Klarna’s David Sandstrom: How huge growth fuelled a ‘coming of age’ for marketing strategy

David Sandstrom, Chief Marketing Officer at digital payments brand Klarna, speaks to WARC’s Anna Hamill for Marketer’s Toolkit 2022 about evolving its brand story, challenging measurement norms, and never outgrowing the ‘start-up’ mindset.

Klarna has seen exponential growth in the last year. What consumer behaviours are fueling that growth?

It's a COVID-era digitalization that we're seeing. We’d seen that already before the pandemic but e-commerce in general has skyrocketed. Since Klarna’s services are, to some extent, a centrepiece of e-commerce across the globe, we have been a big part of that digitalization, the move from brick-and-mortar towards e-commerce, and also now its introduction to new segments and new target audiences.

What we've seen during COVID is a huge uplift in people aged 60+ being introduced to e-commerce. A big part of Klarna’s success at the moment is not driven by the pandemic, but rather by a new consumer behaviour that we're seeing across the globe: a shift away from old, legacy debit cards and banks towards a new way of paying for things and buying things online.

David Sandstrom, Chief Marketing Officer, Klarna

So you're moving into different demographics?

We are seeing that, and that is also challenging for us as marketers and brand builders. Prior to COVID, [Klarna was] used to catering for an audience between 25 and 35 years old, who are digitally affluent and used to all kinds of apps, social channels and payment methods.

What we see now is a new demographic being introduced to e-commerce, and that obviously poses some challenges in how we communicate to them. How do we build the user experience? How do we build the narrative? How do we build trust towards a target audience that is 65+, versus a target audience that is 25+? We have to be fairly flexible with our brand in a different way than we had to be prior to the pandemic.

How have you gone about making those changes?

We've been much more thorough in our segmentation, in our targeting, and much more mindful with how we behave in certain parts of the consumer journey. We have invested heavily in understanding our consumers, the consumer’s needs, our proposition and how that matches to different behaviours much more than we did pre-pandemic.

We're now in a good spot where we can cater to a very broad audience with our products and services. But again, we were still learning. People have different experiences and values when it comes to money and in financial services, so being mindful is really at the heart of what we do.

How do you build a consistent strategy for brand growth in an area of fintech where regulatory requirements are changing quickly, and across markets?

One thing we've been really good at as a ‘start-up’ that moves quickly is adapting to what is around us. We would never complain about regulation - we welcome regulation - but we need to adapt to the regulation that we have at hand. Being flexible as a company - in the way we create products, the way we build the brand, and the way we conduct our business - has been really important. 

‘Start-up’ is an interesting word for a 16-year old business. Is that ‘start-up’ mentality more a part of your brand culture than a descriptor for the company’s scale?

Yes, exactly… We don't think about the [brand valuation] as much as we think about how we can change consumer’s lives for the better, or our partner businesses for the better, or society for the better. You have to be curious and you have to showcase all of the traits that a start-up has: you have to work harder than anyone else, you have to be able to manage bumps in the road, you have to be flexible and adaptable. There are a lot of things that are present in the start-up mentality that we still need while on this path that we are creating ourselves.

How are you engaging with your customers now, compared to before the pandemic?

Feedback, customer support, dialogue and engagement has always been at the heart of what we do and that hasn’t changed much. What we've become more mindful of is that we play a bigger role than a small tech start-up. We're closing in on 100 million customers and we have over 250,000 retailers and merchants connected to us as partners. That has, from a brand communication perspective, sparked a kind of ‘coming of age’ in our thinking, from buying media to how we frame ourselves.

With regards to social commerce and the creator economy, is that something that you have a footprint in?

It is a huge priority - almost the top of our agenda - to start looking into that.  This summer, Klarna invested heavily in a virtual shopping company and we're now going to embed it into all of our services. The creator economy, social shopping, and peer-to-peer or influencer shopping is something that is going to boom in the Western world. But we have to be honest about the fact that no one [in the West] has cracked it.

There is no equivalent of WeChat in Western countries, with social media, technology, payments etc in one eco-system. In the Western world, we have all of these things, but they're spread out across 20 different platforms. Looking at what China has managed to do is very inspiring.

Has Klarna changed its influencer strategy to engage directly with creators and niche communities?

What we represent when it comes to e-commerce is something that is, to many people, an interest that people are passionate about: it can be make-up, it can be sneakers, it can be drones.

The curation part is going to be absolutely key. There's an abundance of content, there's an abundance of products, and there's an abundance of marketing. Teaming up with people who can curate is something that we've been looking into in the last year. If you look at the Klarna app nowadays, it's filled with those individuals.

What metrics do you use when you're engaging with influencers and creators?

We’re very metrics-driven in all our partnerships, but it depends. Sometimes we're after reach, sometimes we're after engagement, sometimes we're after affinity. But we measure everything.

It is important that not everything comes down to sales. Although it's an important metric, always going straight for the kill is not something that is beneficial. Building up the number of returning customers, monthly active users, time spent in the app, engagement with our articles and with our collections or wish lists... those kinds of things are at the centre of what we do.

So you’re really thinking about customer retention as well as acquisition.

Yes. Both are important levers, and we understand and appreciate that brands grow through new customer acquisition. With that said, we have a unique opportunity to build communities around Klarna, around our partners and merchants, and what they represent and sell. There are huge shopping communities that we want to cater to. Creating content and services for them is something that we think about on a daily basis.

How do you use data in your marketing? Do you have relationships where you share data?

We don't share data per se, because data is extremely important and sensitive for our partners, and for us. We utilise the data that we have in order to create better services, so we don't utilise the data that we have to create better banner advertisements but really to understand our customers’ needs.

I would say 70% of our marketing is data-driven and 30% of our marketing, we deliberately almost do not measure at all. If you start measuring certain initiatives or certain campaigns or certain partnerships, you almost invoke the wrong behaviour for those projects. So we let the brand campaigns be brand campaigns and then we measure the hell out of the performance campaigns.

How are you evolving your media mix for these new consumer behaviours?

Klarna is slowly increasing spend in more traditional media, mainly out of home and TV.

The internet and digital marketing is fantastic for a lot of things, but I don’t think that we've been able to replace TV advertising when it comes to reach and penetrating certain audiences, so that’s something we are looking into as well.

We're going to launch in 14 new markets in the next couple of months, so we have to be smart in how we do that. I believe in partnerships as much as I believe in traditional media buying.

Are you making changes to the way that you measure your campaigns to prepare for a cookieless digital ecosystem?

We are. Finding smart ways to help consumers understand the proposition and benefits of being ‘logged in’ is going to be absolutely key for a lot of marketers going forward. Making sure that people understand that the entire experience is going to be better if they are ‘logged in’ with Klarna is going to help us a lot when it comes to personalization and finding twin audiences.. I think the preparation comes a lot from actually looking at the product itself.

What impact will the demise of last click attribution have on your business?

It's obviously going to change to some extent how we've worked with digital CPA platforms, so we're slowly trying to try to change that as well, ie. going from digital performance marketing and looking into completely new ways of acquiring customers.

For example, is it more beneficial to us to look at a referral programme where we don't need to spend the money on the big digital platforms such as Google and Facebook? To us, it's not only about finding smarter ways to work with the platforms, per se, but really to replace or move the entire budget somewhere else.