Into the future: World Federation of Advertisers’ Stephan Loerke on the changing world of marketing

Stephan Loerke, the managing director of World Federation of Advertisers, was brought to Auckland recently by the Association of New Zealand Advertisers to speak to Kiwi marketers about what they will have to do in this rapidly changing world if they hope to connect with consumers in a relevant and welcomed manner. Here’s a summary of his presentation ‘How to Future-Proof Advertising’.

Seismic shifts in the marketplace

There are three disruptive forces fundamentally reshaping the environment in which marketers operate and engage with consumers:

1: The scale and the speed of the Internet revolution.

  • Two billion people have access to the internet, or a third of the world population; the three billion mark will be reached in 2015
  • There are now more than 500 million Facebook users
  • 1 in 10 couples in the US have met through the internet
  • The results of the last German Presidential elections were leaked via Twitter before they were officially announced by the Ministry of the Interior.

As the internet revolution is redefining the way people live, work, meet and socialise, consumers are re-defining their priorities:

  • Whereas 20 years ago, the annual US spend on food was $614 billion, $2 billion was spent on computers, a ratio of 300:1. Today, that ratio is 1:1.

No doubt, Steve Jobs has played a role in this. MP3, smartphones, tablets…the adoption rate has been breathtaking. We’re now even seeing the first countries (Taiwan and Luxembourg) with penetration rates of cell phones above 100 percent. And this is only the beginning:

  • There are 700 million people in China on mobile and the number is growing at eight million a month
  • And India is growing even faster at 12 million a month
  • In Africa, mobile phone penetration (37 percent) is higher than electricity penetration (25 percent). A person can be on an ox-driven cart and talking on a mobile phone.

All this is impacting consumers and the way they engage with brands. It means that the days of the one-way-street, brands-to-consumers type of communication are numbered. And it is being replaced by a conversation prism which is two-way and which is emanating from consumers to other consumers. In some cases, it can involve brands, but on an “invitation only“ basis. That favour has to be earned. What it also means, is that your brand is going to be the subject of conversations, whether you like it or not. You can decide to ignore this, but at your own peril.

2: A vast economic re-ordering

China has now overtaken Japan to become the world’s 2nd largest economy. Deutsche Bank has recently released a forecast predicting that China will overtake the US as early as 2020. But the macro-economic changes are by no means limited to China. What we are witnessing is a change of centre of gravity:

  • 10 years ago, the rich countries (G7 as they were called back then) contributed about 2/3 of global GDP. Now it’s less than a half – the financial meltdown may have played a role in this.
  • The weight of the E7 countries will surpass the G7 countries by 2020.

In this new world, where emerging countries are rapidly catching up with developed ones, where people are inter-connected like never before, where a boy living in Brussels can play his favourite video-game against teenage kids in Brazil and South Africa, the concept of “local” doesn’t exist anymore for worldwide brands. A brand that operates across geographies needs to be seen to play by the same rules and standards. Any ill thought-through commercial, promotion, micro-site in Thailand or Peru can come back and bite you in the UK, NZ or Australia. Brands are as strong as their weakest link. Get used to it.

To illustrate this:

a) William Lawson’s Whisky and haka against the Kilts

b) the Burger King Whopper Virgin promotion in the US. The concept is actually quite funny: BK travels to the other end of the world to find people who are really “off-the-grid“ and perform the world’s purest taste test: Whopper versus Big Mac. Needless to say, that generated quite a backlash, not only in the countries chosen (Thailand & Romania) but across the internet.

It may have been precisely what BK in the US was looking for: controversy, polarising, standing out. But that raises some difficult questions about how sustainable such an approach can be. In the new digital age, a brand with a global footprint needs to be consistent in terms of brand message and in terms of ethical commitment, while being relevant to worldwide consumers, who are by no means the same.

3. A profound shift in the way consumers interact with their brands

The days when we could assume consumers would sit tight and listen or when consumers’ attention could be bought with 30 sec TV spots are definitely numbered. And that will have consequences on the way we’re going to be talking to consumers. There is more than a grain of truth to the comment: ”If you talked to people the way advertising talked to people, they’d punch you in the face.”

We’re moving from a traditional model (where brands were talking to consumers) to an emerging model (where brands are part of the conversation). The conversation is not exclusive to the brand. It involves all sorts of stakeholders, including media, investors, NGO’s, employees, government. And clearly that sort of conversation model has both a top-down and bottom-up component.

As a direct consequence of this, the old “corporate-to-consumer” dichotonomy is broken. Marketers can’t just focus their attention on the consumer, while neglecting other stakeholders of the brand. This is the end of the world which was neatly separated in two:

  • The consumer world – for which brand marketers were responsible
  • And the world of the stakeholders – which would be delegated to the external affairs people

Marketers who decide to ignore this do it at their own peril and it may well come back and bite them. Brand owners in industries as diverse as food, alcohol, cars and cosmetics have experienced first hand how societal debates (on obesity, binge drinking and sexual stereotyping) can directly impact their brand message, and ultimately their brand reputation.

Whether we like it or not, the simple reality is that we can’t just assume that we have the “right to market”. With freedom, comes responsibility. We need to demonstrate that we are continuously listening and be prepared to evolve our ethical standards to meet changing expectations. We also need to be making the case, as an industry—much more forcefully than we’ve done so far—about the actual benefits of marketing for the average citizen. If we don’t, sooner or later, we will confront some difficult questions about the legitimacy of marketing communications.

The Way Forward

It’s the marketer’s responsibility to future-proof brands and the way we engage with consumers, citizens and stakeholders. This is anything but straightforward and many brand owners are still in process of trial and error; trying to figure out the rules of the game in this new environment. To help focus attention, here are five worthwile recommendations:

1. Engage with the total consumer experience

Or to put it differently: You can’t salami the consumer experience. The brand reputation of an airline is as much shaped by the comfort of the seats, the quality of its food and its punctuality as it is by the performance of its baggage handlers and the responsiveness of its customer service. They are all contributing to one and the same thing: the customer experience.

Example: It took UNITED Airlines some time to fully figure out all the implications of this. A band called ‘Sons of Maxwell’ was flying from Canada to Nebraska with a stop-over in Chicago. As they were in transit, Dave Carroll, the singer, noticed that baggage handlers were throwing around the band’s guitars. When Dave talked to the flight attendant, she responded it was not her business. The ground staff responded that this was precisely why passengers were asked to sign a waiver before booking a flight.

Dave found out later that day that his $3000 guitar had been crushed. He tried, for six months, to find a solution with UNITED. He called people in Chicago, NYC, Canada….Realising that this was going nowhere, he decided to write a song. That song has now 10 million hits on YouTube.

BP and Toyota are two other cases where marketers have had to realise that, ultimately, they are not the ones who own their brand. And how quickly a breach of confidence is reacted to by consumers and citizens. And they are, by no means, an exception. Many brands in the financial sector are going through a similar experience.

All these dynamics are creating whole new challenges for marketers. And there are certainly no easy, straight answers. As Martha Nussbaum (US philosopher) puts it: “Knowledge is no guarantee of good behaviour, but ignorance is a virtual guarantee of bad behaviour.”

2. Appreciate the importance of corporate reputation.

To quote Larry Light, the former CMO of McDonald’s: Trust is a Must.

Global research on factors contributing to a company’s overall reputation found that trustworthiness, honesty, transparency scored as highly as the quality of products and services, and they scored significantly higher than innovation and admiration. Put simply, the challenge for the modern brand is to be the hero rather than the villain. Keeping in mind that changing status from hero to villain goes much faster than the other way around.

An example of where the line between being a hero or a villain is actually very thin: A societal debate normally starts with scientific alerts (our kids get fatter, binge drinking among adolescents is rising, etc). NGO’s typically use some of these alerts as a foundation for their campaigns. And no doubt, they are effective campaigners. Media pick up these themes and amplify them. Just look at the dramatic, sometimes hysterical, coverage of obesity. Inevitably, this has an impact among consumers and it influences the political agenda. It is only when the process leads to a social trend that it reaches the Corporate Saliency Threshold and that’s too late! Whatever the marketing response and the commitment to ethical standards, you are already categorised as the villain.

In order to be a hero, and to remain a hero, you need to act/re-act much earlier, when the issue is being debated and before it reaches the consumer.

3. Learn how to listen.

We simply need to get better at listening, conversing and engaging. There is no other way to improve our understanding of what people think and expect of us as marketers. Social media provides a unique platform to activate this dialogue. And there are definitely some marketers who stand out and who should be a source of inspiration:

Example: what Nike did with ‘The Human Race‘ was:

  • Create a sense of belonging among their customers
  • Have a conversation via content creation
  • Incentivise achievement
  • Activate customers via running as part of a global community

It was great stuff. Or the Cannes award winning campaign of Obama 2008: A clear brand platform and a masterful use of social media. The presidential candidate, Obama, invited supporters to get involved with mybarackobama.com, offering digital tools that allowed 13 million people to connect, create events, raise money and respond to the media.

Many marketers talk about engagement.But, honestly, how many marketers truly practice it? David Brain hit the nail on the head when he said: “Companies need to speak and listen to a different and often wider range of stakeholders than in the past. More than ever, engagement needs to be tied to action and not just set to broadcast.”

4. Be salient.

You can’t buy consumers’ attention anymore; you need to be compelling/relevant/exciting. Don’t drown people in corporate speech. Because the sad reality is that most people are on the verge of forgetting you.

5. Think about the future of the children

Children and adolescents are no doubt an important demographic for marketers seeking to build brands. But they should be aware that, as a vulnerable target group, they require a lot of sensitivity. According to the US-based Family Foundation, research released last year showed that 8-18 year olds devote, on average, 7hrs 38min to using entertainment media on a typical day. And because of media multi-tasking, they actually pack a total of 10hr 45min worth of media content into those hours. And only 3 in 10 young people say they have any rules about how much time they can spend online.

The phone plays a key role in all this:

  • According to Nielsen, 15 percent access internet on their mobile
  • The average 13-17 year old sends 2000 text messages per month
  • Social networking has seen a 250 percent increase over a year ago

And there is no indication that this trend is anywhere near slowing down. According to Nielsen research, the average age kids start using a borrowed mobile phone has decreased to eight years and the average age kids get their own mobile phone is now under the age of ten.

According to the WSJ, children are particularly targeted online. In one test, they reported that the average child’s browser received 30 percent more cookies than the average adult’s. This can’t be right and that’s unsustainable. Sooner or later it will create a backlash.

In an environment where children and teens spend over seven hours per day online, mostly without parental supervision, my recommendation would be to be particularly careful when tracking children online.

Conclusion: we live in extraordinary times

Our environment is being profoundly re-shaped and the pace of change is simply amazing. As we adjust to this new reality and try to find our way, we can see exciting new opportunities, and also some pretty scary pitfalls.

The changes are posing challenges, but they are NOT “problems to be solved”. A real marketer will always be keen to understand the changes and anticipate new opportunities. A lazy marketer will perceive change as a threat to the status quo. Now is the time to be courageous and to re-write the rules of the game.

A great example of this is being prepared to “lose control” of the marketing message when using social media. It needs to have many people working it to be effective which means many more staff empowered to respond. So the corporate needs to be prepared for when different opinions are aired.

We have some great sources of inspiration: Unilever’s Dove, P&G’s Pampers, Nike, Obama and a few others have proven that there is a role and a place in this environment for great brands. But they need to morph from being megaphones to being friends.

  • The World Federation of Advertisers (WFA) is the only global organisation representing the common interests of marketers. Through its network of 58 national advertiser associations on five continents and over 60 of the world’s biggest marketers, WFA represents around 90 percent of global marketing communications, almost US$ 700 billion annually. Stephan Loerke, 47, has been managing director of the World Federation of Advertisers (WFA) since November 2003. During his tenure, WFA has increased corporate membership by over 60 percent and has extended its network to 57 countries, significantly reinforcing the WFA’s presence in the world’s fastest emerging advertising markets. Loerke is co-founder and a steering committee member of the Advertising Education Forum (AEF). The AEF is an expert source of information on the issue of advertising and children and serves to promote the use of academic information in policy-making. Prior to joining WFA, he worked for L’Oreal in Paris and Brussels and in 2000 was nominated as one of Europe’s top 40 Marketers Under 40 by Media Marketing Magazine.
  • The full powerpoint file of his presentation is available here.

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