I joined Dave Donars, Cardwell Beach chief of research, to celebrate Thanksgiving by doing what we do best: analyzing the state of marketing and branding as we enter into the holiday season. Together, we cover a lot of ground, including why some companies are re-thinking Black Friday, the future of the economy, why brands should be like champagne, changing the way brands are marketed during a recession, and how analytics is redefining the role of the CMO.
Take a listen below:
DAVE: Hi. Welcome to Air Quotes, the Cardwell Beach podcast about invisible marketing. My name is Dave Donars, I’m the chief of research at Cardwell Beach.
BRIAN: My name is Brian Erickson, I am the chief marketing officer at Cardwell Beach. Thanks, guys, for joining. Today we’re going to talk about a few things. Now, I know by the time this is broadcast, it’s going to be after Thanksgiving, since we are recording a scant few hours away from people probably beginning to wake up and start cooking those turkeys, and just a few more hours away from people rushing out to the stores in what I find actually a little depressing, mad rush for Black Friday stuff.
DAVE: Yeah, the 6 p.m. start this year. Is that the time?
BRIAN: Yeah, yeah. But you know, I think we’re getting into the fourth quarter here, or we are well into the fourth quarter, looking at the high holiday season. So the topics we’re going to discuss today are going to be the economy, which is approaching full employment, and what that means for businesses, as well as just marketing in general. We’d like to touch on some lighter elements within tradition about Thanksgiving. I think that that’s kind of a good topic, something that we’ll probably loop around a few more times. Some of the new enhancements with Google Maps, and maybe we’ll touch on some of the elements of store cards and loyalty programs. But I think that that might be something that we’ll bill out to a full show, as well.
DAVE: Sure. Potentially getting a little bit into kiosks and some of our relationships with retail, posts that Matt has put up on the blog recently.
BRIAN: Cool, alright. So let’s get started. Do we want to just get the Thanksgiving, Black Friday everything out of the way?
DAVE: Sure, is that even a thing?
BRIAN: Sure, sure, yeah. I really don’t want to get into Black Friday too much. I just wanted to say, no, everybody’s tired of hearing about Black Friday. I thought we’re going so far in one direction with the 6 p.m. starts, even the earlier in the day Black Friday starts, I thought it was kind of interesting, certain brands are now taking the opportunity to go the other way and say that they are closed on Thanksgiving, they are closed on Black Friday. And that’s a really great way to differentiate, I feel. So the REI would be the big example there.
BRIAN: I think that that’s extremely good for their brand, because it’s about get outside, you know, really, this is the holiday, this is about your time off. Don’t make shopping a job. And I think that there’s an element of Black Friday where a lot of retailers obviously this is their main, main sale, sales of the year. I mean, it’s incredibly distended about how much of the total volume of sales in a given year. Now not total margin, because these are going to be thinner margins, but total volume of sales in a given year are going to be in this holiday season, especially around some specific days. So it’ll be Black Friday, December 22nd, there’s a weird pickup on like January 4th or 6th, depending on the scheduling of the year. I understand why retailers need to do it, but it has gone too far. Because the implication of this, and, is that people have to be away from their families in order to facilitate this.
And that’s something that’s not a thousand percent comfortable to me. Because we’re dealing with people that are maybe more seasonally employed and maybe have some, I think that they’re not as in control of their schedule to be able to say that we don’t want to do this. Or you’re dealing with, you know, teenagers, high schoolers, college kids who maybe have a second job, and it hurts, in some ways it hurts the ability for a family to plan out their holiday, some of those other elements. But some of the other things that are being done by retailers is to, even though this is such a misnomer, because this does not make sense, because Black Friday is a specific day of the year, but like recently I got a coat from Groupon, no, excuse me, Jack Threads, sorry, but it was considered like Black Friday month.
DAVE: Right. Amazon’s doing a similar thing.
BRIAN: Yeah. And I think that that is kind of gearing up for the anticipation of those great cost reductions that, you know, we’re all so traditionally used to at this time of year, but also lessens the load of it being kind of around a specific holiday. So that may be a shift we’ll start to see. But enough about Black Friday. You’ve heard about that from everybody else. Let’s dive into some topics you may not have heard about.
DAVE: Yeah, let’s talk about the economy. You haven’t heard about that from anybody else.
BRIAN: Yeah, so this will be everyone’s first news on the American economy. So basically what we’d like to talk about is that there was obviously a major recession in the United States, which we are continuing to climb out of. It has been what Jan Hatzius of Goldman Sachs, he’s their chief economist at Goldman Sachs, has called this the tortoise recovery. Because it’s been a slower pace. If you look at the big, big recessions in the United States, when recovery starts to occur there’s a dramatic increase in jobs and in high paying jobs. That’s been much slower in this recovery than in previous ones. But it’s also been a trend since the dip, the double dip in the early 80’s. Every recession afterwards has had less of a steep incline on job growth as it continues. But this one being not flat, but nearly flat. All that being said is that we are now approaching, within the next few months or a year, to get to what is considered full employment, which is around 5 percent or below 5 percent unemployment.
I’d like to discuss what that means for, in terms of businesses, what the opportunities are, where consumer spending is. Because inventory is going to be moving quicker in terms of B2B, B2C, even B2I with institutions, and also what that means for how do you market? What are the advantages that we can take at this point where we have a growing economy that is different from where we were with a retracting economy or just a stable economy, where we were very concerned about kind of holding our own market, you know, we were worried about cannibalization, loss of margin. How is the world that we are entering right now different? Because I think we are really going to come round the bend, this isn’t going to be a blip on the radar, this is just going to be holiday, holiday, holiday to everybody. We’re going to come round the bend, we’re going to have primaries, we’re going to have CES, we’re going to have a bunch of stuff in January. But I think that that January cycle is the beginning of something that is substantially different than we’ve seen for seven years.
DAVE: And that’s kind of a crazy thing, because if you think about how long seven years is, I mean you have people who were potentially not even in the job market who are in leadership roles at this time. And you have, even more than that, people who are in completely different industries who have never experienced a truly up market in the industry that they’re in. So there are a lot of people that are really facing completely unfamiliar territory. You know, I think your breakdown, B2B, B2C, B2I, is really important, because I think each of these sectors faces different challenges and I think even within each of those sectors, is your specific business and is your specific market a pro-cyclical business, or is it a counter-cyclical business? So businesses that are focused on cost savings and the like have probably really enjoyed this time period. You know, even if it’s not a boom for everyone there are certain businesses that are booming because of the down economy.
BRIAN: And what do they do when the market turns up?
DAVE: Yeah, I think we should definitely get to that, but I mean I think that there’s an unsaid element of what you’re saying, is that within a cyclical, businesses that are very part of a growth in a cyclical economy, like there’s a tremendous opportunity right now where if there’s an expansion in consumer spending or business, almost, these are so interchangeable at some point, unless you’re buying like large steel grids or like big battleships or something, but most consumers aren’t buying those things. But by and large, even on the volumetric level, things really start to increase. And if people are buying more razors in the coming year, or a little bit more deodorant or things that we think of that just don’t seem cyclical, in every single recession and recovery we find that volumetrically, consumer package goods do increase in sales.
Even things like that we think of as very required for life, like prescription drugs and stuff like that, in recoveries those script writings and things go up. That’s due to our health care costs and those other elements. People buy more food. Where are we in that where your brand has maintained and existed for a while, but how, what is your opportunity to grow and where is it? Is it volumetrically, making sure that your current customers are consuming more, or trying to push product more? Or is it grabbing new audiences? And maybe that’s where we should focus, is where is that distinction? Because I think we learned from this last recession volumetrics have very, a limit. There’s a ceiling to how much will consume with no matter what it is. But new audiences, introducing yourself to new people, introducing your good or service into a new occasion or a new use or something. I think that those are very good ways to get more, a larger customer base.
BRIAN: So talk about that a little bit more. I mean, this is much more your domain than mine. What are some examples that we’ve seen, maybe in the past or that are even emerging today that we can kind of use to ground this a little bit?
DAVE: I think the earliest example of this in the modern economy is going to be a dumb example, but it’s the rise of the personal computer, where it was a business utility, or people were starting to use it at home as a business utility, it became kind of more of an entertainment center. Then it became just something that’s essential for people to live. That is a very good product pathway expansion of things. Now, obviously a computer is like a data utility. It is ultimately very transformable in what it can do. It’s got a wide variety of things. But throughout the 80’s, 90’s and the earlier part of the 2000’s, this was just a continual expansion as we learned to put the computer into other niches. There was a tremendous amount of people at play in that and a tremendous amount of growth of the internet economy and things like that.
But I think that that’s the pathway. And so you look for other companies that have done that type of expansion with their product. It’s really difficult for people to get used to using a product in one way, but then starting to use it in a different way on different occasions. That’s a very tough sell. The good sell that I’ve seen probably in the last 15 years, as an industry, has been champagne. Because champagne used to be a very high end, celebratory event, something that was around a graduation or a new job or winning the World Series, you know? I’d say car racing, but don’t they drink milk? Isn’t that the thing they do? It just, and I think it had kind of a high falutin sensibility to it. What you’ve seen over the last 15 years is not that champagne has lost that, they haven’t lost that celebratory, very oh my God, break out the champagne kind of feel, it hasn’t gone down market but it’s expanded. And that’s what’s really interesting, is that champagne is now much more utilized at brunch with mimosas and blinis and things like that.
And it’s also just something you can order now maybe in, obviously not like the biker bar, that would get weird looks, but you know, a lot of more high end cocktail bars, things like that. It’s not insane to conceive of a world where at concerts or even those really, not my style, not for me, but those kind of higher end bowling alleys or something like that that they would serve champagne. It’s not totally off brand anymore. And I think that that’s a good example of expansion of a product that is basically a single use. Because you can only use, unlike the computer, champagne is something that you can only use in one way. You drink it, right? And you drink it with friends and family and stuff like that, hopefully. And that’s a single use, but it’s expanded its events, it’s expanded those spaces that it can be in, without losing its original appeal.
BRIAN: Hm. I think that’s a very good example. Is there anything that kind of sticks out that may follow a similar pattern, maybe a different pattern? I mean, the thing that popped into my head while you were talking about champagne, maybe coming from the other end of the spectrum, is craft beer. And you know, also the micro-distilling movement that has been happening the last four or five years. I think they finally deregulated some of the regulations on distilling. And is there going to be a big push in that category? I mean, they’ve been growing with really no help from the economy fairly rapidly, both of those sectors. Obviously, craft beer is a little bit ahead of micro-distilling. But could that be something that really just benefits from a tremendous boom as the economy turns around and people have a little bit more disposable income?
DAVE: I think so. I think that this is where we’re edging, is to a separate and distinct conversation, which is about the distribution methods. Where we’ve got some ease around some regulatory things and distribution becomes easier, and we’ve got some quality controls in place, I think that the major disruptive things that we’ve seen in the economy are a pale comparison to what is going to happen. Because it’s certainly not going to put any major stresses on corporations and branding and especially large conglomerates and things like that. But there probably is more of a realistic opportunity to get your product out that you, as a small, one single person operation or a small team, are making, be it craft beer or handmade products, furniture, those type of things, because there’s the ability to use things like Handmade with Amazon, there’s the ability to use Etsy, there’s the ability to distribute in a wider sense than ever before. And those really do open up a big opportunity for people. I guess this is an element of the sharing economy, maybe in a way, where it’s just like your passion can actually kind of, in some way, become a profit center. Whereas twenty years ago, it was a hobby, and it was like a money sink. You weren’t going to get anything out of it. I don’t think you’re going to break even in most cases, but for the few that do, they’ll probably start to do very well. For the few that don’t, at least you’re entering into more of a space where it’s like, I’m not just foisting my, you know, homemade brew on somebody now. Like now maybe the local bar will pick it up. Maybe different things are going to happen.
And in a fairer marketplace, people being able to choose that taste and get that taste and being very discerning about it, you know, that is something more specific where more and more and more, like I personally get annoyed when I go to a bar or something and they only have IPA’s or light beers or something like that. And there’s not much on the other end of the register. And I get that they’re going to where things are selling the most, but I think that that’s going to start to lose some steam over time. And it does open up the ability for craft beer, for more of the distributor network to get to a broader base of very localized stuff. Because that’s really what you want, you know? Like Dyckman Beer. The new guy, Dyckman Brewery, has started to expand really just around Dyckman Street in New York City. And they’re starting to get into Brooklyn now, but it was basically Upper Manhattan for quite a few years. And that, I think, is an interesting way that, given the legal requirements, given where we were even fifteen years ago, I just don’t think you could do it. I mean, there’s always the guys in the garage story, but I mean, let’s be honest. Since the 70’s, the guys in the garage story has been about digital, it’s been about computing, it’s been about that kind of stuff. Nobody’s been rebranding and building food and CPG and all these types of empires, but that’s what we’re seeing in the last few years. Because you see Five Dollar Shave Club, or is it Dollar Shave Club?
BRIAN: Dollar Shave Club.
DAVE: And then you see things like where we are with even things like old choice is trying to ride that trend of feeling like authentic within CPG and stuff like that. But within food, I think you’re seeing a lot of things that are specific to one area or specific to a certain taste, and that that’s what people like. And they don’t have to compromise about that anymore. That opens up a great opportunity where there’s just not enough agility within big corporations to adapt to that quickly.
BRIAN: You know, it’s interesting, you kind of arrived at a similar place to what I was thinking as you were talking earlier in the conversation. I think it does tie back to the rebound in the economy and the lengthening of the recession cycle that we’ve seen over the last couple recessions. I think specifically, what I’ve anecdotally observed, is really that the recession was so long that, and unemployment so high for such a long period of time, I think people just got frustrated, and said OK, if this is going to be the new way that the world is going to work, I’m going to take my fate into my own hands and I’m going to go out and pursue my passion. This is the perfect opportunity. And I think as the economy has gotten better, people had already developed the skillset to kind of be more independent and not as reliant on the jobs that they used to have, and more entrepreneurial. And I think that’s potentially part of what we’re seeing in this whole craft beer movement, the local food movement, all these unique things that have come out of people pursuing their passions in a down economy.
DAVE: And the way to tie this together is that I’m not sure, and look, I don’t have a degree in economics. You don’t, right?
BRIAN: No, absolutely not.
DAVE: OK. We should probably get somebody who knows what they’re talking about.
BRIAN: Yeah, that would be nice.
DAVE: But I’m not sure that when we look at things, like we started talking about this with full employment and those things, I’m not sure if all this registers there. Like I’m not sure if you selling beer at a very small, local level, or selling stuff on Etsy or making furniture or those type of elements, I’m not sure if that registers in how we measure the economy right now, in terms of gross domestic product, in taxation, that’s not the concern. But it’s much more about how do we define a job? You know? Like if somebody, if we say that employment, unemployment is below 5 percent, and it’s been below it for about two months now, what does that mean? Does that mean that you’re a W-2 employee? Does that mean 1099? Does, where do you account for these things where this kind of merging over into that passion and that kind of almost, it’s not a barter economy but it is, it is some kind of sharing economy equivalent?
BRIAN: Well, I think the direction that we’re heading, kind of at a super high level, is that you can use your skills where they’re most useful, is kind of the direction that we’re heading. So you see a huge uptick in the number of freelancers that are saying OK, I’m going to do five hours a week for this company, twenty hours a week for this company, three hours a week for that company.
DAVE: So where I think we should loop this back around is thinking in terms of how do companies start to really differentiate? How do they get ahead in the growing economy that’s also becoming more of a, I hate the word, but more of a sharing economy, more of a passion based economy where people have much more distinct tastes? What do you do as a brand? And we’ll loop it back. Like let’s just have a conversation where is the idea better to make, try to increase your volume?
BRIAN: Well, let’s take it back to craft beer, right? So craft beer is a growing segment. Are they hitting people who weren’t drinking beer at all? Or are they taking audience away from the big breweries? And if so, how would a big brewery respond to that?
DAVE: Really, I think what it is, is within a specific craft brewer, right now you’ve got a core customer base. There’s a very good opportunity over the next year to expand that base. Or, just keep to your base, keep to your absolute purists, and make sure that they’re buying more. To me, it’s not, it’s not, you’re not competing with SAB Miller. I don’t think that you’re competing against Anheuser Busch. It’s much more about smaller local distribution, about how to get that out. And I think for bigger brands, as well. Like let’s jump off of this for a second and go to like mobile operating systems or to search engines for a second. You know, Google is very dominant in both of those places. But as we start to change right now, like Windows, and I know this seems absolutely counter-intuitive, actually has a good opportunity to start eating into some of that growth, because without having to always just go back to the existing Microsoft Windows phone users, because there’s like nine of them, but the reality is that there’s a good opportunity for them to roll out a product, to get people used to things, to fall back into those traditional roles about how people are using things, and really start in this moment to try to grab while people are willing to experiment with something that’s new, while demanding a lot of things that they really need.
That’s a good growth opportunity. It’s whether they can capitalize on it or not, because I think Windows having an incredibly implementation, especially with the Office Suite, would think that we only have to turn to those people, like this is our base. When realistically, there’s no reason that that has to be like that. You could expand to people who are currently using Android and never had Microsoft Office Suite. Let’s say somewhere in the developing world, like in Brazil or Argentina or South Africa or something like that. In a global scale, those corporations are dealing with customers who do not have long form experience with any product line, and now is the time to grab them. In a new way, here where it’s a pretty established market and there’s not a lot of new, lot of new things happening, I think that there’s an opportunity to winnow in on behavior that’s already done. Let’s say beer drinkers. I don’t think craft beer is going to do a good job of kind of expanding to Mormons and people who just traditionally do not drink at all, teetotalers. But within people who go out to bars and things like that, it’s about not introducing a new product but changing taste. And that’s a difficult thing to do, but I think that there’s an overall element in it which is, we are doing exactly what you need. This is what you want. We have built our company to cater just to you. And I think that that’s a really good interplay for us to look at. Because if you can nail that, if you can nail the ability to actually make products that people care about a lot and have high opinions about, and this really is where marketing works, making people feel that it is made just for them, with them in mind.
That’s the entire goal of marketing, that’s the entire goal of most companies.
BRIAN: You know, it’s pretty incredible, as you talk about some of this, I’m thinking of Sam Adams, right, who has grown well beyond the scale of craft brewing. And you’re going to look up some statistics here for me as you always do, I appreciate that. There is an official limit on the amount of beer that you can brew to still be considered a craft brewery, and Sam Adams is just so far beyond that. But at the same time, they have maintained that feel, as a brand, that they are doing something just for you, and that they are a local brewery even though they’re huge. Annual production of 6 million barrels of beer or less is a craft brewer. Now that is very small.
DAVE: Yeah. I mean, that’s very large, 6 million barrels.
BRIAN: That’s what I meant, large. But it’s only 3 percent of beer sales.
DAVE: Yeah, that’s pretty remarkable.
BRIAN: What’s Sam Adams at in barrels?
DAVE: Wow, they’re still a craft brewery.
BRIAN: Are they?
DAVE: Yeah, production output is 4.1 million U.S. beer barrels.
BRIAN: OK, well I was totally wrong.
DAVE: No, they do a lot of advertising. Their revenue is almost $800 million, and that’s just FY 13, which is the most recently available information.
The Miller Coors brewery in Albany, just that one brewery, brews 10 million barrels of beer a year. And that’s owned by SAB Miller, which would have a conglomerate of, it’s not countless, but I would estimate that it’s almost a hundred breweries worldwide, if not more. I’m trying to be conservative about that.
DAVE: But so let’s not get distracted from the point and go back to the craft beers.
BRIAN: Yes. Full employment coming out of the recession and the effect that that’s going to have on different sectors and different businesses, kind of tying it back to Dave’s analysis or anecdotal analysis of champagne and how that volumetrically reached a different audience to increase its reach.
DAVE: I think that there’s been a lot of things as well that we’ve seen in the expansion of, I think that men’s fashion has gotten to a place where it’s kind of a requirement that you have more than one belt. You know, you need different color belts, you need them for different occasions, things like that. That’s another area where I think without become totally down market, that they’ve also done a good job of expanding what the men’s requirements are. You look at things like body wash and stuff like that, where it’s more focused to a men’s market now, that’s one where it’s not a direct expansion of taste, but it’s an expansion of, it’s a change in behavior. And that I think is a good one to stick with. When you look at things like tools, I think tools are really interesting. You see it more and more that they’re trying to expand who tools are for to a broader and broader market. Like Prosumer Tools, high end stuff like hammering drills and stuff like that.
Like these are not things that you necessarily need on a day to day basis living in a house or owning, being a homeowner, but you see more and more expansion of Prosumer tools into a broader way of people. So it’s not just these specialists who are carpenters or anything like that, it’s becoming about that if you’re a homeowner, you kind of need this stuff. Right? Like this is a requirement for you to survive as a homeowner. Now it’s getting into, you know, as a renter, you need this stuff because you’re going to move around a lot and this stuff is going to help you get the job done quicker. And then I think that they’ve started to, this will take a lot longer culturally speaking, but if you look at some of the tool ads recently, fifteen years ago those ads always had men in them.
We’re in a phase where it’s not female geared marketing for the tools, but it is about the tool itself. So we’re in a transition phase from being focused on just men to focusing on just the tools, where I think the outcome of it, the outgrowth in ten years or so is going to be that you can show men or women using these tools. And I think that’s a long form thing that they’re going to, to expand to other markets. Not markets, to expand to other types of consumers. They’re moving away from a purely consumer model, I’m sorry, purely B2B model into just a broader consumer model. I think those are maybe the three that I’d stick with now.
BRIAN: Cool. Another thought that I had was just companies like The Art of Shaving, is something, that’s a brand that’s been around since 1996. But correct me if I’m wrong, I feel has picked up dramatically during this recession period as an inexpensive, you know, it’s expensive for shaving, but an inexpensive way to indulge yourself. How do you think those types of brands are going to fare as the economy bounces back?
DAVE: I think the real thing that we’re seeing with The Art of Shaving and a lot of other things is that it’s an expansion of what guys can do or gifts for guys or what’s acceptable for guys to receive as a gift, or to care for themselves and groom and all that stuff. I think that that’s a big, big, big kind of meta-trend that’s been expanding throughout most of my life. And you know what? Like as negative as we can be about this, that this is just like volumetrics and this is just about sales and who needs this? You know, it’s a good thing, because I worry that there was a time, and I think we’re moving out of it ever so slowly, but we had done a good job with like jeans, which were made for miners in San Francisco, whatever, like isn’t that right? And you know, the denim fabric and stuff like that really, it was distinct in gender roles for a long time with dresses and guys in pants and jeans were for the working class.
And as that expanded, everyone could wear jeans. And it was acceptable to wear it in the workplace, and it was acceptable for men and women to wear it and all those other things. But during that time, there wasn’t any expansion of well, it’s good that it’s equitable and it’s for everyone and things like that. A lot of things that were traditionally male are now for everyone. But what did not happen in concurrence to that is an expansion of things that were traditionally female that are OK for men. And that, I think, is what the Art of Shaving and some of those other trends are with grooming and things are, that it’s more acceptable. I mean, years ago, for my friend, he was getting married and one of his bachelor party presents was we did go to like an Art of Shaving, I’m not sure if it was that, it might have been a local one. But it was, you know, kind of going together and getting the shave and stuff like that.
And you know, it’s a good kind of experience and it’s something more closely aligned to what I think is the mani-pedi for women. I mean, men can have those, too, but you know, I think that those are good things. Because it’s giving guys a bigger, broader place of what masculinity is, and I think that that’s actually servicing a social good, unlike just volumetric sales or anything like that. Serving a social good, and also moving to where society is going, in a growing economy is a very good place to be.
BRIAN: No, it’s a good observation, I think that’s a very good observation. So what about brands like Living Social and Groupon, who correctly moved to where society was going at a time, and now have not moved again and are suffering dramatically? I just saw an article the other day about Living Social’s headcount went from 3,500 two years ago or three years ago, to 800 today. And it’s just like a wasteland. They’re really facing a hard road ahead as the economy improves. Both businesses and consumers alike are kind of down on daily deals. How do they turn that around?
DAVE: I think that, and I’m not putting this on the shoulders of Living Social, I mean I think we’ve seen the Amazon daily deals go away, and Groupon is surviving.
BRIAN: It’s daily deals as a trend I think in general. It’s not any of them individually.
DAVE: But I think there was too broad of an expansion into too many areas. I think travel got tackled by a lot of these guys. We’re looking at the Living Social website right now, and they do talk about travel experiences. It just never got known for that. And it’s odd, as a concept, unless you’re a very specific type of a person that is going to jump on a daily deal that only lasts for 48 hours for a big week of travel. I mean, that requires a certain amount of planning and a lot of contingencies there that does not function in the daily deal. The product level, I think Groupon nailed much better with Groupon Goods, where it does, when I’m looking for something, when I don’t necessarily care precisely what it is, I will kind of say like oh, does Groupon have a version of this? Where they should have stayed more of is those unique experiences, what’s happening with an event, something that’s in your city.
I mean, I used I think it was Groupon earlier this year for my dad’s birthday, because they’re out of Milwaukee, I’m not exactly attuned to everything that’s happening in Milwaukee, but I wanted to give him a different experience. So it was, you know, out at the state fairgrounds, it was, he got to drive like a Ferrari and a Lamborghini for, I don’t know, five laps, which my dad drives pretty fast. So that might have been like a three minute experience for him. But that is a real opening. And there’s no other way for those type of companies that are doing those unique experiential things to kind of get out, unless it is through kind of a Groupon. Or the helicopter rides in New York City, those type of things are really good, or local events.
You know, I remember last year going to, speaking about craft brewing, like a craft beer event up in Westchester County that my friends and I had found out about through a Living Social or Groupon kind of situation. The expansion beyond that was maybe not the best move. And then there were so many players there that it’s really, you’re competing for, let’s go back to this idea of core audience. You’re competing for the exact same core audience of people. That’s not a successful path, because if you got five or six companies that are brutally going after each other to survive in a single marketplace, somebody’s going to lose over time. That’s just inevitable. It was kind of counter, but I don’t know if it was necessarily counter-cyclical, because I don’t know if what the essence of what they were valuing.
BRIAN: I think for the businesses it was. You know? I think that, to me, that’s where they really messed up, was they never, it was never a win win win. It was always a win win lose. Living Social or Groupon wins, the consumer wins, and the businesses lose. If you’re doing a 50 percent off Groupon deal and then Groupon takes half of that, you’re charging 25 percent of your original sticker price for, especially, I think where it does work is for events and things that just kind of it happens, and if it’s not full you lose money on it. But like for a restaurant, you’re losing money on that, right? You have an actual cost associated with the meal that you provide.
DAVE: But I think you’re thinking of it in a structure that’s a little too tight. Because by losing money, we’re not talking about losing money. We’re talking about decreasing margin.
BRIAN: But I think that, I think they were below cost.
DAVE: I think that one of the things we need to address with this is that there are marketing costs to get your name out, and that it was an assumed marketing cost.
BRIAN: But that’s where I think they messed up. I think that was the guise that they were going under, and I think they had good intentions, but I don’t think that that ever happened the way that they hoped it would happen or said it would happen. I think people became loyal to Groupon and Living Social, rather than loyal to the businesses that they bought those Groupons to. So you didn’t become loyal to Joe’s Pizzeria, you were more of a, you know, experiential hopper bouncing around to different things and going from deal to deal, more so than looking for a local place that you were going to stand by for a long time. Anything else about the counter cycle? Because that’s particularly interesting to me. Businesses focused on saving money, cutting costs, that type of thing. How are they going to fare when that becomes less emphasized? You think there’s always a place for that?
DAVE: Yeah, but it has to be built into it’s about dynamic growth. That you can’t be cost cutting just to cut costs. You’ve got to think about this in perspective of being able to, as a company grows, make sure that they’re not expanding into areas that they shouldn’t, that they can cut the fat where necessary. I think what I really like are some of the new payroll companies and some of the new human resources companies to help small companies deal with that.
BRIAN: Who are you thinking of there?
DAVE: So I think what we’re talking about with the expansion is that there’s an interesting opportunity for companies that do help you control some of those costs, that do kind of regiment things, and in many ways are utilized as a cost-cutting measure. For instance, HR or payroll or other PEOs.
BRIAN: PEOs? Is that professional employer organization?
DAVE: And so like some of those companies would be like Namely, or TriNet or Zenefits, Zen Benefits, PEO companies, Paychex, ADP to a smaller extent. But if you can be a partner with somebody as they’re growing, while also being the one that’s more focused on cost cutting. Because I think what’s happening is that the last seven or eight years have been a focus that CEO’s are super important, they’re outsized in their pay and everything that happens, but realistically, day to day decision making, a lot of it was transferred over to the CFO and the COO. And a lot of the other C-suite got devalued. Now this is a return to kind of a traditional vision and that you can go there and that this is a growth market and how do we expand? How do we get the most value out of this time right now? And that requires maybe people with different skills. But it doesn’t necessarily mean that cost-cutting goes away. Cost cutting has to be reframed into more pragmatic or reasonable expansion.
BRIAN: So are we going to see a power shift in the C suite more toward, like you’re saying, the vision and growth opportunities, rather than cost control and streamlining operations?
DAVE: I think we’ve already started to see it. I think that we started to see this with Microsoft, where you’re returning to somebody who has a vision. That is a very large corporation. He’s not a logistics head. He doesn’t come from a very strong operations background. Granted, I think every single human being who has ever worked at Microsoft, including janitors and people handing out flyers probably have an engineering degree. But like when they moved to Satya Nadella as CEO, you started to see a vision kind of go around this. I’m sorry, this seems so weirdly pro-Microsoft right now. But you know, there’s one operating system, it’ll be on X-Box, it’ll be on phones, it’ll be on tablets, it’ll be on computers. It is one operating system that they’re giving out an upgrade for everyone for free for right now in that you can think of a world where it is kind of aspiring to, their big competitor in the marketplace, where it is one unified system. But this is one unified operating system across all devices. That is a titanic shift of a very large tech company, and I think that that’s a return to vision. It wasn’t about, we think this many units of this thing can be sold. It is, because vision means brand. And when you get to brand, that is not something that like COO’s or somebody using an actuarial table or an accountant is going to be very good at kind of analyzing overall.
BRIAN: Nor do you want them to be.
DAVE: Right. No, no, I’m not trying to diminish that role. It’s just like vision means brand, and that vision plus culture is your entire organization for a lot of people. Now there’s a lot of functional elements that CEO’s and CFO’s and those people really have to focus on to make sure, because trust me, money and cash is the lifeblood of corporations. Like there’s no way around it. Without that money flowing through, the company dies. So I’m not trying to be too light touch about this, trying to be pragmatic. But that vision was just considered ancillary or too big of a step to take for a lot of companies.
BRIAN: Yeah. So in this power shift, now we talked a little bit about how this down economy affected entrepreneurs and created this whole kind of new breed of people who hadn’t been and now were. How did it affect the CMO? I mean, I think, you know, what you’re talking about here is there’s a major gravitational shift toward the financial aspects of a business. And from what I’ve seen, CMO’s were pulled right along with that, and were kind of forced to become more financially savvy, more data driven.
DAVE: Which is a good thing. I mean, ultimately integrated marketing closer to the actual business unit itself, so it wasn’t just some spacey person talking about this stuff. It’s more grounded in reality. Now you know, fractional attribution and where you want to go with basing modeling, it’s not there yet, we don’t have all the answers. But I like that it’s become more grounded in reality. I think that that’s always a benefit. And I think that that’s due to the economy. It’s also due to different measurement systems, different metrics, different ways that we can calculate this stuff. Television is a great way to advertise with awareness, and we can see that on back end modelings and stuff like that. But it’s ultimately, like we don’t know how many people are watching television at a given moment. We’ve got a lot of ways to calculate it, you know. There’s been things with radio with Arbitron and Nielsen and there’s lots of different ways that we can calculate how many people are watching television at a given time.
But we don’t necessarily really know, especially over the air broadcasts. And even cable boxes aren’t always as refined enough in cable systems to track exactly what shows are being watched. So you know, the diary systems and stuff like that are still utilized. That’s a world where you don’t have hard metrics to define what you’re doing. Print is largely the same way. We can look at circulation levels, but you don’t necessarily know if somebody saw an ad. We’re moving to a true view place in digital. In television, it’s television viewing is becoming much more about something that’s happening on your set top box.
Time shifted viewing, DVR which they can track, things like Hulu, Netflix, Amazon, HBO, everything moving over to be something that is more trackable and definable and discernable. Like that is a very good movement for marketing. It roots marketing back into the rest of the C suite where we talk about numbers, but there’s the element of brand and of vision. And I think that if you had to parse out where things are in an ideal state, you’ve got a CFO and a COO on one side of the table and a CEO and a CMO on the other side. And there’s going to be other people in that C suite, but I think that those are kind of the two defined camps. It’s not that they’re against each other, it’s just that one has to consider vision and one has to consider on the ground pragmatic realities a little bit more. So that’s where I think we’re going back into the vision and brand world. Which is, to tie everything up, like that’s the great thing about right now. Because this is the major push to expand your brand.
BRIAN: And now CMO’s are armed with a set of tools that they didn’t necessarily have before, and also have a higher degree of credibility in the C suite. You know, it’s interesting, as you’re describing this new CMO, it almost seems like, well, it sounds a lot like a CEO, right? And I mean, is the CMO the new path to CEO?
DAVE: Oh gosh. Maybe. Like, it seems reasonable, right? And it seems, you’ve got to have a lot of skills to be in any of these positions.
BRIAN: Of course.
DAVE: But I think that we’re seeing some major brands right now start to gravitate towards that a little bit more. I think where we are, like with American Express, that they have such an emphasis on brand and such an emphasis on vision about what it means. Obviously, they’ve got an extremely elaborate metrics framework for ROI and where they are with their marketing budget, but it is a large budget for big of the company they are, and they do a good job with it. You move to companies that just aren’t doing such a great job, there’s a lot of background in like people having an extensive background in supply chain management or those type of things, and that’s just right now, as we are entering 2016, that is not the most useful skillset. It was in 2008. Right now it’s just not. And I think as time moves forward, which is the weirdest way to ever say that, but I think we’ve got quite a few years where there’s going to be an emphasis on that broader, holistic vision on the end consumer versus on what’s on your shelves in the back end. Because that was important during a scathingly bad recession, but now it’s about the end consumer. And I think we’re going to sit there for ten, twelve years.
BRIAN: And the brands that are going to fall by the wayside are the ones that are stuck in that mindset of supply chain, not that it’s not important, but if you can’t integrate that and move beyond that, it’s the next level that’s going to be tough.
DAVE: Right. And I mean, I think we should table this, but it goes back to some of our original presentations where it’s like Walmart is making a lot of money right now. We should not be going after Walmart for anything that they’re doing wrong, but it’s a supply chain management perspective. And it’s limiting giving consumers, think of Walmart when they only want to go with a low cost option. When they need something to be extremely cost efficient. We’re reaching the end of the efficiencies that we’re going to gain from supply chain management. It’s been a forty year process. Maybe it will go on for another forty years, but it’s not going to have the big gains that we saw.
BRIAN: Diminishing returns.
DAVE: Yeah. And we’re reaching a new level of beginning about customer, like customization, a real focus on user experience, on one to one marketing, a one to one understanding with your CRN. That’s, we’re only beginning that.
BRIAN: Well, I think the interesting thing about the phase that we’re entering is that we’re going from art to science. And we’ve operated intuitively in marketing for so long, and I think that’s partly why marketers tend to sometimes get a bad rap, is oh, I just have a hunch and go that way. But now it’s becoming this hunch that’s backed by data and validated by data, which is what I think makes it so interesting right now.
DAVE: But I think marketers get a bad rap because it seems a little flimsy. Also because they annoy people, like there’s so many annoying ads on the planet. But if we’re moving into a world where the ads I see are relevant to what I need in my life at that moment, or just from an element of like commissioned art or something like that, they enhance my life and therefore I remember that a brand did a good job enhancing my life somehow, that’s valuable. So it’s so good that we’re at the end of useless and crappy marketing. And if you’re going to survive in this world, you’re going to know your customer, you’re going to have a refined supply chain, and all that’s going to be done. And now it’s how do we interact with them? And that’s til we retire. That is literally what we’ll be thinking about. How do we interact with them in the best way possible? Because people demand a lot of things, they want us to know things that are pretty complicated to know, and all of it is about that they have a certain experience and they have a certain need and we need to be there facilitating it and making products that are made for them. So it’s a wider product line, and that’s OK. Like everyone doesn’t have to have the same taste about beer or, I don’t know what you’d use Living Social for, but you know, like or shaving or things like that. It’s about the bespoke element of mass production is now possible, and that is the future.
BRIAN: That’s the end, yeah. That was great. Well, thanks Dave. I appreciate you talking about this with me. I know we promised some other topics, but we got deeper into this one and I’m happy we did.
DAVE: So thank you, Brian. I enjoyed doing this podcast, I really did.
BRIAN: Yeah, me too.
DAVE: Well, that’s Air Quotes. Thanks everybody for listening. If you made it this far, raspberry zebra.