cole tells the Guardian. 
• Cancelled or delayed flights. Staff shortages are at the root of the recent and ongoing chaos at UK airports.
• Thin socks. Economics professor David Blanchflower recalls that in previous recessions “the price of socks remained the same and, as costs changed, the thickness of the sock changed”.
• Menu engineering. Restaurants use cheaper ingredients and/or adjust the meat-to-veg ratio with less, expensive meat and more, cheaper vegetables. 

Final thought

“Skimpflation is a leadership issue masquerading as an economic issue,” suggests leadership strategist Scott Edinger, writing in Forbes. “Successfully combatting it will help you preserve your brand, strengthen your differentiators, and succeed where others fail. Especially with a recession looming on the horizon.”

Sourced from Guardian, Forbes, Traveller, NPR

Australia in 2021: a generational shift and more diversity

Australia’s Baby Boomers are on the verge of being displaced as the nation’s largest generation by Millennials, according to the latest census, which also finds that more than half of the population was born overseas or have a parent who was. 

Why it matters

Boomers and Millennials now each account for 21.5% of the population, with Boomer numbers on the way down and Millennial numbers on the way up. There are implications for everything from government policy to marketing strategy, which may need to be adjusted to reflect shifting demographics. Similarly, new migration patterns may require a rethink of some brand communications.

Takeaways

• The latest five-yearly census shows the population has increased by more than two million people (+8.6%) since the 2016 census.
• Half the growth in population has come from overseas arrivals: the proportion of Australian residents that are born overseas (first generation) or have a parent born overseas (second generation) is now above 50%.
• After England, India and China are the main source of overseas arrivals, followed by New Zealand and the Philippines.  
• The number of people using a language other than English at home has increased by nearly 800,000 (792,062) from 2016 to over 5.5 million people.
• The number of people identifying as Aboriginal and Torres Strait Islander jumped by a quarter from the last census; they now number 812,728 or about 3.2% of the population.

Sourced from Australian Bureau of Statistics, BBC, Guardian

Consumers increasingly turn to private-label products

Shoppers are reaching for privately owned brands over big-name products, both for lower prices and increased availability during the pandemic, as well as a myriad of other conveniences, according to trade body the Food Industry Association’s (FMI) 2022 Power of Private Brands report.

Why it matters

For consumers looking to save money during the COVID-19 pandemic, private brands posed a viable alternative to national ones. But more than two years after the onset of the crisis, many shoppers are still maintaining a focus on small brands, for the price and value proposition, putting the onus on marketers to make products available and accessible in order to win against the competition.

Takeaways

• Forty percent of consumers have reportedly increased their store-branded purchases since the beginning of the COVID-19 pandemic.
• Three quarters of that portion of consumers said they will continue shopping private labels in the future.
• Sixty-three percent of the study’s respondents who purchase private brands said that they do so because of increased value perceived from the transaction.
• In contrast, 55% of respondents said that they purchase private brands because of lower cost.
• “Less than 2% of shoppers say the only reason they purchase private brands is because other products were out of stock,” said Doug Baker, vice president of industry relations at FMI.
• Additionally, “when asked about 14 product attributes,” shoppers pointed to a handful of essential reasons for choosing private-brand products. 
  These reasons included: taste (42%), quality (43%), meal planning needs (24%), and health needs (20%), as well general interest and curiosity (20%).
• Forty-two percent of respondents said they liked the taste of private-brand products.
• Forty-three percent of respondents reported choosing store-brands for superior quality.

The big idea

“When it comes to taste and quality, shoppers clearly see private brands as a good option, on par with national brands” - Doug Baker, vp/industry relations at FMI.

Sourced from Supermarket News

Why Apple is a guide for modern brands

Apple tends to be thought of as a brand apart – simply on a different level from most others and therefore not really worth exploring – but veteran strategists Tom Morton and James Hurman told the audience at a WARC session during Cannes Lions 2022 that Apple and other digital brands’ experiences are not only useful, but can strengthen existing models of brand growth.

Why it matters

Penetration still matters, but what of the brands that have really grown through loyalty?

What’s happening

Morton, R/GA’s global chief strategy officer, who made this point more fully in an exclusive essay for WARC in May, outlined his idea that the lessons of Professor Byron Sharp’s How Brands Grow remain vital but that there is a different generation of brands and companies, mostly in tech, that have bucked the model and that these ideas should be absorbed into the corpus of marketing knowledge. Without it, we’re trying to fix Google-shaped problems with Tony the Tiger tools.

At the other end of the scale, many young digital startup brands delude themselves that their low-cost acquisitions will continue indefinitely; James Hurman, founding partner of Previously Unavailable, and a long-time WARC collaborator, outlines how an idea of future demand should become part of the startup lexicon if they are to emulate ecosystem brands like Apple.

The ideas

How Brands Grow has had a colossal influence on marketing, but much of it is based on cases from CPGs or “replenishment” buying brands that grow because their products are bought by increasing numbers of light buyers. In this way, loyalty is at best overrated and at worst a harmful myth. Penetration is what you need.

However, HBG doesn’t include many cases from streaming services, DTC, search engines or subscription businesses – which tend to be the biggest contemporary companies. R/GA, the tech-focused agency that Morton joined six years ago, works on these kinds of brands and spotted an opportunity to add some useful caveats. 

In response, Prof. Sharp maintained that it is still user growth that matters most, with the example of Netflix showing how higher revenue per user was not enough to stem the effects of user decline. 

Apple

Between 2016 and 2020, Apple grew its total customers by 16%, but revenues grew quicker at closer to 27%.  The reason, explains Morton, is an explosion in unit sales, which tripled. This is the beauty of an ecosystem: “you can start to add products and services that fit nicely together. And you can start to find growth that a specific product-penetration alone model wouldn’t find.”

Targeting before broadening

Many startups grow first by finding a specific, niche audience. Startups “should expect to go through a targeted growth phase before they target the general market,” explains Morton. It’s not because they’re “dumb or immature” but early on you need to achieve product-market fit before progressing to the general market.

But then the opportunities broaden. “If you’re a disrupter, your product isn’t fixed,” he points out. “You can actually harness product innovation to grow your penetration in a way that, respectfully, I don’t think the standard brand model accounts for.”

Future demand

However, startups need to be aware of the existing demand trap. James Hurman explains that startups tend to follow a tested pattern. The company has a solution to a problem that an existing-demand audience already have (especially in B2B). The problem is that these are a vanishingly small group. And usually within about two years those buyers are exhausted and you need to grow future demand.

Those ready to buy now need product and price, but the future demand audience doesn’t need any of that. “What it’s all about in terms of driving those future customers is building a brand in a way that makes it familiar to that big group. They become familiar with you, and they feel positively towards you.”

Effectively, you need an eye on both – in the style of Apple – so that brands are able to build demand that they can convert at a sustainable rate. “This is really the answer to creating sustainable long-term growth”.

A better definition of brand building

If you’re looking for a good definition of brand-building for a non-marketer, the following is key: brand advertising is about building the company’s reputation and name “among an audience who aren’t necessarily going to buy from us right now but will in the future”.

Reported by SPT [Image: Apple]