Who will survive, thrive, and die in the emerging direct brand economy? Legacy brands and their suppliers are struggling with growth, while more customized, data-enriched, consumer-centric brands are thriving. The 2018 event explored how the new direct-to-consumer (D2C) economy will drive growth in 2018 and how brands are building their own supply chain ‘stacks’ to meet their Production, Attention, Data, and Fulfillment needs. The event uncovered marketing, data, and organizational strategies that will help brands, publishers and their partners compete in a world with nimble, tech-focused new market entrants and adapt their businesses to thrive in the 21st Century.
Day 1 Highlights
Randall Rothenberg, Chief Executive Officer, IAB, welcomed over 1,100 media and marketing executives to the 2018 event in Palm Desert, CA, on February 11-13. The meeting was themed “How to Build a 21st Century Brand” – introducing the idea of the direct brand economy. This event is a forum for the industry to set the agenda for the coming year, and this year, more than ever, it emphasized learning with many breakout sessions and insights from great speakers—such as Leonid Sudakov from Unilever, Jen Rubio from Away, Henry Davis from Glossier, Liza Landsman from Jet.com, and many others. Attendees were invited to actively engage into dialogues, both from the main stage with the IAB Leadership Dialogues and in smaller room settings with the town halls and master classes.
The world has shifted from an indirect brand economy to a direct brand economy with incredible growth, extraordinary innovation, and general disruption. Thousands of retail stores closed in 2017. Smaller brands are providing a new business model. Yet, some leading incumbent brands—such as Unilever and Mars Petcare—have also adopted direct-to-consumer strategies.
Rothenberg thanked all the sponsors and announced the new IAB Board Slate for 2018. The IAB Board of Directors elected Scott Schiller, Executive Vice President, General Manager, Marketing, Advertising Sales & Client Partnerships, NBC Universal, as the new Chair of the Board and Rik van der Kooi, Corporate Vice President, Microsoft Advertising, as Vice-Chair of the IAB Board of Directors. Schiller was one of the founding members of IAB.
Schiller said he was excited to take on the responsibility of the chairmanship this year. He commented that “when IAB started, we saw an immense opportunity for consumers, marketing, and media – our industry was at inflection point in the 1990s with consumer habits dramatically changing business. The opportunity still awaits us. We want to help our customers and ourselves grow.” With more brands in the room than ever, this is the opportunity to work together and make our industry even better, Schiller pursued. 2017 was a tough year for many companies. The media industry including web publishers and retail brands are facing increasing challenges and disruption at the same time. It was time for major changes, so here we are once again at the cross world of change and opportunity. Growing and thriving today and tomorrow requires that we tap our collective scale, expertise, and resources. We must come together to envision and enact a new future,” said Schiller.
Many industries have found the way to grow and evolve in the face of disruption. Today technology and data have obscured the opportunities in front of us. Consumers have so many ways to get content. Choices have multiplied. We are forced to change in order to grow. Story telling opportunities for media companies have expanded. We are now in a world populated by influencers and branded content. And data has multiplied – including data about consumers’ needs and desires. The supply chain has exploded – hundreds of brands work directly with technology partners and media partners. Many of them are going directly to consumers with narrative shaped in house. They work with publisher content studios and they manage their own influencers’ relationship. As an industry, we need to steer in the right direction and work together. First, we have to listen to consumers who now have the ability to have direct relationship with brands. Innovation led growth is shifting to smaller direct-to-consumer and boutique brands – in categories like mattresses, craft beers, and most famously razors. Who heard of Harry’s and Dollar Shave Club five years ago? Today they are almost 15% of share in that market. Growth has stopped for most Fortune 500 companies.
IAB and others have responded to so many of those challenges and it helped us improve the consumer experience. Initiatives like the Digital Advertising Alliance have helped consumers secure their privacy and learn more about how their data is being used. The Coalition for Better Ads helps consumer control the unsightly assault of retargeting without having to use third-party ad blockers. TAG, ANA, IAB, and 4As’ joint venture is successfully creating a more brand safe, fraud-free internet by demanding brand safety from all publishers. Since Marc Pritchard requested all his P&G media suppliers to be TAG certified, advertising fraud has declined almost 10% in 2017 according to ANA. And we can do more. We have to help marketers reach their goals and ask them how they define success. Art directors, copywriters, account teams, communication specialists, and media buyers need to get back in the same room.
We want to focus on the true brand growth cycle and how to make the experience easier on the marketers for the benefit of consumers. We all have to contribute and listen better, collaborate, innovate, and push the needle forward so we can contribute to growth. Brand safety must be a given and a mandate for everyone. Ultimately the IAB exists because we believe in three things: 1) the internet is a great source for content and commerce; 2) internet advertising is good and we can inform, entertain, and educate in environments subsidized by brands and we can build businesses too; 3) and we have the will and the power to self-regulate and to hold ourselves to high consumer standards so that we are trusted. We have to innovate and lead. Let’s take action to move our business ahead and contribute to growth.
Next, Jeffrey Cole, Director, Center for the Digital Future, USC Annenberg School for Communication and Journalism, talked about “The Transformation of the Media: New Payment Models, New Players, and New Content” and the change that we see in the media business – with new players and new business models. Cole believes the AT&T and Time Warner merger will go through and AT&T will probably be able to bring CNN along into the new company. When they do, out of the six major studios, we will have three super studios: AT&T Time Warner, Disney, and NBC Universal Comcast. That leaves three studios that, according to Cole, are not big enough—20th Century Fox, Paramount (part of Viacom), and Sony. These companies will have to sell or find partnerships. Google, Facebook, Baidu, Tencent, and Alibaba are ready to move into this space. Amazon decided not to buy a studio, but to build its own studio, already an Emmy-award winning and Oscar-winning one. And Cole predicts we will see Amazon, followed by Facebook, move aggressively into a whole new space: sports.
“Last year, Netflix spent 6 billion dollars on original programming and will spend about 8 or 9 billion this year,” said Cole. Amazon, Apple, HBO, and Hulu all increased their spending too, and Cole estimates there will be about 19 billion dollars spent this year on original programming by non-network or studio players, almost all over-the-top (OTT), and projects about 24 billion next year. And there will be one new type of player. Cole has been talking a lot about driverless cars. The automobile is about to become the second most important entertainment environment in our lives. Cole predicts that we will consume more media in our car than in other single place, with the exception of our home. And it will create lots of new opportunities for software, content, hardware, etc.
We are seeing 200 years of business model being completely disrupted – very old industries as well. Last week, the LA Times got bought by a local billionaire, Patrick Soon-Shiong. Cole thinks it is good because there is almost no other alternative for local newspapers. Jeff Bezos bought the Washington Post because he liked it and wanted to save it. And the Post has been the most improved newspaper in the country over the last couple of years, hiring journalists and winning Pulitzer prizes. Rupert Murdoch also split NewsCorp in half to save the newspapers, said Cole. The movie theaters, which were most threatened of not surviving, have also moved to a new business model. Last year, summer box office was at a 25-year low. The major reason was the cost of going to the movie theater compared to a monthly subscription like Netflix providing TV, theatricals, and original programming. In the next 18 months, the music industry that looked like it was at death’s door, will be a bigger business than it was before the internet and Napster. Where those dollars go is completely different than where they went 20 years ago—e.g. Spotify and Pandora—but this has become a bigger business with more people listening to more music.
Television has moved to a subscription model – most people spend about $90 a month on media as they shave or cut the cord. Netflix and Amazon Video are part of this change. Netflix has evolved from a red envelope business seven years ago to a successful digital streaming business with quality original programming. Television tells you to stay home—where it’s warm, safe, and convenient—whereas movies have always required more effort—however the movie stars were bigger than TV stars, the content was bigger, more majestic, more thematic, and the quality of the picture was so much better… but, that’s not true anymore. Netflix, Hulu, and Amazon have been successful – and the film/movie theater industry is even more in trouble than the television industry.
In the following session, titled “How to Build 21st Century Brand Loyalty,” keynote speaker, Henry Davis, President and COO, Glossier, shared insights into the customer experiences crucial for companies to ensure prolonged brand loyalty in an age where customers are increasingly product loyal. Glossier disrupted the beauty industry with core insights into its consumers, building a loyal following even before its launch. Davis talked about how the shopping paradigm driving the change in brands now. Retail is not what it once was. This is challenging brands because their products are becoming the collateral damage in the battle royal for retail: when things go on discount, retail is commoditizing brand products. So, many brands are looking to e-commerce as the future, where they need to be. E-commerce in the U.S. is dominated by Amazon. In 2015, Amazon did one third of all the U.S. e-commerce volume; in 2017 they did 44 percent; and it won’t be long before they do over half and become the majority player. Amazon defines e-commerce as fewer clicks, fewer dollars, and fewer delivery days as possible. They want to remove any friction. This threatens brand loyalty. Amazon is an infinite shelf and algorithms tell you what you need which challenges brands who have been surviving on product loyalty and shelf hegemony for so long.
People still want brands. But they also want to feel part of something and feel good about their purchase. Millennials are at the vanguard of this shift. They just want to be listened to. Two thirds of them are annoyed by mass marketing and fed up by how they’ve been preached to. “You are not thin enough, you are not man enough, or your lips are not full enough” – the beauty industry is probably the worst of all, creating the anxiety relievable by purchase. Millennials are rejecting that. They want brands as peers – they are choosing inclusive, nice, and real. The brands of the future will be based on belonging and community, a place where people go to share belief and lifestyle. And digital is what allows brands to make meaningful connections with people at scale. These communities are international, they transcend borders, demographics, psychographics, and people can opt into them. To tap into this new way of thinking and to foster this environment, look to start a conversation. Davis recommends brands engage, listen, and continue the conversation to make consumers become stakeholders.
At Glossier, “we involve our customers in everything we do,” said Davis. They include their customers with user generated content (UGC) – from development to marketing to selling. Then, customers want to evangelize the products they have been part of creating. “Don’t try so hard making customers feel like they are being listened to. Really listen to your customers,” commented Davis. Customer engagement is the antidote to the commoditization of brands and will solve all the problems the brands face. According to Davis, the brands of the future will understand three things:
- E-commerce “the Amazon way” is commoditizing brands (and media “the Facebook way” is similar).
- Millennials expect more from brands. They want to feel a part of something, that they are friends with the brand.
- Brands that include customers in everything they do will be the most successful.
Then Davis had a Q&A with Alexa Christon and Laura Correnti, Hosts of Adlandia. They uncovered that Glossier first thinks about helping customers find their own beauty style and routine – hoping Glossier will be part of it eventually. Davis said they measure engagement and everything they do is content. There is a silent conversation. Davis stated they can’t grow unless they are conversational – 80% of Glossier’s new customers come through earned or owned channels – in particular peer-to-peer recommendations, their biggest acquisition channel. That all requires conversation. They want people more than they want sales – how to engage them and make them to understand who they are and what they are buying. “With social platforms, you can easily find the lifestyle affinities and the psychographic you want, “said Davis. “The challenge is to engage them from there.”
Glossier is very transparent about their creation and marketing processes. They think about it as levels of “inclusive exclusivity” with circles that get narrower and narrower, yet with open doors. Davis said that Emily Weiss, Founder and CEO of Glossier, talks to customers about her views on the brand. Glossier wants to have as many conversations as possible. Data is important, and good at providing feedback and improving your product. But, to innovate, you need to reach beyond data to intuitive reasoning. Glossier has only a single physical retail store in NYC, and this store has more sales per square foot than Apple. “We think there is a place for retail as community-building and conversation – we don’t see it as distribution,” said Davis. “You should build your own e-commerce platform to have room to engage with customers the way they want to engage.” recommends Davis.
Next, Doug Weaver, Founder and Chief Executive Officer, Upstream Group, Inc., took the stage to help us understand what the future of digital sales looks like, in a session titled “Go disrupt yourself! Tiny Acts of Rebellion and a New Future for Digital Sales.” The tape looping inside the publisher’s head seems all too familiar: duopoly, programmatic, consolidation, margin pressure, smaller site lists, fewer RFPs. In 2018, the life of the digital seller is filled with disruption. “Now may be just the time to become the disruption,” said Doug Weaver, who shared some of the basic tenets of sales team disruption and how sales leaders and managers can foster long-term standards and everyday habits within their teams. In a market as precarious as ours, inertia and incrementalism may be the riskiest options of all.
Weaver started by saying that to your sales teams the world looks like they are in the shadow of a death star. They see a world being shaped by consolidation – duopoly or “triopoly” soon. Sellers feel increasingly unconsidered, they are starting to feel invisible, and the natural reaction is to disengage, or to start to become desperate. But, the answer to making the change as a sales leader is in the answers to two core questions:
- How will we live and thrive in a consolidated world of giants? Consolidation is a part of every industry and media channel.
- How do we succeed when the systems and practices we once relied on no longer serve us? The system seems rigged.
Weaver talked about tiny acts of rebellion to positively disrupt the future of your organization as a sales leader – sales teams are in the middle of disruption, but don’t feel like they are doing the disrupting. You can help them do it:
- Start to let go of things: the fading rituals and relics of the past that are eating away valuable time and resources. Meetings, over reliance on the media agency, capabilities presentations, lunch-and-learn’s should be out the door. They are the very things holding your sales people back.
- Start at a different place. Focus first on the client’s business and marketing story, then consider their budget. The media team they are calling on has no idea how many budgets the marketer could access if s/he wanted to fund a new idea.
- At the agencies, we need to reach higher with a new set of motivations and incentives. Change the access point and get in to see the C-Suite and account owners within the agency. Help them find new kinds of budgets, incremental client spending, opportunities for brand leadership, capability extenders and workforce multipliers.
- Hygiene is the new superpower. Last year, Marc Pritchard’s speech was crucial and sent a clear message to the industry. The issue matters, and we need to press it today. The idea that an advertiser should get what they paid for should not be in dispute. And the idea that fraud has no place in our business should be beyond question.
- We have mistaken the idea of storytelling with telling our story better and more effectively – we have become a nation of describers, said Weaver. We need more betas: beta issues, beta concepts, and beta programs – teach sales people to go out with fragmented, partial ideas and concepts to engage customers in a more collaborative and inclusive way – give marketers the chance to participate – instead of just telling.
The incoming IAB Chairman shared insights about where the industry is headed in 2018 and then recognized IAB members who have demonstrated strong leadership and contributed exceptional service over the last year with the IAB Sales and Service Excellence Awards.
Day 2 Highlights
Monday started with an IAB Women in Leadership Breakfast featuring Allison Allen, VP, Diversity, Inclusion & Talent Management, Oath, Kim Perell, CEO, Amobee, and Ilana Wollin, Vice President, Marketplace Partnerships, AppNexus, and moderated by Megan Hauck, Senior Director, IAB Education Foundation. The leaders shared some of their secrets to success and some stories about how diversity has increased productivity in their teams and for their bottom line.
Then, reconvening to a full room, Randall Rothenberg, Chief Executive Officer, IAB, announced the release of a new IAB study on the evolution of brand marketing in his opening remarks. The Rise of the 21st Century Brand Economy focused on growth and how to crack the code of the new consumer economy. Rothenberg started by claiming that new direct-to-consumer companies such as Warby Parker in eyewear, Glossier in cosmetics, Casper in mattresses, and Away Travel in luggage are not interesting curiosities. They represent an enduring shift in the way the consumer economy operates. Legacy brands in most consumer categories are now in crisis.
We have lived for almost 140 years inside what we call the Indirect Brand Economy. Indirect brands created value through their high-barrier-to-entry, capital-intensive, owned-and-operated supply chains, and extracted that value through indirect, one-way relationships with their end consumers, mediated by a series of independent third parties, ending with fulfillment in a physical retail store. Now, we have entered the Direct Brand Economy. We date its origin to 2010, the year Warby Parker was founded. In this new economy, 21st Century Brands create value by tapping into a low-barrier-to-entry, capital-flexible, leased or rented supply chains. And they extract that value through a number of fulfillment models, all of which have a single thing in common: they aim to create a mutually beneficial, two-way relationship between the brand and the consumer, because that interactive relationship throws off the data that is the central competitive element for every other function in the enterprise. In the Direct Brand Economy, supply chain functions reside in four “stacks.” These are the production stack, the attention stack, the fulfillment stack, and the data stack – all of their functions available to rent, or to insource, depending on your strategic requirements.
Consumption isn’t going away. What’s changing is the way consumption is done. Non-store retailers grew from 4 percent in 1992 to 10.4 percent of the $5.3 trillion retail economy in February 2017. According to Nielsen, dollar sales in brick-and-mortar stores increased just 0.1 percent during the first half of 2017 for fast-moving consumer goods, while online channels saw a 21.1 percent uptick in sales.
Rothenberg laid out a new framework for understanding the direct consumer economy and assured the audience that IAB is committing to this framework – and to helping you navigate this exciting, transcendental evolution in the way brands and consumers interrelate.
IAB is going to bring the brands into the room. Our members have a lot to learn from them and their evolution. We also have a lot to teach them – about the best content marketing, risks to their data in the global public policy environment, best practices and technical developments in attribution modeling, and many other things. The centerpiece of this mutual learning experience will be the IAB Direct Brands Conference on October 30-31, 2018. This conference will become an annual fixture on the IAB calendar. At this event, we will release a more refined version of the IAB 250 powered by Dun & Bradstreet, that was released as a first-of-its-kind analysis pinpointing which Direct Brands to watch in the U.S. economy – both newcomers and evolved incumbents having the most impact in their categories. We also expect to release our first-ever benchmarking report on the Direct Brand Economy, diving deep into their operations to learn how they work with media, marketing, and data partners, what obstacles they are facing, and what’s contributing to their growth.
Rothenberg left the audience with four main takeaways:
- The world is awash in capacity for producing, marketing, and delivering goods and services to consumers – and drawing first-party data from those interactions. The “stack your own supply chain” is generating thousands of new companies, and changing the competitive requirements for all companies.
- To succeed in this new economy, you must become a direct brand or serve the needs of direct brands – seeking to create more enduring two-way relationships with their consumers.
- Creating those data-enriched two-way relationships requires technology, but it also requires story, for there are three last mile gaps that must be closed: to the head, to the home, and to the heart of the consumer.
- Maintaining and growing enduring two-way relationships between brands and consumers requires authenticity and trust. For trust equals data equals growth. And growth is the goal.
Today’s consumers are hyper-segmented and hyper-connected, and they expect hyper-convenience from their retail experiences. In this keynote session titled “In Brands We Trust,” Keith Weed, Chief Marketing and Communications Officer, Unilever, explained how the changing consumer is altering how we build brands forever and showed how a global CPG company with over 400 brands can win in this new world. He showed how Unilever found new ways for a sustainable business. For Weed, 2017 was the year of voice and mobile video for consumers, and for the industry, it was clearly the year of the digital supply chain. We need to make sure that 2018 is a very different year where we rebuild trust in our system and our society collectively. At this year’s World Economic Forum in Davos, the Edelman Trust Barometer showed that there was a 37 percent decrease in trust across business, government, non-government organizations (NGOs), and media in the U.S. Less than a third of people trust social media vs. 50 percent in traditional media, undermining confidence. This is important because if you undermine confidence you undermine trust. Business is expected to lead. Weed talked about hygiene factors, in particular the three Vs—Viewability, Verification and Value. Significant progress has been made, as a result we are delivering good value. Table stakes have changed and they are impacting society. There is an underlying issue of trust and truth going on. This is about people, society, and the people we serve. Fake news, sexism, racism, terrorism, spreading hate, we are a million miles away from the internet we thought we were inventing. It is time to act before viewers stop viewing, advertisers stop advertising and publishers stop publishing. This is an issue of trust – this is undermining the relationship between consumers and brands. Brands cannot ignore this. They can’t say this is someone else’s supply chain. We cannot have people not believing what they see online. No trust equals no data, no brand, and no company. We all need to be part of the solution.
Brand safety is paramount as well as brand suitability. Brands have a social responsibility and should have a positive impact on society. Weed made three commitments to change the conversation from social media to social responsibility: 1) Only partnering and investing in responsible platforms with a responsible approach to supply chain, 2) Committing to responsible content, tackling gender stereotypes in advertising, and championing progressive advertising, 3) Committing to building responsible infrastructure with one measurement system across all media – TV, digital, and wall gardens.
In their other supply chain, the goods and products supply chain, Unilever has made a commitment to source 100% of agricultural raw material sustainably by 2020. “Unilever is working in partnership with all players to ensure that all our supply chain – product and digital – are sustainable.”
When YouTube and Facebook had issues last year, Unilever kept the dialogue open and had positive conversations to improve the consumers’ experience and prioritize meaningful relationships – bringing transparency into the media world to ensure a positive online experience. A brand without trust is just a product. It is time for brands to step forward and take action, speak up about things that need fixing in the digital supply chain. Consumers are increasingly looking at brands and businesses to improve the society and environment. Unilever has been working on brands with purpose – such as Dove, which promotes beauty and building self-esteem to understand body and lives in different ways.
For Weed, you can build a brand that is good for people, for the planet, and for businesses. This is no longer a moral case, we also have a business case. Accept that we have a society issue, we need to own this collectively. An industry issue has moved into a societal issue. We are starting to impact society with the quality of the supply chain.
Randy Freer, Chief Executive Officer, Hulu, and Janet Balis, Partner, Global Advisory Leader for Media & Entertainment, EY, talked about TV and the 21st Century Brand in an always-on TV world. Ten years ago, Hulu ignited the television revolution – reimagining the viewer’s relationship with TV and introducing new ways for advertisers to engage audiences. Today, Hulu is leading TV forward into its next exciting era. Balis and Freer discussed what it takes to succeed as a 21st century brand in the constantly changing world of media. Freer agrees that it all starts with trust – you have an opportunity to build trust with one consumer at a time. In the live space, quality stream is harder than it looks. We all need to move faster. If you put legacy and tradition in front of everything, then you slow yourself down. Gillette could have done what Dollar Shave Club has done, if they chose to. For the under 35 age group, more than 50% of the consumption of content is ad free (HBO, Netflix, Hulu ad free, Showtime, etc.). Companies need to move beyond what their legacy business has forced them to hold onto. They need to find ways to balance the expectations of shareholders and others and evolve much quicker because consumers are moving fast.
To make advertising relevant, you need to think from the consumer side first – how is that message going to be consumed, how will they dive into it. We have overloaded the media experience with advertising. We need to value people’s time, get back to the right transaction and value proposition. We need to create an ad experience focused on the customer experience. Getting back to a quality, premium environment; lower ad load; more relevance to those ads and creative technology. Hulu subscribers, 31 years old on average, are vocal, active, and have great expectations. First, they want a robust quality stream and content in an easily discoverable way. And they want a complete experience, bringing all the content they want together, on any devices, wherever they want it. In an on-demand, always-on world; to compete for attention, ultimately you need to have what they want to watch, when they want to watch it. You need originals and a wide variety of content and material difference with content they are passionate about. They may come in to watch the Handmaid’s Tale then they look for comic relief after – e.g. comedy, adult animation, etc. To provide the right content at the right moment with serendipity. You get to know someone. You have to be careful and protect their data.
To be a successful D2C brand, it takes a cultural shift inside a company. We need to think about design, relationship, and trust for customers; how we measure and move them from place to place once they log on, what the customer/subscriber is seeing; and how we are impacting that consumer at a particular moment in time. There is a shift in how the company needs to think. Brands want to reach customers around content and communities. You need to appreciate customers and value their time. We need to get back to the beginning when brands told stories then we need to integrate branded entertainment and product placement. We need the greatest creators, the best storytellers to tell stories about brands that resonate and elevate consumers through content, communities, or virally.
Transforming the world lies in our hands. We need to shake off the power-point imprisonment, put the consumer at the epicenter of what we do, and draw the future from there. With Connected Solutions, Mars Petcare is at the forefront of adapting a legacy business to the changed environment of direct, 21st century brand connectivity. Leonid Sudakov, President of Connected Solutions, Mars Petcare, explained how he is shaping the business by becoming more consumer-centric and daring to dream big in his keynote session titled “No one Has Monopoly on the Dream.” Sudakov talked about the journey of transformation over the last few years, focusing on the people behind the brand, and the way you organize.
Mars Petcare is the global leader in all things pets – health, care, and nutrition; serving almost 50% of the pet owners and owning the four biggest animal hospital chains. In the last decade, Mars Petcare has lived the transformation of genetics, consumer technology, IoT, and health diagnostics. They are in the service business as much as the product business. It forced them to redefine what they want to stand for as a company. This transformation has been all about finding our dream. No one has a monopoly on the heart and on the dream. Mars Petcare’s dream is creating a better world for pets. This dream allows them to prioritize. They fight for better cities, for pets to be more welcomed in offices and playground as well as nutrition and health for pet and pet parents alike. They shift their focus on how they can make our customer’s life better. “We rebuilt this unmatched customer obsession muscle, stated Sudakov.” Our relationship with consumer is what gives us the right to first party data. Everything else is a commodity.”
As a multi-million-dollar company, they realized they had underestimated and underutilized resources. They gave up of the culture of self-preservation because people who are afraid are not taking risks. They have to fight the bureaucracy and inertia every day – nothing kills the signal between you and your consumer more than the layers of bureaucracy. They’ve learned to act small in order to dream big. Every startup acquired was used as a cultural champion for change in Mars Petcare. They want to be a partner of choice for every disruptor in their industry. Scale creates a real differentiator. The next step is how to translate their existing advantage of scale into an advantage of speed.
Mars Petcare created a completely new open platform for their business to commission and create digital communication in real-time. “We signed over 10,000 creators from 100 countries – started with $300 per piece of communication.” Technology has democratized production. The whole journey matters. Mars Petcare sees scale as an opportunity, not as a dead weight that drags them down. Find the dreamers who will create the transformation of your business and think how to organize to make them successful. Impatience and tenacity are important components of making this transformation possible. Because no one holds the opportunity on dreams.
At Mars Petcare, 60% of growth on category levels already comes from digital. They have focused on how to make sure their people have a direct relationship with the consumer. It’s all about the people behind the brand.
Next, Jen Rubio, Co-Founder and Chief Brand Officer, Away Travel, joined James Ledbetter, Editor of Inc. Magazine, on stage to share how the company has created content and experiences that set it apart, Building a Lifestyle Brand in the 21st Century. Away, the direct-to-consumer travel company, has redefined what it means to connect with customers, having quickly developed a loyal following of hundreds of thousands of people around the world. But, Away’s secret to growth goes far beyond a suitcase—whether through its in-store experiences, profitable editorial arm, or unique collaborations, Away has proven that it’s building a brand, not just a product. Rubio said that the idea to build luggage came out of a pain point, however the two co-founders were not interested in building a company that just sells suitcases. The old luggage industry was missing the emotional connection with customers, just talking about wheels and zippers. They wanted to make travel easier and more enjoyable – luggage was just their first stop. They centered their entire brand around the connection with the customer.
Lately, Away branched out to brick-and-mortar retail store sales. For Rubio, if you are a direct-to-consumer brand, you can still have a retail space, but you need to also own that channel. The fundamental value of a direct-to-consumer brand is relationship. Retail allows people to touch the luggage. They do events, workshops, classes, product focus activation built around community interactions. Away’s retail conversion is in the low 30% – if consumers buy online later then this is also a success. The retail store is just another brand touch point. Retail expansion is one of Away’s pillars of growth over the next couple of years. Each store teaches them a little bit more.
Away looked at all the data available to them from the beginning. One of their first hires was a data analyst. The obsession with what the consumer thinks has driven much of what they’ve done. For instance, Away brought back limited edition pink suitcases and told the customers it was because of them. Attribution is a big part of what’s missing. They developed in-house a proprietary attribution model because they have a very specific marketing mix. Away has been building their organization to reflect what customers are demanding from them. Away expanded from luggage to a travel goods line and is looking at other gaps in travel. Everyone loves to travel but the actual process is a pain. Away created a quarterly print magazine and online destination targeting millennials with high household income who have an immediate intention to travel. In social media, Instagram is the second highest way people found Away. They looked at the type of demographics they were aligning themselves with and what those people were posting. They carefully worked with the right community. Rubio recommend to align yourself with the right people who will tell stories in a better and more authentic way. Success is defined beyond likes or followers.
In a frank keynote address about Real Diversity and Inclusion Practices for the 21st Century Brand, Freada Kapor Klein, Co-Founder, Project Include; Partner, Kapor Center for Social Impact, and Ellen Pao, Co-Founder, Project Include; Chief Diversity and Inclusion Officer, Kapor Center for Social Impact, discussed what digital companies can do in the areas of Diversity and Inclusion that are comprehensive, necessary, and effective. They provided insights on what brands can do to truly modernize their D&I strategies to retain talent and grow revenue, and how companies foster environments that are not only better for their employees, but also for their ever-evolving consumer-base, allowing all to thrive. Pao, who was once interim CEO at Reddit, talked about “the thousand cuts” – all the cuts you experience at being underrepresented at a company. Cuts that are tied to being invisible, lower status, and putting you in your place. Pao and Kapor Klein discussed how to stand those thousand cuts and how to make sure people feel included and want to stay rather than leave the tech industry. Freada Kapor Klein also shared findings from the Tech Leavers Study about what is deterring the best and the brightest. Both unfairness and the thousand cuts drive turnover. Unfairness was the most frequent reason to leave a company, twice more than being recruited away and those who left would not recommend that company to relatives and friends.
Project Include, co-founded with six other women, defines three values—inclusive to all groups, comprehensive across all activities in your company (recruiting, promotion, and pay) and accountability metrics to see how you are doing—and uses three tools: a handbook with 87 recommendations, working with startup CEOs and VCs (venture capital), and surveys or reports to show what is possible.
They looked at five factors and if they make a difference in frequency and in retention of employees:
- Hiring a head of D&I – does not work as a standalone initiative
- Setting explicit diversity & inclusion goals
- Referral bonus for under-represented employee hiring
- Conducting unconscious bias training can help people have aha moments
- Employee Resource Group (ERGs)
Some of those initiatives do not work as standalone, and the sweet spot is to have all five of these in place together to deliver a decrease in all forms of unfairness and an increase in retention. Kapor Klein said that you cannot increase diversity without improving culture and sense of inclusion otherwise you just have revolving doors at your company. Pao said that the biggest obstacles for doing these is that people have it on their to do list but don’t get to it. This is a below the line priority. If companies see the long game, they realize they have to do it now.
Company culture does not change without critical mass. Critical mass matters. Getting pipelines of kids like the SMASH (Summer Math and Science Honors Academy) program scholars in place and the iDiverse graduates and begin to change the culture.
Today’s consumer can get exactly what she wants, instantly and effortlessly. This is having a profound impact on the world of marketing, as people increasingly expect brands to anticipate and deliver on their needs in every micro-moment. In the next session about Marketing in the Age of Assistance, Jim Lecinski, Vice President, Customer Solutions, Google, underscored why assistance has become the battleground for growth, and shared how leading marketers are partnering with Google to create useful, personal, and frictionless experiences to win.
In the past, growth was based on production cost and integration. This system worked until challengers came along. Mars moved from a manufacturing and production focused company to a service focused company or an assistive brand. Production and manufacturing means have changed from when Henry Ford created the Ford T in the 1920s focused on scale to drive down the unit cost. Consumer demand and expectations have changed too. Mobile changes everything with people checking their smartphone 150 times per day. Google defines four micro-moments when I want to know, I want to go, I want to do, and I want to buy. Consumers want to know if your brand can exactly satisfy that here and now. The underlying technology and the new supply chain empower the customer expectation– through artificial intelligence and machine learning I can swipe, I can type, and I can talk at my fingertips. It puts an expectation of speed, precision, and nimbleness on brands, putting some stress on brands created for supply chain, mass needs, mass taste, and mass production. Consumers are now curious, demanding, and impatient. According to Harvard Business School professor Clayton Christensen, “Consumers hire your 21st century brand to do a job.”
Assistance is the new battleground for growth. What’s our opportunity to assist? Some brands are being assistive today – e.g. Maybelline “contour-me-quick” videos with tutorials and makeup tips, and Starbucks “virtual barista.” Assistive brands help build brand loyalty and lifelong consumer experience, taking the butterfly effect from many small meaningful assistive ideas adding up for a different type of competitive advantage. Nest, with its connected home devices, uses machine learning to program itself for home comfort. You can show up, wise up, speed up to be there in the consumer’s moment of need and to use data in an efficient way. Be nimble, fast, and use input from consumers. Go forth and be assistive – go forth and build an awesome company.
Day 3 Highlights
Tuesday started with several breakout sessions, including two master classes about Equipping Your 21st Century Sales Force and GDPR (General Data Protection Regulation) Solutions, and a Leadership Dialogue: Get Your Brand Ready for Immersive Media with Intel Senior Vice President and Chief Marketing Officer, Steve Fund.
Then Liza Landsman, President, Jet.com, and member of Walmart’s e-commerce team, provided her insights in a keynote about “Innovating the Online Shopping Experience with Culture, Creativity, and Customer Satisfaction.” Since its inception in 2015, Jet.com attracted shoppers with its tongue-in-cheek tone, playful ads, and site imagery. With Walmart’s acquisition, the brand was empowered to focus on innovating for the urban shopper. Jet.com continues to maintain its startup culture and innovative edge through urban-inspired product launches and partnerships, including its own private brand, last mile delivery innovations, and new ways to shop via mobile. Landsman shared how Jet.com capitalizes on its strong culture, creativity, and passion for customer satisfaction to help the brand win the eCommerce game.
Landsman noted that many venture brands and companies are built through bootstrapping. The quintessential American entrepreneurial story is two guys building a new business in a garage, she said. At Jet.com, they did the exact opposite: they raised a total of over $800K in capital and equity in about 18 months. Amazon started with one category, books, over 20 years ago. Jet.com took a different approach, thinking about “pulling a sequoia out of the ground with their bare hands” rather than slowly nurturing a single green shoot. They started with 1,436 categories in every market in the U.S. and launched in every channel across four platforms out of the gate with a profound focus on scale. They did a massive launch in July and, about 11 weeks later, they hit the million-user mark, which positioned them at the level of Spotify and Instagram for growth. That gave them a tremendous amount of credibility among established brands and provided a massive consumer base to observe – what and how they buy. Landsman said that they had to offer 10-15% better pricing overall than is available elsewhere online, so they re-engineered the supply chain and passed those savings to consumers without charging a membership fee.
Here are some of Landsman’s lessons from the launch of Jet.com:
- To win a race, you first have to know what you are running towards – from day one, Jet.com focused on scale. It impacted who they hired and when they got acquired by Walmart in August of 2016 for $1.3 billion, they already had 3,000 employees.
- Focus on customer metrics and consumer experience in the beginning and always. They built a consumer experience lab that grew with them for live research with consumers on usability, communication, core product features, etc.
- Build diversity in your team from the start – Build a great culture and get a better business outcome. It is harder if you treat it as icing to add on top of the cake once baked rather than doing it from the beginning.
According to Landsman, Jet.com growth has been organic – with an intense focus on consumer experience and marketing. Yet, they also thought about inorganic growth. They acquired Hay Needle (home goods and fashion), a pure play e-commerce, to build the Jet brand with speed and agility – because deep subject matter expertise makes a real difference in the consumer experience. Walmart reaches over 240 million people a week globally through their stores or website so their acquisition was also a great accelerator.
In a fireside chat with Rothenberg, Landsman shared that she doesn’t think that channels operate in silos. Consumers do not think they are shopping in a store today and tomorrow they will shop online. This is about the satisfaction of their wants, desires, and needs. “The choice of channel is based on convenience and some preference with a rare foray into joy,” she added. The consumer is truly in control. Jet.com focused early on trying to create the least friction and the most joy as opposed to being purely an efficiency play, said Landsman. Prompted about Amazon, she also noted that consumers don’t love a monopoly. Choice is really important. In a TV interview, she stated that her ambition was “to be a tremendous #2.” Much of e-commerce is a transactional relationship, yet there should be joy and celebration. The emotional connection generates more fun for employees, but also creates, stickier, deeper, more lasting connections with consumers. This is the blending art and science. You can anticipate trends by looking at data. Yet, also bring design sensibility and some gamification into the experience. Landsman thinks content marketing is important because human beings are emotional and irrational creatures. “You need to tell the story of your brand and what your culture is about. Urban affluent consumers talk about who they support with their dollar as opposed to where they spend.” This is why she thinks content marketing serves a very important function in the funnel. If people don’t know who you are and what you stand for, why would they spend their precious dollar with you?
Welcome to Optimism: Brand Building in a Post-Advertising World. A lot of ad agencies watched the rise of digital, programmatic advertising, and targeting, and wonder where the humanity went in advertising. Truth is humans are more interested and engaged in what brands have to say than ever. Direct consumer engagement and people’s desire for real experience make this an amazing time to build a brand. Colleen DeCourcy, Chief Creative Officer, Wieden+Kennedy, and founder of the IAB Agency Board, examined how advertising, agencies, and creativity fit into brand building in the 21st century.
DeCourcy stated that “Change is here: Disruptive innovation is rooted in more people having access to tools that used to be available only to people with lots of money or skills. Music does not need records. Each step, it is about taking friction out of the process.” Hollywood looked at the digital disruption and cried “defend us, this is going to kill creativity,” but it didn’t. Removal of friction and use of data intensified Hollywood creative output. Big box retailers, Hollywood, record companies, etc. are all victims of the same logic. “More delivery, less friction, still creative: this is the challenge we all have in front of us in the 21st century,” said DeCourcy. We’ve moved from a market of things to a market of technology and systems. Scale is no longer your friend. Competition is coming from everywhere, she added. Unprecedented access to the means of production is what created the new economy. Great advertising can still drastically change the fortunes of a brand – new economy or old. There is just no role for mediocre work anymore.
DeCourcy said she was very grateful that Wieden+Kennedy was small and the money goes into the work: “D2C companies have taught us that any move that is not in the direction of nimbleness, emotional intelligence, transparency, collaboration is just building in the wrong direction. Brand building is not a guarantee of long-term success. Loyalty is hard to find. Companies like Glossier, Warby Parker, and Everlane are not just internet companies that figured out supply chain and targeting. These are ideas – they also live offline, they create content, they make meaningful gestures, they capture an audience. The biggest difference is that they do it without massive infrastructure.”
Marketers used to invest in advertising and brand building to raise awareness and to drive sales in physical stores. Now, the marketing mix for both direct digital brands and legacy brands who want to adapt is surprisingly similar. “What is interesting is how little of it sits inside of media,” noted DeCourcy. With the new direct economy, we moved from mass target audience reach to individual precision on a mass scale. 21st century marketing is about humanity. People are more interested and willing to play along with brands than they have ever been. They also expect more from brands than they ever did. Brands who are more audience centric, human centric, who focus on creating value for people, who combine tech with human insights and empathy, and look at people as more than consumers or targets, are the ones who will be marked in history as the 21st century brands, claimed DeCourcy. “As the economy loses friction, becomes more direct, it opens up opportunities for any brand and for truly creative companies to develop human relationships in new ways. This is an opportunity to reassess everything we thought was a rule. The optimism lives here. The great 21st century marketers will hone the direct, targeted, programmatic, and they will also use the work to create conversations that live in the real world. It’s not the end of advertising. It is the beginning of everything,” she pursued. At the intersection of data, storytelling, and content, companies are driven to first party relationship infused with rich data. And, data is how creatives now brief themselves, how they find the truth in a non-monolithic culture. “Data is a form of empathy, a piece of insight,” she concluded.
Programmatic advertising can be a murky ecosystem and marketers should have full visibility into every dollar they spend. Will Blockchain be the answer? The last session on “Blockchain: Getting to Radical Transparency” looked at several ways in which Blockchain could play a role in the future of the digital ecosystem and dove into how Blockchain can solve transparency for marketers. Richard Bush, Chief Product and Technology Officer, NYIAX, and Co-Chair, IAB Blockchain Working Group, started with an explanation of blockchain technology and how it can enable the next wave of automation through trust and safety. NYIAX partnered with NASDAQ to bring a blockchain in the back of their financial system and contracts. Blockchain is the underlying technology that is enabling cryptocurrencies such as Bitcoin.
Why are people saying Blockchain will revolutionize advertising?
- Digital Value Transfer: Describing something of value in code, transferring it directly between parties, consumers, publishers, and advertisers
- Identity: there is a lot of activity in particular in healthcare, government, GDPR, etc.
- Smart-Contracts: they are legal contracts, self-effectuating, and they define the terms of the agreement and the actions coming from that in code
- Value Chain Transparency: public blockchains and private blockchains can be used to create the right level of transparency
After this explanation, Bush invited the audience to educate themselves and their business, and to get involved with the IAB Tech Lab Blockchain Working Group, quoting a stat from the World Economic Forum stating that “10% of all global GDPs will be stored in blockchains by 2027.” Then Will Luttrell, Founder and CEO, Amino Payments, Brian O’Kelley, Chief Executive Officer and Co-Founder, AppNexus, and Mark Wright, Vice President of Media & Sponsorships, AT&T, joined Bush on stage for the last session of the day.
“What is the actual problem we are trying to solve with blockchain?” asked O’Kelley. As a guardian of the AT&T brand and a steward of its investment, Wright said his goal is to verify and validate who is charging for what in the chain, then to maximize investment, and to assess value at each one of the stops. There is an opportunity for buyers and publishers, who have become more distant with programmatic, to couple the efficiency of the programmatic chain with the proximity of publishers in the blockchain. Wright said that his AT&T team has the responsibility to understand what’s going on with their investment in the space, then to take some corrective actions as necessary, and to set the level of expectation with the people they are doing business with. Transparency is about giving everyone the data and allowing them to assess. It is about value and impact. The move to transparency will benefit everyone from marketers to publishers and all legitimate players in the system – as identified by ads.txt for instance. Wright recommended to “take care of your brand, to understand your investment, and to validate it.” He encouraged the audience to take action towards transparency and to find the right partners.
Randall Rothenberg gave his closing remarks and summarized a few takeaways from the three days, and invited the audience to the next event in Phoenix on February 10-12, 2019.
To learn about the 2019 Annual Leadership Meeting taking place February 10-12, 2019, in Phoenix, AZ, visit iab.com/alm.