The end of the year is often a time for reflection. But rather than rehash the past, we decided to reflect on the future. Executives from a quartet of marketing and research firms shared with us their predictions for multichannel commerce in the year ahead. On some points our pundits agree (go East, young marketer); on a few they don’t (either eco-awareness is going to increase, or there’s going to be an eco backlash). But there’s plenty here to mull over as you prepare to ring out the old and ring in the new.
Anyone for tennis and marketing?
BY DREW NEISSER
During Roger Federer’s stunning tennis victory at this year’s U.S. Open, the camera panned frequently to Tiger Woods, who was there as Federer’s guest. There they were, two of the best athletes in the world, possibly the best ever in their respective sports, sharing a cross-border, cross-sport, cross-race moment of mutual admiration.
How quaint, right? Or perhaps this was actually a brilliant product-placement scheme by Nike founder/CEO Phil Knight, ensuring that his brand — which both Woods and Federer endorse — was front and center the entire match.
What does this have to do with the 2007 marketing arena? Think of it as a reminder that when watching trends, we should do so with both wonder and cynicism, cheering greatness and booing duplicity. That said, here are my picks for the trends most worth watching.
Just as the new instant replay system at this year’s U.S. Open kept the line judges honest, bloggers are bringing a new level of scrutiny to corporations and their marketing activities. Marketers must assume that they live in glass houses and that consumers are armed with some pretty large stones. Spy on other members of your board of directors as Hewlett-Packard allegedly did, and you will be exposed by a blogger. Try to pass off a YouTube video as consumer-generated content, and you will be exposed faster than you can rap “Smirnoff Raw Tea.”
Directness and honesty will not only help you win a lot of points, but they will also allow you to recover from some bad shots. This is exactly what the folks at Facebook discovered when their recent “upgrade” caused an uproar among their stalwarts, who decried a loss of privacy. Bombarded with negative e-mails and postings, Facebook management was quick to respond, first with a “don’t panic, we hear you” posting followed by a “you’re right, we fixed it” note to all of its loyal users.
In a world of glass houses, the winners will be those companies that focus first and foremost on customer satisfaction. Expect more companies to redouble their efforts to improve customer satisfaction in 2007 at every point of contact. Contact-center response times will be heavily scrutinized with the goal of reducing hold time to seconds instead of minutes. More companies will offer the “push zero” feature providing valuable customers relief from endlessly annoying phone trees. Online customer support will also improve radically as more companies offer “live” support along with improved search functionality enabling customers to find what they seek in a click or two.
NET PROMOTER SCORES BIG
As customer satisfaction moves to the forefront of business strategies, expect more companies to use new metrics such as the net promoter score (NPS) to assess progress and reward performance. Developed by former Bain consultant Fred Reichheld, NPS measures the relative strength of brand promoters vs. brand detractors. Research found that companies with a high NPS consistently outperformed those with a lower rating. NPS requires asking only one question: “On a scale of 0 to 10, how likely are you to recommend brand X to a friend?” Companies such as General Electric have already made NPS ratings an integral part of their business, basing 20% of compensation on NPS scores.
DEFENDING YOUR END WITH BLOG MONITORS
Marketers will be enhancing their ability to defend against potentially ruinous blog attacks by dedicating resources to blog monitoring and blog response. “Blog monitor” will finally become a full-time position in the communications department as opposed to the occasional activity of a lone blog nut. In addition to tracking blog noise, the blog monitor will actively engage other bloggers, correcting mistruths and responding to issues as they arise. Corporate blogs will also be a defensive weapon, assuming that the authors are empowered to tell the truth, even if that means admitting a product shortcoming (as Dell ultimately did with its exploding-battery crisis).
HITTING THE CORNERS
In the 2006 U.S. Open finals, Roger Federer outaced the more powerful Andy Roddick 17-7, trading speed for increased accuracy. Similarly, foresighted marketers will seek out the corners, mining new niches with increasing accuracy and reward.
Case in point: Unilever’s All Small & Mighty detergent, which packs a lot of cleaning punch into a small bottle. Targeting city dwellers who hate lugging heavy containers to the laundromat, Small & Mighty is cleaning up.
Another example: Panasonic recently introduced a 103-inch plasma TV that retails for nearly $75,000 — including, of course, custom installation. Not a product for the masses, but in addition to earning bragging rights for producing the world’s largest plasma, Panasonic has ensured that no self-respecting billionaire will want to be left off the waiting list for this “must have.”
Smart marketers will bake in eco-friendly “green” strategies across the board in 2007. Remarkably, Wal-Mart appears to be leading the way in this arena with its new “Embrace the Earth” mission that pushes “sustainability” on its vendors the way it used to push price slashing. Wal-Mart is now the world’s largest buyer of organic cotton, fair-trade coffee, and energy-efficient light bulbs.
And the ripple effect will be enormous:Thousands of other companies will be forced to examine the “greenness” of their manufacturing and distribution processes.
|EVEN MORE USER-GENERATED CONTENT|
User-generated content (UGC) seemed to be all the rage in 2006. Everyone from Doritos to MasterCard offered UGC programs. And not without good reason: Consumers really responded. For instance, the Share the Air Video Contest that we at Renegade Marketing Group created for Panasonic, in which the company solicited 24-second action-sports films to air on a microsite, has been great for truly engaging the action-sports community.
Looking ahead, marketers will need to raise the ante if they hope to get consumers involved in campaigns. One way will be to offer cash (or other incentives), not just for the winners of a particular contest but for the producers of all UGC that other consumers end up watching. This “pay for play” approach is certainly gaining traction with the emergence of Current TV (which is paying for ads) and Revver.com (which is paying for content).
|NO MORE LINES|
For years marketers have been dividing their communication budgets into “above the line” and “below the line” buckets and by offline vs. online activity. Hopefully 2007 will be the year that marketers say “forget the lines” and look at their communications as one continuous conversation that seamlessly weaves across media, turning prospects into customers and ultimately into brand advocates. To achieve this, marketers will need a new approach to strategy development and product management, creating briefs that embrace multichannel ideation and managers who seek ideas, not tactics.
Next year will be the proving ground for a number of emerging digital-media weapons, from mash-ups — combining content from very different sources to create a unique entity — to RSS to virtual worlds. Google led the way with map-based mash-ups like the one it executed for the second Pirates of the Caribbean movie. Zillow.com created a stir with its mash-up of real estate sales data and mapping software, providing instant house-value estimates. With RSS feeds just about everywhere, consumers can control how they access content. While none of these new-media approaches are likely to conquer the world by themselves, for the right companies each could play a fruitful role in next year’s marketing mix.
|THE TRIUMPH OF INNOVATION|
Innovation will propel select marketers to new heights in 2007. To innovate, companies will need to extend their core competencies to new arenas. The opportunities for innovation abound; the only impediment is the will to go for it.
Drew Neisser is president/CEO of Renegade Marketing Group, a New York-based promotion and interactive agency.
|Vive la differentiation|
|BY THOMAS ORDAHL, MICHAEL MEGALLI, MICHAEL CUCKA, AND TODD MERRIMAN|
It may seem oxymoronic to say that differentiation will be an overriding trend for 2007. But what companies will have in common in the coming year is the need to set themselves apart from the competition. Here are some of the tactics that we think companies will try.
Technology and the improved ability and desire to serve customers on a customized, one-to-one basis, coupled with the increasing lack of ability to differentiate services in the marketplace, means that companies will put a greater emphasis on adding new services. The idea is that if you can’t make the service different, differentiate yourself by offering more services.
The explosion of Chinese manufacturing is not news. Until now, however, Chinese manufacturing has primarily been a behind-the-scenes affair; products created in China were then sold under established non-Chinese brands. This will change as the U.S. market sees the entrance of new Chinese brands that will take on established competitors. The case of computer manufacturer Lenovo provides illumination here. That company has come out from behind its IBM ThinkPad manufacturing deal and in a relatively short time established itself on the PC scene.
|TIME TO GET SPECIFIC|
A few years ago, on the advice of marketers, companies focused on simple messages about their point of difference. This went a bit too far; everyone from Fortune 500 tech companies to your local plumber promised vagaries such as “innovative solutions.” Oversimplification of this sort may work if you sell particularly inventive products, but if you’re like most companies, 2007 will be the year of getting more specific. Customers will be increasingly focused on the details of offerings and how they deliver value — especially if the economy takes a turn for the worse.
The trade deficit, immigration, a potential shakeup of the housing market, and the war in Iraq will be cause for a resurgence of populist sentiment throughout the country. More American advertisers will jump on this bandwagon and try to differentiate their products with a “made in the USA” theme.
Consumers will see more applications of RFID technology in everyday products. We’ve already been using RFID to pay highway tolls for years; this sort of application will become much more common as banks and credit-card companies push “contactless” payment cards for everyday purchases.
|THE NEW GLOBAL CONSUMER|
The continuing globalization of the world economy and the expansion of economies in China and India are creating a new global middle class, which will provide a fertile new market for media, technology, electronics, healthcare, and automotive products.
|THE DEATH OF SPAM|
Spam will begin a sharp decline. With the on-going improvement of filtering software coupled with the ever-increasing sophistication of the average Internet user, spam has hit its tipping point.
The obsession with organic foods will ebb as people question the environmental costs. Take Whole Foods’ New Zealand organic apples: Is it really environmentally responsible to fly an apple halfway around the world? Many will begin to question the supremacy of organic and will instead focus on “local” foods.
|IT’S TOO EASY BEING GREEN|
With companies touting hybrid cars (Toyota Prius, et. al.), ecologically friendly packaging (Procter & Gamble), and free disposal of old computers (Apple), to name just a few, “green” will get old fast in 2007. Companies will need to look for ways to differentiate their greenness by basing it in some unique truth that competitors cannot match. We’ll see more marketing tied to community — the place from which products and services come or in which they will be used. With Google Earth already reemphasizing the link of a business to its location, we’ll see companies do more to ground themselves in green.
Thomas Ordahl, Michael Megalli, Michael Cucka, and Todd Merriman are the leading forces at Group 1066, a New York-based strategic marketing firm.
|DIY spas, Asian chic, and precautionists|
|BY PATRICIA PAO|
As consumers move to take more control over all aspects of their harried lives, we’re seeing dramatic changes in media, marketing, and retailing — the rise of multichannel commerce is an obvious case in point.
Other changes, though, are more subtle. Merchants that can capitalize on the emerging trends can expect the most growth, with much of it from nontraditional sources.
Exactly what trends are we talking about? Here’s a list:
|SPAS COME HOME|
More and more people want to “spa” on their own. The desire for privacy and their own space encourages them to learn how to incorporate the spa experience into their everyday lives. That’s why we’re seeing more entrants into the home spa-products market, such as the recently launched Akhassa, which is dedicated to bringing the Asian spa experience to the American home.
|SPEED IS IN FASHION|
It no longer takes months for runway trends to trickle down to the masses. H&M, Zara, and Topshop are three European retail chains that boast of being able to translate and merchandise runway trends for a mass audience with production times of less than 30 days. And home-grown retailer Wal-Mart hosted “Rock the Runway” in September as part of New York Fashion Week, showing clothing that was highly reminiscent of lines shown by Proenza Schouler and Roland Mouret. This trend may be a challenge for catalogers, with their more-advanced lead times.
|GREEN IS GOOD|
Eco-awareness is only going to become more widespread. In the apparel and footwear sector, for instance, Nike recently announced that it figured out how to remove the greenhouse gas from its sneakers, and Levi Strauss is introducing Eco jeans, its first organic-cotton line. According to Organic Exchange, a nonprofit advocacy group, demand for organic cotton by clothing makers is increasing at an annual rate of 93%; it projects that sales from organic cotton will be $2.6 billion by the end of 2007. Vendors ranging from American Apparel to Wal-Mart now offer clothing under the organic-cotton banner. What’s more, fibers made from wood pulp, bamboo, seaweed, soy, and corn blended with luscious organic silks and cashmeres are becoming a fashion staple.
In their desire for control, “precautionists” are seeking optimal safety in everything from cleaning products to toiletries. Precautionists swap chemical products for vinegar and water and leave their shoes at the door so that they don’t track contaminants into the house. They sleep on cotton sheets, eat organic food, and buy chemical-free toothpaste and deodorant. The key to marketing to precautionists is to encourage them to lobby for a better, safer environment but to also encourage them to enjoy life.
|ASIA IS CHIC|
In the next 10 years, as many Americans will visit China as will travel to Europe. As was the case 20 years ago, when they brought back a taste for things French and Italian from their travels, these travelers are likely to embrace Asian themes. Merchants as diverse as Alsto’s, Hammacher Schlemmer, and Coldwater Creek already sell bamboo home accessories — which also ties in with the eco-friendly trend, as bamboo is a replenishable resource. And Chinese calligraphy already adorns everything from wrapping paper at Flax Art & Design to rubber bracelets from Oriental Trading Co.
|ACTIVEWEAR CONTINUES AS EVERYDAY WEAR|
Two-thirds of American women dedicate at least half of their closets to activewear, and they’re not saving the workout clothes for the gym. They are trading traditional sportswear for activewear as their casual apparel of choice. Going forward, activewear manufacturers will place much more emphasis on having a fashion point of view, which explains the recent partnerships between Stella McCartney and Adidas and between Alexander McQueen and Puma. American Eagle’s new retail concept, Martin + Osa, is dedicated to the concept of fusing high-tech sport and casual sportswear. And actress Scarlett Johansson will launch a line of urban activewear next year in partnership with Reebok.
|THE BRANDING OF PRIVATE LABEL|
What appears to be an oxymoron is now true. Wal-Mart’s Ol’ Roy dog food is preferred over Purina. 7-Eleven now sells more of its private-label Santiago beer than it does Corona. About one of two fans sold in the U.S. is Home Depot’s Hampton Bay brand. Private brands account for more than 40% of J.C. Penney’s revenue, as well as for much of its turnaround in recent years. Retailers are beginning to recognize that they cannot simply rely on nationally branded products to attract consumers and retain their business.
Patricia S. Pao is CEO of Pao Principle, a New York-based marketing consultancy specializing in the luxury goods, beauty, and retail industries.
|The luxury of change|
|BY MILTON PEDRAZA|
Perhaps the rich are different…but in many ways companies targeting the wealthiest consumers aren’t so different from those marketing to a mass audience. The predictions we’re making for luxury firms aren’t really all that distinct from those for consumer merchants at large.
Innovative luxury goods and services firms are finally beginning to realize that Hispanics, along with African-Americans and Asian-Americans, now make up profitable demographic segments of the wealthy-consumer population. Wealthy actors, athletes, and entertainers from minority groups are the most conspicuous consumers of luxury goods.
For instance, rap stars often sing the praises of Cristal champagne (although Jay-Z called for a boycott of the bubbly earlier this year, after comments a Cristal executive made in a magazine article offended him). In actuality most wealthy nonwhites are conservative entrepreneurs, executives, and professionals. As “new” money, they’re eager to consume and experience top luxury brands — and they expect genuinely friendly customer service.
The savvy luxury marketers will not only embrace these consumers on their own terms but will also begin to tap their authentic (not stereotyped) cultural roots for new product and service lines that will generate loyalty, affinity, and profits. Ethnically inspired luxury goods and other initiatives geared toward minority segments are bound to have crossover appeal among mainstream wealthy and international consumers as well.
The true luxury fashion brands that want to retain their upscale status in the minds of wealthy consumers will retreat from — or avoid all together — leveraging their prestigious names to launch second-tier or diffusional lines. It’s delusional to think that luxury firms can pursue a move down-market without losing their standing among their best customers.
Many luxury brands are starting to look tired and old-fashioned due to a lack of investment. Stay at some of the world’s finest luxury hotels, test-drive the foremost luxury automobiles, buy a new pair of shoes from the best craftsmen, and you will find many old, tired brands that need major reinvestment in facilities, models, and materials. Today luxury brands must deliver the most up-to-date technology and modern design with the greatest of comfort and style. So look for the best hotels to upgrade their televisions to high-definition, flat-screen TVs. Look for service providers such as wealth managers to stay on top by providing the best security and convenience to their tech-savvy, wealthy customer base.
|LUXURY IN CYBERSPACE|
The celebrated sites of Web 2.0 — MySpace, Yelp, Facebook, YouTube — are primarily for the young and restless (and careless) who have nothing to lose. In 2007, Internet entrepreneurs will realize that mature, affluent consumers want to benefit from peer-to-peer affinity communities too. Many of the community sites for wealthy consumers will be subscription based and membership based — essentially online, commercial-free “gated” communities. And in terms of reaching upscale consumers, the emphasis will continue to shift from traditional media such as broadcast television and print magazines to emerging venues such as video-on-demand and satellite radio in addition to online communities.
Luxury firms should have been among the first to use sophisticated technological and analytical tools to surgically target and customize offers for their clients. So far, however, most luxury goods and services firms get an “F” in customer relationship management. A shocking number even fail to execute on easy lay-ups such as a well-targeted and measured referral program. It doesn’t help that most firms lack strong marketing departments and even appropriately skilled quantitative and analytical staff to create such programs.
This will change, however. Having understood the power of optimizing customer experience in the creative and artistic sense, luxury marketers will begin to develop the personnel, analytics, and data management skills as well as the testing and learning methodologies required to operate a highly adaptive, customized marketing and selling operation. It will be a very difficult transformation to this level of business intelligence, but it will happen with quickening frequency in 2007.
Milton Pedraza is CEO of the Luxury Institute, a New York-based ratings and research institution that focuses on the top 10% of America’s wealthy.