AdAge and The Decline In Car Driving Among The Young The advertising industry’s most important publication, Ad Age, recently posted an article entitled “Is Digital Revolution Driving Decline in U.S. Car Culture?” wherein the author describes the decline in driving among the young, and the readership leaves comment after comment positing reasons for the change, most of which belie political sentiments. This kind of economic commentary can be found daily on any economics blog. And it’s fascinating to see the difference between the interpretations of different subcultures of the same data. Economists make fewer errors in their reasoning. Reporters try to create sensationalism and readership by appealing to the common errors that people tend to make, most importantly the error of confirmation bias : seeking what you agree with and ignoring what you don’t. Humans demonstrate a cognitive bias wherein they overestimate their own ‘normalcy’, or how likely people are to think like them. This is particularly true of people in the agency business for a variety of reasons – and thinking otherwise might not necessarily be beneficial to one’s career in the agency business. This business is a ‘magnet’ for group-thinkers, because the profession requires that you think about ‘groups’ for a living. THE REALITIES OF CITIES Most people in history were confined to 20 mile arduous around their home. Cities are, and always have been, notoriously dirty and noisy, often crime ridden, and push people into small spaces from which they desire ‘vacations’. (The Un-Heavenly City by Banfield.) In a recent conversation I had with a Chinese intellectual I was surprised at how little he understood the ‘toxicity’ of human beings living in density. It’s hard on them. (Selection in urban environments comes from disease resistance. – Plagues and Peoples by McNeil) People like density because it decreases opportunity costs – everything is close-by and because it’s dense, businesses and services are better capitalized and better funded because they have a higher opportunity of being funded – as long as they don’t require much space, or as long as what they sell is expensive enough to pay the cost of that density. But because of the expense of that proximity, raising children is for the poor who have no other choice but to live in kennels where the cost per human is low, and the wealthy who can afford to make the choice, not the middle class, who must live elsewhere. Therefore, Cars and Suburbia Are Synonymous. Because costs of a the quality of residences decrease with distance from urban centers, allowing more space at lower cost. Most urban downtown cores are surrounded by slums. Paris, Vienna, NY, Chicago and most impressively LA. Most dense urban areas outside of the west are almost entirely slums. London seems to have done a better job of controlling it’s development than most other cities. The reason for this is simply a tragedy of the commons that occurs when people move into very high density. It’s fixable with serious political effort, but there is a high cost of projecting that effort. WHY PEOPLE DRIVE CARS People drive cars because 1) Increasing opportunities for experience (we all this ‘the sense of freedom’) 2) Increased opportunities for mating outside of one’s group (this is obvious) 3) Permitting distance between home and job once jobs industrialized 4) Permitting the easy transpiration of ‘stuff’ to one’s residence 5) Ease of childrearing, especially once women enter the work force. 6) Increasing Leisure Time not spent traveling. 7) Status – because status will always be with us, because it determines access to mates, jobs, opportunities, knowledge and experiences, and because people are imitative and need a way of knowing what to imitate in order to get attention, opportunities, and mates. CHANGES IN DRIVING BEHAVIOR The actual reasons for the shift In Driving: 1) Cheap credit inflated residential prices, mortgages and rents. Wages were stickier, so young people whose primary social function is mate-seeking chose urban locations in exchange for car ownership and geographic freedom. This phenomenon will change once they find mates and seek suburban life for their children, as well as increase their household incomes by marring. So in other words, preferences will not change, just demographic distributions. (Just like political preferences.) 2) Unemployment over the past two years has decreased the tolerance for high fixed costs and younger people are abandoning or delaying the luxury of driving. They are just delaying it, and will reverse it when possible. 3) It’s a lot less ‘boring’ to stay at home when you have so many forms of entertainment available. 4) People live in increasing density, so that the need to travel in order to ‘sample’ enough people to identify friends and potential mates is lower, and to some degree is simply easier on the web. 5) Increased Populations Of Immigrant Urban Poor and their children who are most likely to consume public services, and least likely to have risk capital available for automobiles. These aren’t in any order, but I’ll leave it to the reader to determine the impact of adding 30M people over a 20 year period. PUBLIC TRANSPORTATION Public transportation has a statistically insignificant to statistically minor impact on commuting everywhere except New York City. In fact, NYC is so dominant, that it skews the entire country. If you remove NYC from the analysis then the dominance of car culture is obvious. By contrast, many rail systems (Portland Oregon for example) are catastrophic losses, and suffer from insufficient ridership to cover the costs. In europe people do not own homes, they rent and save. National cultures are also more homogenous. People are gregarious in homogenous societies and isolationist in heterogeneous societies. Contrary to what is commonly believed. Diversity decreases willingness for public investment. Everywhere. in general, if a people can afford the independence of a car, in any culture, they adopt it. That is what the statistics illustrate, and there is no evidence that that preference will change unless the cost of urban homes decreases per square foot and the cost of personal transpiration increases dramatically. Why? Because at any point, either TIME or MONEY is more important. At the point where time is more scarce than money, a car becomes your preferred method of transport. At the point where you have a family and must transport them, and STUFF a car becomes your preferred method of transport. No matter what your income bracket. People do not change their lifestyle, political or class biases, except that they become more conservative as they age. There is no shift going on that is not purely economic and demographic in origins. Agencies who are supposed to promote goods and services can only create loyalty inducing narratives for people if they understand why people make decisions. And bringing your biases to the table only makes it increasingly difficult to create messages and campaigns that resonate with consumers – because consumers increasingly resonate with the truth. Good advertising is the truth spoken succinctly and creatively.
Category: Business, Organization, and Management
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You Do Not Engineer A Company. You Grow It.
This is a response to an article posted on An Entrepreneurial Mind. In that post the author, Dr Cornwall recommneds writeing a business plan. And the steps for doing so. And I’m of the opinion that that’s just silly. A plan is a tool for managing weak leaders. A plan is what oyu write when you have given control to investors. A plan is what you write so that a leader who lacks knowelgde, understanding and vision can give his consent. A plan is the myth that teachers instill in students as a substitute for the act of critical analysis. I write a plan every six months. It’s detailed deep and critical. From it I extract goals, an ignore the plan. Goals are just longer term opportunities that we work to exploit. They are rarely and end unto themselves. There is no end of history. And there is no end of business.
You can’t engineer your company any longer. The reasons are complex, but they have a lot to do with the availability of capital. There is more of it. Raising money today, even in this environment, is very different from the 1980’s. Because of this, no one writes a business plan any longer. At least, It’s a sign of naivety in the business community. They are an artifact of the era of post war engineering. A myth held by the young and inexperienced. A device used to provide false confidence to failing management. A plan is what you write when you think you know something but don’t, and often cant. The truth is, that the reason young people don’t like to write business plans is because they don’t have the knowledge to. A business plan is a contract among participants, and it is the wrong type of contract for the wrong type of processes and goals. And entrepreneur who authors a contract does so in order to hand over his sovereignty to someone else. Or he uses it because he lacks the sovereignty to act as an entrepreneur. As such, a business plan is a sign of weakness. Of immaturity. Of lack of sovereignty. It is a contract for a false good. When instead, he should have a list of MBO’s, and a financial model – a set of tools that maintain his sovereignty – his ability to adapt to circumstances. The problem isn’t a plan it’s the research. It’s the knowledge. The problem with planning is that it does not reflect business, and hasn’t in half a century. Napoleon didn’t plan. Napoleon mastered his environment. He read everything he could. He hired spies. Read shipping records. Red mail. Read ship manifests. Read intercepted letters. He collected just about all the information that he could. Then he mobilized his forces to take advantage of opportunities that presented themselves. This is a very different way of looking at business strategy. (See Duggan and Keegan) Collect the information that you need to run your business. all of it. Take advantage of every opportunity. Build an INTELLIGENCE NETWORK first. Intelligence networks allow you to identify and exploit opportunities. How do you build your intelligence network? How will information get to you? What kind of non-quantitative intelligence can you and your people gather. The best sales teams meet weekly and review what they have LEARNED about their target accounts. THis process teaches everyone. The CEO should collect that information. But this is also true of marketing, of vendors, of distributors of partners, of the government. It is a vast information problem. I tend to ignore what competitors are doing except when directly competing with them. It is far easier for your staff to pay attention to competitors than it is for them to pay attention to consumers. But systematically collecting customer and consumer information is priceless. The best opportunities are those where someone larger than you are needs something that they cannot achieve for bureaucratic reasons. In those cases you build a company to sell to someone larger. I always start a company with a list of companies I would like to sell it to. The next best opportunities are those where the existing people in an industry are enamored of their value chain, and you can innovate and take their business because of it. THe next best opportunities are those where you can collect either better talent, or better capital than competitors. In most cases, it is easier to steal talent from a bigger and stronger competitor if you have ‘seats at the table’ in your company available. The next best opportunities are those where you have a technological innovation that you can put to practice and patent. This is far harder than it would seem. The next best is where you arbitrage rather than create value: where you have lower costs. This is almost always a bridge strategy. Lower costs are not a sustainable market position. They simply assist in some other market position. Many people are trapped in being small because their only advantage is low cost. Low cost usually means low talent, and talent is what makes your business competitive. It is better to look for increased value and higher cost that people are willing to pay for. Write short definition of a one-year success criteria. If you made these things happen your first year, then would you be successful? Do this every year. I do mine every six months. I hang them on the wall behind my office door. Plans that are longer than that are questionable. Goals may be valuable. Plans are not. Largely, size, number of employees, number of customers, amount of revenue is all good. The rest is just self aggrandizement. Write a one page description of your product, products, or services. If you cannot sell it in one page, then you cannot sell it. Get market research on every competitor, large and small. Take greater interest in why people failed than in why people succeeded in your industry. Most of the time it’s simply tactical. Make a list of all your customers that you can think of. try to understand why they make a purchasing decision. It is very often not intuitive. It is often counter to the reasons you think your product or service has value. One man tried to sell a software system to a bank. But it would have eliminated the department. The VP would ave no one to manage. He poisoned the sale. People in bureaucracies are not entrepreneurs. You have to create a value proposition that appeals to them. Map our your supply chain. Who will you need things from? Why will they give you attention? What will it cost to maintain them? Map out your distribution chain. Who will you distribute your goods and services through? will you rely on yourself alone? a large sales org? channel partners? Alliances are almost universally meaningless. they are a waste of time. Create a very complex, detailed operational spreadsheet. It should be as close to an accurate version of your chart of accounts, balance sheet, income statement, and all costs and cash flows as is possible. Be paranoid and conservative. Mine are usually good enough to run the business on, and I mandate that accounting systems and management reports mimic them. Usually 10-15 pages of spreadsheets. Create a list of the people you know of or think that you can recruit into your organization who will put extraordinary effort into the business. I have started eight companies and I care more about my people than I do about any other factor. good people make a business. Start recruiting them. If you cannot interest them, then you are not going to interest a customer, banker or investor. It takes nine months to do anything. Make a baby. Forget a bad memory. Lose confidence in a market. Develop new relationships where trust is involved. Work for 9 months testing your theory and trying to prove out your ideas. To do that you need nine months of money. During this time take advantage of every opportunity that you can as long as it either gives you cash to fund your business, or it advances your relationships, customers and employees. Write a ‘Book’, for investors on how you expect to use your business to make them money. They do not care about your idea. They care wether you sound like you know what you’re talking about, whether you and your team have experience, and whether you have any ‘advantages’ that they can understand. WHile investors claim knowledge, most of them are in their jobs not because of business experience but because of relationships and luck. Your job is to make them feel comfortable that you are going to make them money. Emphasize that you have an ‘in’, like a major customer, a larger company that you provide a service for or an off-book-r&D effort you’re going to speculate on. And be willing to fail. It is far harder to be an entrepreneur than to work for someone else. You work far harder for less money but more joy and more control over your life. Entrepreneurship is a lottery. You can win. But you have to understand that luck is a very important factor in your success, because you cannot know enough going in to be sure you will succeed. In general, plans are silly. Goals and models are not. Make a model. Revise it constantly based on new knowledge. Stick to nothing. The purpose of goals is simply to provide yourself with decision making criteria when there are many decisions to be made and most of them seem ambiguous. A plan commits you to something and forces you to organize your business rigidly. A business does not execute a plan. It is a large number of people who identify create and exploit opportunities. Your job is to fund an intelligence network that will give you the largest number of opportunities that you can continuously reorganize your company to exploit. And continuous reorganization is far harder than most people think. but it is far more durable. GIve your people six month MBO’s. Even quarterly. Yearly for very top people. Realize that you must learn and that the only way to know anything is by experience. Entrepreneurship cannot be taught. It can only be learned. Because you must learn to run a business in real time. Education can simply give you the tools. But you can sit and ponder things during your education that must be made at risk and peril in real life. If you are craftsman, you ply your trade. You seek opportunities. You learn your skill well enough to compete. If you get to be an entrepreneur, you will have sacrificed all your time, all your thoughts, and devoted more of your life than common people to your job and will become effectively a machine that takes in information compares it against a model and decides if it can be used to achieve goals. The more information you have, the earlier, the more opportunity you can wring for your business. If successful, at some point you will hand over this duty to someone else, who will, not as well as you, do the same opportunity sifting. You will instead, move to longer term opportunities, like relationship and capital management. This is when you get to take your rewards. Whether you get there or not depends on whether you are enough of a mentor and teacher so that your job can be done well enough by others while still paying you well enough that you can afford to compensate someone talented enough. There are a lot of hard working ceo’s that can’t grow their companies. The reason is that they are not paternal enough. They are working a job rather than raising a family. They try to add value by doing something themselves – which is a convenient distraction from building your business. Execution is a staff function, not an entrepreneurial one. Instead, if you’re doing hard work, you should only do it long enough to understand it well enough so that you can intelligently hire someone to do that job, so that you can move onto the next opportunity that needs creating or exploiting. Working hard is good as long as you’re working on the right things. People need different kinds of fitness. Physical fitness is obvious. Scientific fitness is something else. Oratory fitness something else again. An entrepreneur’s fitness is his ability to create an organization that identifies and exploits opportunities. It’s a knowledge problem. FItness is your ability to process information. To judge people. To make decisions in real time. To make them faster and better than your competitors. Evolve your company. Don’t plan it. Parent and Grow it. Don’t engineer it. If what you mean by planning is modeling then that’s a useful tool that gives you understanding. But if planning is the act of mandating self ignorance so that you do not invest in the act of building an intelligence network that you can exploit for opportunities, then planning is just an excuse to bury your head in the sand, or an admission that you lack the intellect to process the information needed to act as an entrepreneur. Very little than men produce today other than biological research is complex. Almost all business problems are not those of production, but those of opportunity identification and exploitation given the fact that resources and production, like technology itself, a temporary and limited advantage. An entrepreneur is a maker, identifier, calculator and exploiter of opportunities. Everyone else is just a clerk. Curt
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I was very proud of the people in our company today. It’s the best feeling in th
I was very proud of the people in our company today. It’s the best feeling in the world. Great work on great accounts for great clients by great people.
Source date (UTC): 2010-03-18 00:05:00 UTC
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Agency Must Become A Consumer Advocate Rather Than Ally Of ‘The Man’
January 6th, 2010
Throughout history, innovative groups have formed an alliance with ‘The Man’. Bankers have done it forever. In fact, bankers don’t exist where they DON”T ally with ‘The Man’. Capitalists allied with ‘The Man’. They concentrated wealth, by borrowing from bankers to develop ships, machinery, manufacturing, and other increased forms of production. They became ‘The Man’. Entrepreneurs allied with bankers, capitalists and ‘the man’ to distribute goods to the common man, for the first time in history, at such low costs that almost everyone could afford to have more than one pair of clothes for the first time. They became ‘The Man’. Advertisers helped market these goods to consumers, and for 150 years, they helped convert society from religious and nationalistic, to a society of consumers, and urban and suburban tribes. With the advent of technology, Advertising agencies became ‘The Man’. Creatives, who were generally hired craftsmen serving the nobility in most of history, flocked to the movies and advertising, and and allied with ‘The man’. And the demand – the boom – in demand for creatives, allowed the entry of more and more people into the creative industry, albiet, with the acknowledgment that the number of really good creatives, as well as the number of really good academics, or really good high-art artists, seems to remain constant. Like the tech boom, that made room in technology for lots of people who were not that good at it, there was a creative boom. Creatives, allied with ‘The Man’ to take advantage of the increase in available capital that allowed them to experiment with other people’s money.
Now what’s important here is understanding what makes you ‘The Man’. Being ‘The Man’ means that you have control over resources. Kings, thugs, and brigands controlled passes, trade routes, and taxation. Bankers controlled access to money. Capitalists controlled access to production. Entrepreneurs controlled access to goods. Agencies controlled access to media.
The tech boom deflated in just over a year, because it was fueled by speculative capital. The agency boom deflated along with the population that concentrated capital. concentrated production. Concentrated distribution. concentrated media. It deflated at the same rate the demographics deflated, and at the rate the mythos deflated that was held by that population.
There is no concentrated population now. That’s the important message. It’s not a moral message. It’s simply a
There is no concentrated common-aspiration, like the american dream. Instead we have tribes with little status identities.
There is no concentrated access to media now. Instead we have more media than we have content that people desire. We have a shortage of mythic content to feed identities and tribes with to replace traditional, and postwar, and consumer, and american dream mythologies.
There isn’t any concentrated culture any longer. There isn’t any concentrated trade route any longer. There is no ‘Man’ to ally with. There is no general consumer mythos to exploit. And the disappearing boom
There isn’t the problem of getting attention for a product, using a frame of reference like a mythos, so much as the problem of understanding some tribe’s mythos and figuring out how to insert your frame of reference into their mythos.
A long time ago, there were castles on passes. Because the government was formed by brigands charging taxes, or protection racket fees, for people to take goods and services through a geography to reach markets. There are no media-channel protection rackets any longer. Just markets. There is no tax to levy on reaching those markets, that will fund ‘The Man’. The Agency Man.
We have no ‘The Man’ any longer. We have only these small tribes of consumers who have rejected The Man, in all his forms, because he doesn’t need him. He doesn’t need The Man. and he doesn’t need the stories that Creatives have written to serve The Man, to enter into, and he doesn’t want them either. He has his stories. He has his suite of tribal myths. He sees them as his property. He sees them as his identity. And he acts as if these myths are his identity and property. And by acting as if they are real, he makes these abstractions real things. He sees society through the lens of his identity and his myths, and judges his success at finding his place in society by using them – he has nothing else to go by. He obtains his status from using those myths, not from myths created by agencies and creatives on behalf of ‘The Man’.
The Man concentrated people for us. That’s what The Man has always done. We made popular messages for distribution on The Man’s distribution channels. We served ‘The Man’.
Our job is not to ally with The Man, and claim it’s our talent that made a difference rather than his control over passes and people because of it. Our job is to build relationships between brands and tribes. To find out who is passionate and motivate them to create status symbols from our products if possible. If that is not possible, then to create lower status reasons for social interactions. And if that is not possible the to create simple utility.
Advertising, is, and will always be, part of this process. But advertising is no longer the process of concentration people and their purchasing power using available myths and demographics. It is the process of separation and service of identities. Advertising can’t easily inspire any longer on it’s own. It isn’t intimate or meaningful enough. It can legitimize a message. It can tie messages together. It can create awareness, but not change consumer behavior, unless you apply an awful lot of money to the problem.
While vast consumer brands appealing to the low end of the market, will always need to create myths of consumer homogeneity, those myths are limited in their ability to compel consumers to aspiration rather than to the ideas of suffrage, or sarcasm or nihilism. These are negative identities. And a brand who crates homogenity is like a politician who advocates fear: it works in the short term, but it doesn’t make people love you and stick with you. And it doesn’t make them respect or trust you.
Aspirational brands must create niche appeal, with increasingly tribal identities, in order to seem sincere, and in order to make the consumer feel passionate enough to appeal to a brand whose marginal difference in utility is extremely limited if not entirely aesthetic.
Yes, those large retailers will control distribution, because of the capital that they concentrate with the use of debt – debt that they may have a hard time getting ahold of now. But brands must exist within those retail identity myths. And the retailer, like a government, will allow only so much difference between one brand and another – they don’t want intra class conflicts. So they are a resister to excellence.
But our clients, and our brands need to understand that there is no concentration of identity or mythos, or channel which we can exploit.
Creatives no longer can ally with the man. They have to ally with the consumer, and use the man for the consumer’s benefit.
In a world where there is no concentration, no homogeneity, we have succeeded in building the consumer society. There is no real scarcity. We are not afraid of running out of rice and beans, or laundry detergent for that matter. We are only afraid of being lost in society because we cannot judge our status in it – our success or failure in it, our mating ritual in it, without identities and myths that help us do so.
The consumer is The Man.
from: www.puretheoryofmarketing.com
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Our Different Organizational Models Keep Agencies Digital Or Traditional
December 13th, 2009
Different agencies specialize in different services such as media, direct, digital, PR, or Creative, because the risk tolerance, organizational model, financial model, and in particular the model for concentrating or distributing rewards needed to provide incentives to employees, is different in agencies that function in each channel, and that the efficiency gained by unified account management, is counterbalanced by the impediments imposed on risk, organizational, financial, and incentive models – effectively creating a division of labor that is more competitive, effective, and efficient, than monolithic organizations can be.
For example, for all our emphasis on creativity, few people in agencies have creative responsibilities. As Ogilvy stated, the majority of jobs in a media organization are clerical, and only marginally related to marketing. My view is similar: the vast majority of jobs in a digital agency are technical, and have little to do with marketing.
Furthermore, the vast majority of delivery management jobs in a media agency consist of traffic management – communication, while the vast majority of jobs in a digital agency are project management – risk mitigation. In a media agency, delivery management is concerned with customer service, and fast iteration. In a digital agency, risk mitigation, defect free code, and on-time delivery are the primary preoccupations of delivery management. The kind of people who are traffic managers are terrible project managers and visa versa. Yet they are pivotal role within each type of business.
The accidental side effect of this difference in internal processes and preferences is that digital agencies are often less likely to ‘game’ the client. For example, we have a much higher customer loyalty score than any other agency in our field, and we believe it is for three reasons: we aren’t greedy about nickels and dimes, we are very selective about clients, and we understand that delivery is what a customer is buying from us. And if there is a trend that will continue in this industry, I suggest it will be this trend toward trusting a digital agency because it’s internal processes foster that kind of trust, and they will do so because delivery success is materially demonstrable in a field where delivery success has largely been subjective. Small things in large numbers, over time, create vast differences. These differences will grow increasingly important over time.
For all our emphasis on creativity, it is not scarce and the difference between agencies is not marginal: it is not sufficiently different to be meaningful to the client. The resistance to experimentation and risk on the part of clients more than counteracts the creativity within the industry, even if that opportunity for creativity from anarchic personalities is what draws them to the field. However, the organizational biases needed to deliver creativity, marginal or not, within each particular channel of media, direct, pr, brand, or digital, is, at least over time, cumulatively marginal across channels, and the quality of execution is marginal across agencies within a channel.
For these reasons, agencies will continue to specialize. And the client will continue to select the appropriate tool from the suite of specialists to accomplish his or her objective. The problem facing the industry is the creative lottery: we sell ideas but bill for and make profits from, execution. Creativity is a loss-leader. Clients often understand this, and award the production work to agencies who present good ideas. However, many clients do not, and either buy creative from one company and production from others, or they steal creative through the pitch process, and award production to someone else. Thankfully, the market tends to end careers of these people. But that doesn’t change the fact that it’s private sector corruption.
For this state of affairs to change would require a collapse of advertising leading to the the consolidation of businesses, or a radical new technology that disrupted all existing agency models. What we are seeing instead, is a moderate consolidation of media businesses as capital is directed to digital businesses that have higher production costs, but lower distribution costs.
We have to learn to see the rise of television and the big agency, as a temporary distortion of the state of affairs. It glamorized our business. It generated wealth. But it was a bubble, and not a trend. Our agencies, our employees, and our industry publications, operate under the assumption that they are competing to participate in a bubble that no longer exists. The future is an increasing division of labor across channels, and agencies that specialize in channels, none of which are particularly dominant over the others.
Likewise, it will be difficult to produce another round of holding companies for agencies in the near term because we are unlikely to concentrate any semblance of the amount of capital produced by the rise of television.
This lack of any ability to concentrate capital and dominance in a channel, plus the long term decline in the availability of credit, as governments lose their ability to redistribute wealth using monetary policy, plus the general completion of the demographic movement of generations of people from farm and labor occupations with basic needs for consumer goods that allowed them to achieve status improvement from the possession of goods, upon which the growth of consumer products, and consumer product advertising on media depended, and upon which the current concept of brand instead of product properties depends, to suburban and urban clerical occupations that instead need to acquire increasingly differential goods to obtain the same status within small tribal networks with more granular identities than that of past mass market consumers, will mean a more competitive landscape for agencies, but an ongoing retention of our current structure as a division of labor in the process of delivering products and services to market – barring some financial or technical innovation that is as disruptive as was television.
From: www.puretheoryofmarketing.com (offline)
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What will be the biggest opportunities for agencies in the next 5 years? Displacement.
December 12th, 2009 § 0 Comments
We see opportunities for all categories of agencies. Large traditional agencies will continue to dominate the world of the large multi-national, brand portfolio–based clients because they are the only ones who can scale to the needs of those clients in the production of large volume, broad reach traditional media like broadcast and print.
Small agencies will thrive because they are the outlets of anarchistic creative talent. Small agencies also represent where the most specialization will occur. For every new technology, new media, and new channel, it will be the small specialized agencies that will blaze the trail for the rest to follow because they are the least risk averse and are not motivated by the same business drivers as their larger counterparts. These specialized agencies will be able to displace other agencies whose institutional mindsets, business organization, and cost structure reduce their ability to deliver creative value and niche expertise.
The greatest opportunity over the next five years will be in the midsize agencies like Ascentium though. The most successful of these will evolve out of the current digital agency world, although they will be complemented by the best of the midsize agency typified by Crispin Porter + Bogusky. These agencies will excel because of three distinct advantages: they will be freed of the financial handicaps placed on both the large and the small agencies, they will be able to build their reputations around demonstrated leadership in their particular area of specialization, and they will be able to execute their ideas based on deep technology skills.
Independent midsize agencies are not saddled with the high overhead, executive compensation, holding company taxes, and other built-in financial impediments that make large agencies more risk averse and less able to deliver services cost effectively. And midsize agencies hold a distinct advantage over small shops whose restricted access to capital can limit their ability to grow, scale, and, more importantly, attract top talent (especially business-oriented management).
While expertise in communicating using digital and emerging media is what is most often associated with the recent generation of high-growth, successful agencies, it is really their specialized expertise that makes them successful. Take Crispin Porter + Bogusky, for example. Whether it is their work for VW, Burger King, or Best Buy, they repeatedly demonstrate adeptness at connecting with a defined audience (young males, 18-34). In the same way, clients flock to Ideo whose tagline proclaims that they “create impact through design.” And we at Ascentium are very proud of our work with clients like Microsoft and T-Mobile, bringing their brand experiences to life for unequalled customer satisfaction and measurable results.
Deep experience, expertise, and thought leadership in technology are what wins us business and what every successful agency will need to achieve success in the coming years. Traditional agencies will find this hard to excel at because of their focus on delivering volume creative across vast, though not complex, distribution media. And it requires a sophistication of delivery resources that go well beyond what small agencies can muster. So, in the end, technology expertise will belong primarily to midsize firms that we associate with what have become known as digital agencies.
Technology is not a “nice to have” or a gimmick; it is the means for delivering meaningful customer experiences, with rich content, relevant to each micro segment of the audience through an inexpensive distribution channel with higher production costs.
We have had four generations now where the cost of distribution into major media has been artificially constricted by a highly distributed media selling to large numbers of similar consumers through a narrow distribution channel. This circumstance occurred in parallel with limited differences in the properties of major consumer products. We now live in a world of extraordinary diversity of choice, tribal micro communities, and complex dissimilar associations. It’s a world where people take the time to look for their information and find advertising entertaining or curiosity invoking but not necessarily actionable.
The information that consumers seek out on digital media, and the structure of that information and the trust they put in it, will increasingly require technology and media customized for that technology—where the brand imagery is simplistic and constant, but the content varies dramatically from channel to channel. In the past, we spent more money on distribution and less on creative. Over time, this trend will continue to reverse itself, requiring that we spend more on creative and less on distribution. Agencies that can implement diverse technologies and campaigns will continue to capture increasing amounts of the same revenue from clients.
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Digital Versus Traditional: Capitalizing Creative And Execution
December 13th, 2009 § 2 Comments
Aside from scale, the production work performed by most large agencies, is similar enough to be meaningless. Larger agencies must sell creative, and deliver and capitalize production.
To some degree this is true of Digital Advertising agencies, venus Digital Marketing agencies. (A digital advertising agency produces ads. Ads that attempt to get the consumer’s attention. This is simply a traditional business model extended to another publication platform. Digital Marketing agencies produce content. By definition, all of it is long-form advertising. If it’s really good, it entertains a consumer who is seeking it.
While we would like to say that we do, by and large, sell creative, clients buy us for execution. And that’s helpful to us, because Digital Marketing agencies can directly capitalize technology services: we can make money with JUST the technology component. Companies buy us for our execution ability. We can charge for our execution ability. And we can do so because it is frankly, more scarce than the production capability of ad building and distributing. (Note: in our business, we have a separate office that handles Digital Ads. It’s a specialty.
This difference in capitalization means that a Digital Marketing Agency can serve a larger number of accounts at lower risk, because they can afford to be hired, and to compete, purely on execution, as well as on ideas. It is, by nature, more ‘comfortable’ for a Digital Marketing Agency to participate as a peer in a large account, because we can compete on execution, because execution is simply HARD.
Technology is a wonderful deliverable, because the quality of delivery is objective.
Technology organizations must deal with risk mitigation.
Differentiation between deliverables is rarely subtle. It is the scarcity of content in the short form ad, and the impulsive emotional result that it must evoke at a very low cost in money and attention, and the subjective ‘approval’ that must be given by the client for that ad, that makes the iterative production cycle risky to the traditional agency. The Digital Marketing agency has less of this kind of risk. It has execution risk. Execution requires, usually, a learning curve, coding and testing. In fact, the problem for technologists in Digital Marketing agencies is HARDER than it is for consultants in traditional technology consulting models because the need to work with leading edge technologies increases risk dramatically.
Writing code for Facebook for example, is an odd interface to program, although the universal authentication model that it embraces is so powerful for clients that it compensates for the difficulty in using it. Making a rich internet experience on Flash or Silverlight while making sure your content is visible to search engines is painful at times, not because of coding complexity, but of keeping unlinked bits of information in sync. Certain platforms (Disney’s) are extremely rich and complex. Others (Best Buy) must handle a great deal of volume and almost entirely utilitarian. Others (Amazon Stores) are incredibly powerful, but rich and complex and not for the inexperienced technologist.
For these reasons, firms like ours can have “A, B, C, and D relationships”. AOR, Digital AOR, Digital Partner, and Point Solution Provider. We do not need to be an AOR to make money in an account. We only need to be AOR if the cost of selling into the account requires that we capitalize on a creative investment. The traditional agency can only support a client if they can capture enough work to pay for the creative cost of maintaining marginally competitive talent on the account.
For this reason, it certainly appears, that small creative agencies who are thought leaders have a long runway, DIgital agencies are just getting their feet on the ground and are at lower risk, and traditional agencies are in for a long haul of partial displacement, and holding companies are well suited, as long as they are not overly leveraged, to continue their dominance, because there does not appear to be a means of coordinating enough capital to displace them or give rise to another competitor – like most things. Wealth concentration is largely a matter of timing.
From: www.puretheoryofmarketing.com (offline)
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About a Pure Theory of Marketing
Date: 2009
I’m the CEO, and one of the founders of Ascentium: a 600 person, $100M mixed marketing and technology agency1 that we started in 2001. We’re one of the bigger independently owned agencies, and we have grown very quickly, at from 60-100% per year.
Someone asked me a question about two years ago, when I described the depth and duration of this economy, and what it would do to the agency world. I described the failure of the trial and error method of advertising on the web. The drop in funding for media. The general economic conditions and what that did to buyers. That question was “If we aren’t marketing the way we should, then what should we do instead?”.
I just didn’t have a clear enough answer. And I decided to do something about it.
For the past year, I have been working on a way of looking at advertising and marketing. I’m calling it a Pure Theory of Marketing. It’s a little different way of looking at the world. But then, our world is different enough that we need a new way of looking at it. Not just at our tools and channels, but at what it is we’re saying to people, and how we say it. And we need to understand WHY so we know WHAT it is we should be doing instead, and why it will work.
And I started this blog to talk about it with whomever will listen.
Of course, I’m putting out a book, because, that is what one does for legitimacy in the current environment. But a book is not citizen of the web, despite the web’s effect on the citizens and book industry. It’s static. It doesn’t change quickly. It cant be revised. It isn’t a dialog. (You know some of the great philosophers didn’t write much down, and they walked and talked instead for a reason.) I’m a citizen of the web. Our business is a web-business. The world still changes too quickly for print. Blogging is so much more rewarding if you appreciate discussion.
Marketers pride themselves on building a wide audience. On appealing to many people. But that’s not what I’m trying to do. And I couldn’t if I tried. Instead, I want to reach CMO’s, CEO’s, Senior Agency talent, and frankly our own talent, and that talent that might want to join us. And I want to help people understand the future of 1-to-1 marketing, as something very different from the era of big media.
We’re in a new and different world. And it’s a better one, if you know how to make use of it.
- Think Razorfish — except they’re owned by Microsoft, and we aren’t, and we predominantly use Microsoft technology, and they don’t; a fact we find somewhat humorous at all three companies. [↩]
From: www.puretheoryofmarketing.com (offline)
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Toward A Pure Theory Of Marketing
Key Ideas:
1) Business exists in the sociological context. That means that companies, and agencies, are organized in order to sell according to both our assumptions about society, and the way society is organized, and the commonly held beliefs in society.
2) What we think of as the consumer culture, is part of the process of post-empire, post-war western european cultural dissolution. That culture emerged as a series of identities that made people very similar, and therefore easy to market to using mass media. But we are no longer living in a world of postwar consumer identities. Where people were the same. With same ambitions and beliefs about what made a better life. But we aren’t the same anymore. We’re not even similar.
3) Our citizenship today comes not from service to the state, or from religious affiliation, or even from cultural affiliation, but from debt participation. We aren’t united in any set of beliefs or myths other than as consumers. As consumers we have different consumptive and productive abilities. So we are buying our identities with goods rather than adhering to mythos and beliefs. In other words, globalization is happening in America as well as everywhere else in the world. We are finally returning to the level of globalization that we had prior to 1900.
4) Identities are not just fashionable, they’re necessary. Without a shared mythology or shared social beliefs, we literally cannot judge ourselves in such a vast division of labor, or know our status or progress in life, or even what is ‘good’ or ‘bad’ without these identities. These identities are our belief systems. Imagine we lived in a world without numbers, without clocks, without myths, without formulas. Humans beings literally can’t think. they can’t make judgements. Rational civilization has made our mysticism, our world of magic, into one that at least appears to be rational. But we take for granted advanced technologies like time and myths, without understanding that they are formulas that we use to calculate the future. Formulas that we use to make judgements. We live in a complex world where we almost never have enough information to make any decision, which forces most of our decisions to be tie-breakers. Our formulas, our myths and most importantly OUR IDENTITIES, are how we make tie-breaking decisions in real time. Without identities we literally cannot think, any more than we can think without numbers, common sense, or time.
5) Agencies think its hard to create ads and make money in major media, because of the infiltration of the web. But that’s only a symptom of the social change. The web has helped facilitate that social change. But that change was there before the web. Agencies, marketers, creatives, and even, indirectly, CEO’s, are selling products into the postwar identity, using companies, marketers, agencies, and media channels, that were specifically developed to sell into that homogenous postwar population, each of whom had the postwar identity.
6) It’s not just ads, not just campaigns, not just marketing that needs to change. We have to restructure business to sell into this new world order. We have to restructure marketing departments. We have to restructure agencies. Mass media will still have it’s place. But it will largely be for poor people, and major media will continue to become the channel for poor people, rather than postwar consumers.
7 ) Agencies need to learn how to build campaigns and creative for multiple channels, and multiple identities, and to accumulate consumer attention and loyalty, rather than sell broad big-win campaigns into the postwar narrative. We need narratives that appeal to identities. That help people build their identities. Rather than market to absurdity, which is the only common factor the fractured-identity-world we live in can comprehend, and the only campaigns that work today. We need specialized agencies that monitor identities and match them with people, and their disposable income.
8 ) Marketing organizations need to build ‘wardrobes’ of identities, and survey those identities, not their products, but the identities that those products service, rather than demographics, which are simply geographic representations of the postwar identity. These identities then become markets with measurable success criteria. In effect, giving marketers a portfoilio of measurable assets. Marketers need to learn to build campaigns that consist of multiple narratives that sell into a ’set’ of identities, each of which enriches that identity. And to build accumulating interest by consumers rather than asking for their direct attention. This creates a sense of sincerity. It may be that many marketers cannot exist in the post-postwar world of the citizenship-by-debt-participation society. It’s up to you to change. Society changed already. Campaigns need to keep a heartbeat. A lot more of your job will be to determine what’s popular in six or eight different identities rather than to simply shop popular culture for the most widely appealing message. I’ m overstating this a bit – but marketers all want to do what they did yesterday and call it creative. So we need to overemphasize the difference for a few years.
9) CEO’s need to demand that CMO’s become to the brand asset what CFO’s are to financial planning and controller’s are to cash. Balance sheets and income statements need to track brand asset on a timely, if not weekly basis. CMO’s need to have a portfiolio of identities and the measurement of how that product sells into an identithy and plans for addressing each identity and budgets for doing so. CEO’s need to hire external auditors who will audit that brand information so it’s not fudged any more than real estate values are fudged. CEO’s need to look at identities and products and services as related investments, and develop budget and funding processes. The unspoken issue here is that many marketers are campaign managers, not brand managers, and you may have to fire a lot of them, or train them with discipline to get them to perform. Conversely, the board should fire a CEO for NOT doing this because if the CEO doesn’t do it, it means he or she is behind the times, uncompetitive, ignorant of the company’s asset holding, and not fast enough to manage a company in our new environment.
10) Shareholders need to hold companies accountable for brand measurement. Most of the nonsense that is possible for CEO’s to pull off, and destroy asset value, is done because a) we measure only postwar and prewar assets (cash and real property) instead of market potential and employee potential, and b) because accounting rules exist largely to help organizations avoid taxation, or adhere to regulation that increases taxation instead of accurately reflecting the business’ performance, rather than provide accurate pictures of performance in the service of customers and investors, and c) accounting processes are mired in an ancient past, and because of the primarily manual (rather than macro-transactional) nature of the accounting processes is unsophisticated and only reinforces the antiquated culture in accounting.
11) By building our businesses around the new sociological context: the culture of citizenship by debt participation, we can make more profits, build better brands, dispose of antiquated companies, and literally change society for the better while providing an opportunity to a new generation of entrepreneurs, marketers, and creatives who, rather than sit mired in a decade long economic depression, can help raise us out of it by transforming this complex and fascinating world we live in.
12) For technologists, I have given you a glimpse of that amazing future that is very different from the engineering that you have done since 1960. Your concept of what makes ‘good’ technology is dead. Put a stake in the vampire’s heart. Pattern oriented, durable code that is deep and rich and flexible is as useless as phlogiston theory. Discreet data and documents are dead technologies. The future is perishable, not flexible. It’s where subjectivism is incorporated into the code. It’s not isolating companies from consumer subjectivity, but collecting and analyzing consumer subjectivity. Not periodicity. But non-periodicity. If you’re smart enough to guess what that means, then you have a career ahead of you. We can change the world if you’re willing to change your thinking. If not. Go find the guys who write COBOL and ask them for a job.
This set of steps will build the 1to1 marketing capability that business and consumers need today, to service their wants. And it will fix the corporation that consumers feel alienated by – because without these processes, capitalism’s core, which is to serve customers, is being undermined by market failure: ‘general liquidity’ and risk-driven bankers, result in the concentration of capital in large companies that allows businesses to get away with poorly serving customers.
There is more to it. But this is the core of A Pure Theory Of Marketing.
And there is only one company that can help you make that change: Ascentium
www.puretheoryofmarketing.com
A Pure Theory Of Marketing: December 2009Table Of Contents
1. INTRODUCTION
2. THE ECONOMY OF MARKETING
3. THE FUTURE: A THEORY OF MARKETING
4. COMMUNICATING WITH CONSUMERS: CAMPAIGNS
5. RETAINING CONSUMER ATTENTION AND LOYALTY
6. THE MARKETING ORGANIZATION OF THE FUTURE
7. THE EXECUTIVE ORGANIZATION OF THE FUTURE
– The ACCOUNTABLE CMO:
– THE CEO, AND ADDING THE FUTURE ORIENTED ASSET OF BRAND POTENTIAL
8. THE AGENCY OF THE FUTURE
9. THE ECONOMICS AND ETHICS OF MARKETING AND ADVERTISING
10. CLOSING SUMMARYComments on “A Pure Theory Of Marketing”
“This is a manual for CMO’s, CEO’s, Shareholders, and Consumers. It’s effectively a theory of marketing. And because of that, it’s a prescription for the future. It’s the biggest change in marketing MANAGEMENT since the television era. It will work not because it is a fad, or because it’s inspirational, or because it’s a tactical improvement, but because it is pure economics and sociology: because once consumers, shareholders and investors understand what I’m saying, the will DEMAND that much of it be implemented in companies. Because taking better care of customers is taking better care of investors. In other words, we can solve the problem of ‘the corporation’. It not only tells us how to market: how to talk to people, create the right narratives that will engage them, but how to organize our marketing organizations. We can solve the under-funding of marketing. we can solve the waste of marketing dollars. The problem in marketing hasn’t been marketer’s laziness, so much as their lack of a means of working in a quantitative world, and therefore their dismissal by the executive team as irresponsible. But if you follow what I recommend, the only person who can fail, isn’t the CMO. It’s the CEO. And CEO’s are pretty good at preventing failure – especially when it’s theirs.”
“I’m not so much simply confident that we should recommend our customers begin transforming their organizations, as I feel that it’s a deterministic process that will punish companies who do not.”
“I am sure somewhere, someday, someone will figure out that this theory of marketing solves not only a business problem. But it solves a social one as well. Marketers can build a better world, and make money doing it, and make consumers happier, rather than be next in the line of disrespected professionals, with the unenviable claim that at least they’re thought better of than prostitutes, politicians, journalists and lawyers.”
From: www.puretheoryofmarketing.com (offline)
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What will the role of agencies be 5 years from now? The Same, More Specialized, Less Influence
December 12th, 2009
The short answer is that the current trends will continue. The traditional AOR relationship will increasingly face being displaced by agency teams composed of specialty firms who can manage the complexities of existing and emerging channels, media, and technologies. This is for simple reasons: our organizations are different from one another, because the tasks we perform are different from one another. Even organizations like Sapient or Ascentium, which have separate business units that perform consulting or technology specialties, have them to augment their business model, not to augment the traditional agency business model.
The problem, for clients and for agencies, is overall stewardship of the brand across these specialized teams of agencies, channels, and media. Some clients will manage it themselves; others will choose agencies to specifically handle that challenge. And the talent to do so will become a primary challenge for CMOs. Should shareholders and boards begin to demand responsibility for brand performance, as an asset more tangible than our current fixed asset mythology, they will hold CEOs accountable rather than allowing them to offload this responsibility to CMOs who they regularly dispose of as a convenient distraction.
Over time, we have seen a steady reduction in the ability of any company to project and control its brand. The relative influence of the consumer, brought about by a combination of social, economic, and technological factors, is redefining the way in which marketing is used to influence a company’s brand and by extension make an impact on its sales and profitability.
And while the dependence on advertising per se to promote a company’s products or services remains unchanged, the ability of a company to influence or manipulate customers through traditional short format ads is also in general decline. There is not enough information density in the short format to develop a vision that is intimate.
We have been selling a very aspirational message, “the American dream,” for a long time. And now, in most advertisements, we are selling nihilism or sarcasm, which is the very opposite of the contemporary consumer desire for membership in communities, within a class or tribe. Brands have to help people achieve that goal. The short format can do so, but only by segment, not by the broad distribution of low content ads that was possible for general household consumer goods.
Combine this phenomenon with the change in consumption habits—that’s resulted from the major economic upheaval and that’s becoming ingrained in our culture—and technology’s ability to amplify an individual’s sphere of influence, and we will see the role of advertising shift from selling the aspiration for “the American dream” to facilitating the creation of our individual identities and our interaction with other like-minded people.
To support these shifts, marketing will become more about providing access to rich format narratives that reach out to segments or communities of individuals who share common beliefs, preferences, and consumption habits. It will be the role of agencies to produce this increasingly complex and micro-targeted narrative content that people will seek out and want to consume. And agencies will be required to execute the distribution of this highly segmented content across multiple platforms, devices, and media.
In the golden age of movies, the studios not only controlled the creation of content, but, through ownership of movie theaters, they also controlled its distribution. In the future, as agencies increasingly become sophisticated content providers, they will need to, not unlike the studios, develop and execute the means by which content is distributed to multiple screens—on the Web, mobile devices, digital out-of-home media, or via technologies we haven’t even thought of yet.
And while it is not inconceivable for a holding company to purchase a business or channel like Facebook and limit advertising on it to select customers using select messages—thereby making the Web destination a profitable as opposed to a money-losing distribution channel—it is more likely that these channels will require certain formats and types of content (Facebook apps are effective, Facebook ads are not). This requires an understanding of not only the channels that require rich content versus short form content, but also the technology required to leverage the channel sufficiently to motivate consumers to act.
It is this combination of the ability to develop and distribute highly relevant and rich narrative content that will be the primary role of the successful agencies in the future. They will be required to marry the account management skills of the large agency, the creative energy of the independent shop, and the technology prowess of the digital agency.
From: www.puretheoryofmarketing.com (offline)