Category Archives: Branding

Using Science for Selling: Sometimes Yes, Sometimes No

A recent study out of Ohio State University seems like one of those that the world really didn’t need. The researchers were exploring whether introducing science into the marketing would help sell chocolate chip cookies.

And to us who make a living in marketing, this is one of those things that might make us say “Duh, you needed research to tell us that? Of course you don’t use science to sell chocolate chip cookies!”

But bear with me, because if we keep asking why enough, we can come up with some answers that might surprise us.

So, what did the researchers learn? I quote,

“Specifically, since hedonic attributes are associated with warmth, the coldness associated with science is conceptually disfluent with the anticipated warmth of hedonic products and attributes, reducing product valuation.”

Ohio State Study

In other words – much simpler and fewer in number – science doesn’t help sell cookies. And it’s because our brains think differently about some things than other.

For example, a study published in the journal Computers in Human Behavior (Casado-Aranda, Sanchez-Fernandez and Garcia) found that when we’re exposed to “hedonic” ads – ads that appeal to pleasurable sensations – the parts of our brain that retrieve memories kicks in. This isn’t true when we see utilitarian ads. Predictably, we approach those ads as a problem to be solved and engage the parts of our brain that control working memory and the ability to focus our attention.

Essentially, these two advertising approaches take two different paths in our awareness, one takes the “thinking” path and one takes the “feeling” path. Or, as Nobel Laureate Daniel Kahneman would say, one takes the “thinking slow” path and one takes the “thinking fast” path.

Yet another study begins to show why this may be so. Let’s go back to chocolate chip cookies for a moment. When you smell a fresh baked cookie, it’s not just the sensory appeal “in the moment” that makes the cookie irresistible. It’s also the memories it brings back for you. We know that how things smell is a particularly effective way to trigger this connection with the past. Certain smells – like that of cookies just out of the oven – can be the shortest path between today and some childhood memory. These are called associative memories. And they’re a big part of “feeling” something rather than just “thinking” about it.

At the University of California – Irvine – Neuroscientists discovered a very specific type of neuron in our memory centers that oversee the creation of new associative memories. They’re called “fan cells” and it seems that these neurons are responsible for creating the link between new input and those emotion-inducing memories that we may have tucked away from our past. And – critically – it seems that dopamine is the key to linking the two. When our brains “smell” a potential reward, it kicks these fan cells into gear and our brain is bathed in the “warm fuzzies.” Lead research Kei Igarashi, said,

“We never expected that dopamine is involved in the memory circuit. However, when the evidence accumulated, it gradually became clear that dopamine is involved. These experiments were like a detective story for us, and we are excited about the results.”

Kei Igarashi – University of California – Irvine

Not surprisingly – as our first study found – introducing science into this whole process can be a bit of a buzz kill. It would be like inviting Bill Nye the Science Guy to teach you about quantum physics during your Saturday morning cuddle time.

All of this probably seems overwhelmingly academic to you. Selling something like chocolate chip cookies isn’t something that should take three different scientific studies and strapping several people inside a fMRI machine to explain. We should be able to rely on our guts, and our guts know that science has no place in a campaign built on an emotional appeal.

But there is a point to all this. Different marketing approaches are handled by different parts of the brain, and knowing that allows us to reinforce our marketing intuition with a better understanding of why we humans do the things we do.

Utilitarian appeals activate the parts of the brain that are front and center, the data crunching, evaluating and rational parts of our cognitive machinery.

Hedonic appeals probe the subterranean depths of our brains, unpacking memories and prodding emotions below the thresholds of us being conscious of the process. We respond viscerally – which literally means “from our guts”.

If we’re talking about selling chocolate chip cookies, we have moved about as far towards the hedonic end of the scale as we can. At the other end we would find something like motor oil – where scientific messaging such as “advanced formulation” or “proven engine protection” would be more persuasive. But almost all other products fall somewhere in between. They are a mix of hedonic and utilitarian factors. And we haven’t even factored in the most significant of all consumer considerations – risk and how to avoid it. Think how complex things would get in our brains if we were buying a new car!

Buying chocolate chip cookies might seem like a no brainer – because – well – it almost is. Beyond dosing our neural pathways with dopamine, our brains barely kick in when considering whether to grab a bag of Chips Ahoy on our next trip to the store. In fact, the last thing you want your brain to do when you’re craving chewy chocolate is to kick in. Then you would start considering things like caloric intake and how you should be cutting down on processed sugar. Chocolate chip cookies might be a no-brainer, but almost nothing else in the consumer world is that simple.

Marketing is relying more and more on data. But data is typically restricted to answering “who”, “what”, “when” and “where” questions. It’s studies like the ones I shared here that start to pick apart the “why” of marketing.

And when things get complex, asking “why” is exactly what we need to do.

What Media Insiders Were Thinking (And Writing) In 2021

Note: This is a year back look at the posts in the Media Insider Column on Mediapost, for which I write every Tuesday. All the writers for the column have been part of the Marketing and Media business for decades, so there’s a lot of wisdom there to draw on. This is the second time I’ve done this look back at what we’ve written about in the previous year.

As part of the group of Media Insiders, I’ve always considered myself in sterling company. I suspect if you added up all the years of experience in this stable of industry experts, we’d be well into the triple digits. Most of the Insiders are still active in the world of marketing. For myself, although I’m no longer active in the business, I’m still fascinated by how it impacts our lives and our culture.

For all those reasons, I think the opinions of this group are worth listening to — and, thankfully,  MediaPost gives you those opinions every day.

Three years ago, I thought it would be interesting to do a “meta-analysis” of those opinions over the span of the year, to see what has collectively been on the minds of the Media Insiders. I meant to do it again last year, but just never got around to it — as you know, global pandemics and uprisings against democracy were a bit of a distraction.

This year, I decided to give it another shot. And it was illuminating. Here’s a summary of what has been on our collective minds:

I don’t think it’s stretching things to say that your Insiders have been unusually existential in their thoughts in the past 12 months. Now, granted, this is one column on MediaPost that leads to existential musings. That’s why I ended up here. I love the fact that I can write about pretty much anything and it generally fits under the “Media Insider” masthead. I suspect the same is true for the other Insiders.

But even with that in mind, this year was different. I think we’ve all spent a lot of the last year thinking about what the moral and ethical boundaries for marketers are — for everyone, really — in the world of 2021. Those ponderings broke down into a few recurring themes.

Trying to Navigate a Substantially Different World

Most of this was naturally tied to the ongoing COVID pandemic.  

Surprisingly, given that three years ago it was one of the most popular topics, Insiders said little about politics. Of course, we were then squarely in the middle of “Trump time.” There were definitely a few posts after the Jan. 6 insurrection, but most of it was just trying to figure out how the world might permanently change after 2021. Almost 20% of our columns touched on this topic.

A notable subset of this was how our workplaces might change. With many of us being forced to work from home, 4% of the year’s posts talked about how “going to work” may never look the same again.

Ad-Tech Advice

The next most popular topic from Insiders (especially those still in the biz, like Corey, Dave, Ted and Maarten) was ongoing insight on how to manage the nuts and bolts of your marketing. A lot of this focused on using ad tech effectively. That made up 15% of last year’s posts.

And Now, The Bad News

I will say your Media Insiders (myself included) are a somewhat pessimistic bunch. Even when we weren’t talking about wrenching change brought about by a global pandemic, we were worrying about the tech world going to hell in a handbasket. About 13.5% of our posts talked about social media, and it was almost all negative, with most of it aimed squarely at Facebook — sorry, Meta.

Another 12% of our posts talked about other troubling aspects of technology. Privacy concerns over data usage and targeting took the lead here. But we were also worried about other issues, like the breakdown of person-to-person relationships, disappearing attention spans, and tears in our social fabric. When we talked about the future of tech, we tended to do it through a dystopian lens.

Added to this was a sincere concern about the future of journalism. This accounted for another 5% of all our posts. This makes almost a full third of all posts with a decidedly gloomy outlook when it comes to tech and digital media’s impact on society.

The Runners-Up

If there was one branch of media that seemed the most popular among the Insiders (especially Dave Morgan), it was TV and streaming video. I also squeezed a few posts about online gaming into this category. Together, this topic made up 10.5% of all posts.

Next in line, social marketing and ethical branding. We all took our own spins on this, and together we devoted almost 9.5% of all posts in 2021 to it. I’ve talked before about the irony of a world that has little trust in advertising but growing trust in brands. Your Insiders have tried to thread the needle between the two sides of this seeming paradox.

Finally, we did cover a smattering of other topics, but one in particular rose about the others as something increasingly on our radar. We touched on the Metaverse and its implications in almost 3% of our posts.

Summing Up

To try to wrap up 2021 in one post is difficult, but if there was a single takeaway, I think it’s that both marketing and media are faced with some very existential questions. Ad-supported revenue models have now been pushed to the point where we must ask what the longer-term ethical implications might be.

If anything, I would say the past year has marked the beginning of our industry realizing that a lot of unintended consequences have now come home to roost.

The Deconstruction of Trust

Just over a week ago, fellow Insider Steven Rosenbaum wrote a post entitled “Trust Is In Decline Worldwide.” He quotes from the Edelman Trust Barometer Report for 2021. There, graph after graph shows this decline. And that feels exactly right. The Barometer “reveals an epidemic of misinformation and widespread mistrust of societal institutions and leaders around the world.”

Here in the ad biz, the decline of trust is nothing new. We’ve been seeing it slip for at least the last decade.

But that is not a universal truth. Yes, trust in advertising is in decline. But trust in brands — at least, some brands — has never been higher. And that is indicative of the decoupling we’re seeing between the concept of brand and the practice of advertising. One used to support the other. Now, even when an ad works, it may be stripping the trust from a brand.

This decline in advertising trust also varies from generation to generation. An Ofcom study in the UK of young adults 16 to 34 found that 91.6% of all respondents had little or no trust in ads. The same study found that if you were looking for trustworthy sources, 73.5% would go to online reviews or recommendations of friends.

One reason for this erosion in trust is that advertising has been slumming. Social media advertising is the least trustworthy channel that exists. The vast majority of us don’t trust what we see on it. Yet the advertising dollars continue to pour into social media.

Yet more than ever, we want to trust a brand. The Edelman Report shows that business is the most trusted institution, ahead of NGOs, government and media. And the brands that are rising to the challenge are taking a more holistic approach to brand management.

More than ever, brands are not built on advertising. They are built on consumer experience, on ideals and on meeting promises.  In short, they are built on instilling trust. Consumers, in turn are making trust a bigger deal. Those aged 18 to 34, that very same demo that has no trust in advertising, is the first to say brand trust matters more than ever. They’re just looking for proof of that trust in different places.

But why is trust important? That seems like a dumb question, but it’s not. There are deeper levels of understanding that are required here. And we might just find the answer in southern Italy.

Trust to the north and south of Naples

Italy has an economic problem. It’s always been there, but it definitely got worse after World War Two. It’s called the Mezzogiorno Problem.

Mezzogiorno means “noon” in Italian. But it’s also a label for the south of Italy. Like many things in Italian culture, it can make even problems sound charming and romantic. It has something to do with being sunny.

Italy has two economies. The North’s economy has always been more robust than the South’s. Per capita income in the Mezzogiorno is 60% of the national average. Unemployment is twice as high. Despite repeated attempts by the government to kickstart the economy of the South, the money and talent in Italy typically flow north of Naples.

The roots of the Mezzogiorno problem go to a not totally surprising place: a lack of trust. Trust is also called social capital. And southern Italy has less social capital than the North. Part of this has to do with geography. Villages in southern Italy are more isolated and there is less interaction between them. Part of it has to do with systemic corruption and crime. Part of it has to do with something called Campanilismo — where Italian loyalties belong first to their family, second to their village or city, third to their immediate region and, lastly, to any notion of belonging to a nation. People from the South have trouble trusting anyone not from their inner circle.

For all these reasons, the co-ops that transformed the agricultural industry in the north of Italy never gained a foothold in the South. If you were to look for an example of how low trust can lead to negative outcomes for all, it would be hard to find a better one than southern Italy.

But what does this have to do with advertising? That begins to become clear when we look at the impact trust has on our brains.

Our Brains On Trust

Neuroeconomist Paul J. Zak has found that trust plays a key role in the functioning of our brains. When trust is present, our brain produces oxytocin, which Zak calls the trust molecule. It literally rewards our brain when we work together with others. It pushes us to cooperate rather than be focused exclusively on our own self-interest. This is exactly what was missing in southern Italy.

But there’s another side to this: the dark side of oxytocin. It can also cause us emotional pain in stressful social situations. And these episodes tend to get embedded in us as bad memories, leading to a triggering of fear or anxiety in the future.

We have to think more carefully about this question of trust. The whole goal of advertising is simply to get an impression to the right person. I suspect most marketers might define an unsuccessful ad as one that gets ignored. But the reality might be far worse. An ad that is shown in an untrusted channel might cause an emotional deficit, leading to the creation of future anxiety about or animosity towards a brand.

Once this happens, the game is over. You now have a Mezzogiorno of marketing.

It’s the Fall that’s Gonna Kill You

Butch: I’ll jump first.
Sundance: Nope.
Butch: Then you jump first.
Sundance: No, I said!
Butch: What’s the matter with you?!
Sundance: I can’t swim!
Butch:  Why, you crazy — the fall’ll probably kill ya!

                                     Butch Cassidy and the Sundance Kid – 1969

Last Monday, fellow Insider Steven Rosenbaum asked, “Is Advertising Obsolete?” The column and the post by law professor Ramsi Woodcock that prompted it were both interesting. So were the comments – which were by and large supportive of good advertising.

I won’t rehash Rosenbaum’s column, but it strikes me that we – being the collective we of the MediaPost universe – have been debating whether advertising is good or bad, relevant or obsolete, a trusted source of information or a con job for the ages and we don’t seem to be any closer to an answer.

The reason is that an advertisement is all of those things. But not at the same time.

I used to do behavioral research, specifically eye-tracking. And the end of an eye tracking study, you get what’s called an aggregate heat map. This is the summary of all the eyeball activity of all the participants over the entire duration of all interactions with whatever the image was. These were interesting, but personally I was fascinated with the time slices of the interactions. I found that often, you can learn more about behaviors by looking at who looked at what when. It was only when we looked at interactions on a second by second basis that we started to notice the really interesting patterns emerge. For example, when looking at a new website, men looked immediately at the navigation bar, whereas women were first drawn to the “hero” image. But if you looked at the aggregates – the sum of all scanning activities – the men and women’s images were almost identical.

I believe the same thing is happening when we try to pin down advertising. And it’s because advertising – and our attitudes towards it – change through the life cycle of a brand, or product, or company.

Our relationship with a product or brand can be represented by an inverted U chart, with the vertical axis being awareness/engagement and the horizontal axis being time. Like a zillion other things, our brain defines our relationship with a product or brand by a resource/reward algorithm. Much of human behavior can be attributed to a dynamic tension between opposing forces and this is no exception. Driving us to explore the new are cognitive forces like novelty seeking and changing expectations of utility while things like cognitive lock in and the endowment effect tend to keep us loyal. As we engage with a new product or brand, we climb up the first side of the inverted U. But nothing in nature continues on a straight line, much as every sales manager would love it to. At some point, our engagement will peak and we’ll get itchy feet to try something new. Then we start falling down the descent of the U. And it’s this fall that kills our acceptance of advertising.

2000px-HebbianYerkesDodson.svgThis inverted U shows up all the time in human behavior. We assume you can never have too much of a good thing, but this is almost never true. There’s even a law that defines this, known as the Yerkes-Dodson Law. Developed by psychologists Robert Yerkes and John Dodson in 1908, it plots performance against mental or physical arousal. Predictably, performance increases with how fully we’re engaged with whatever we’re doing – but only up to a point. Then, performance peaks and starts to decline into anxiety.

It’s also why TV show runners are getting smarter about ending a series just as they crest the top of the hump. Hard lessons about the dangers of the decline have been learned by the jumping of multiple sharks.

Our entire relationship with a brand or product is built on the foundation of this inverted U, so it should come as no surprise that our acceptance of advertising for said brand or product also has to be plotted on this same chart. Yet it seems to constantly comes as a surprise for the marketing teams. In the beginning, on the upslope of the upside-down U, we are seeking novelty, and an advertisement for something new fits the bill.

When the inevitable downward curve starts, the sales and marketing teams panic and respond by upping advertising. They do their best to maintain a straight up line, but it’s too late. The gap between their goals and audience acceptance continues to grow as one line is projected upwards and the other curves ever more steeply downwards. Eventually the message is received and the plug is pulled, but the damage has already been done.

When we look at advertising, we have to plot it against this ubiquitous U. And when we talk about advertising, we have to be more careful to define what we’re talking about. If we’re talking specifically, we will all be able to find examples of useful and even welcome ads. But when I talk about the broken contract of advertising, I speak in more general terms. In the digital compression of timelines, we are reaching the peak of advertising effectiveness faster than ever before. And when we hit the decline, we actively reject advertising because we can. We have other alternatives. This decline is dragging the industry down with it. Yes, we can all think of good ads, but the category is suffering from our evolving opinion which is increasingly being formed on the downside of the U.

 

 

Will We Ever Let Robots Shop for Us?

Several years ago, my family and I visited Astoria, Oregon. You’ll find it at the mouth of the Columbia River, where it empties into the Pacific. We happened to take a tour of Astoria and our guide pointed out a warehouse. He told us it was filled with canned salmon, waiting to be labeled and shipped. I asked what brand they were. His answer was “All of them. They all come from the same warehouse. The only thing different is the label.”

Ahh… the power of branding…

Labels can make a huge difference. If you need proof, look no further than the experimental introduction of generic brands in grocery stores. Well, they were generic to begin with, anyway. But over time, the generic “yellow label” was replaced with a plethora of store brands. The quality of what’s inside the box hasn’t changed much, but the packaging has. We do love our brands.

But there’s often no rational reason to do so. Take the aforementioned canned salmon for example. Same fish, no matter what label you may stick on it. Brands are a trick our brain plays on us. We may swear our favorite brand tastes better than it’s competitors, but it’s usually just our brain short circuiting our senses and our sensibility. Neuroscientist Read Montague found this out when he redid the classic Pepsi taste test using a fMRI scanner. The result? When Coke drinkers didn’t know what they were drinking, the majority preferred Pepsi. But the minute the brand was revealed, they again sweared allegiance to Coke. The taste hadn’t changed, but their brains had. As soon as the brain was aware of the brand, some parts of it suddenly started lighting up like a pinball machine.

In previous research we did, we found that the brain instantly responded to favored brains the same way it did to a picture of a friend or a smiling face. Our brains have an instantaneous and subconscious response to brands. And because of that, our brains shouldn’t be trusted with buying decisions. We’d be better off letting a robot do it for us.

And I’m not saying that facetiously.

A recent post on Bloomberg.com looked forward 20 years and predicted how automation would gradually take over ever step of the consumer product supply chain, from manufacturing to shipping to delivery to our door. The post predicts that the factory floor, the warehouse, ocean liners, trucks and delivery drones will all be powered by Artificial intelligence and robotic labor. The first set of human hands that might touch a product would be those of the buyer. But maybe we’re automating the wrong side of the consumer transaction. The thing human hands shouldn’t be touching is the buy button. We suck at it.

We have taken some steps in the right direction. Itamar Simonson and Emanuel Rosen predicted a death of branding in their book Absolute Value:

“In the past the marketing function “protected” the organization in some cases. When things like positioning, branding, or persuasion worked effectively, a mediocre company with a good marketing arm (and deep pockets for advertising) could get by. Now, as consumers are becoming less influenced by quality proxies, and as more consumers base their decisions on their likely experience with a product, this is changing.”

But our brand love dies hard. If our brain can literally rewire the evidence from our own senses – how can we possibly make rational buying decisions? True, as Simonson and Rosen point out, we do tend to favor objective information when it’s available, but at the end of the day, our buying decisions still rely on an instrument that has proven itself unreliable in making optimal decisions under the influence of brand messaging.

If we’re prepared to let robots steer ships, drive trucks and run factories, why won’t we let them shop for us? Existing shopping bots stop well short of actually making the purchase. We’ll put our lives in the hands of A.I. in a myriad of ways, but we won’t hand our credit card over. Why is that?

It seems ironic to me. If there were any area where machines can beat humans, it would be in making purchases. They’re much better at filtering based on objective criteria, they can stay on top of all prices everywhere and they can instantly aggregate data from all similar types of purchases. Most importantly, machines can’t be tricked by branding or marketing. They can complete the Absolute Value loop Simonson and Rosen talk about in their book.

Of course, there’s just one little problem with all that. It essentially ends the entire marketing and advertising industry.

Ooops.

Why Marketers Love Malcolm Gladwell … and Why They Shouldn’t

Marketers love Malcolm Gladwell. They love his pithy, reductionist approach to popular science – his tendency to sacrifice verity for the sake of a good “Just-so” story. And in doing this, what is Malcolm Gladwell but a marketer at heart? No wonder our industry is ga-ga over him. We love anyone who can oversimplify complexity down to the point where it can be appropriated as yet another marketing “angle”.

Take the entire influencer advertising business, for instance. Earlier this year, I saw an article saying more and more brands are expanding their influencer marketing programs. We are desperately searching for that holy nexus where social media and those super-connected “mavens” meet. While the idea of influencer marketing has been around for a while, it really gained steam with the release of Gladwell’s “The Tipping Point.” And that head of steam seems to have been building since the release of the book in 2000.

As others have pointed out, Gladwell has made a habit of taking one narrow perspective that promises to “play well” with the masses, supporting it with just enough science to make it seem plausible and then enshrining it as a “Law.”

Take “The Law of the Few”, for instance, from The Tipping Point: “The success of any kind of social epidemic is heavily dependent on the involvement of people with a particular and rare set of social gifts.” You could literally hear the millions of ears attached to marketing heads “perk up” when they heard this. “All we have to do,” the reasoning went, “is reach these people, plant a favorable opinion of our product and give them the tools to spread the word. Then we just sit back and wait for the inevitable epidemic to sweep us to new heights of profitability.”

Certainly commercial viral cascades do happen. They happen all the time. And, in hindsight, if you look long and hard enough, you’ll probably find what appears to be a “maven” near ground-zero. From this perspective, Gladwell’s “Law of the Few” seems to hold water. But that’s exactly the type of seductive reasoning that makes “Just So” stories so misleading. You mistakenly believe that because it happened once, you can predict when it’s going to happen again. Gladwell’s indiscriminate use of the term “Law” contributes to this common deceit. A law is something that is universally applicable and constant. When a law governs something, it plays out the same way, every time. And this is certainly not the case in social epidemics.

duncan-watts

Duncan Watts

If Malcolm Gladwell’s books have become marketing and pop-culture bibles, the same, sadly, cannot be said for Duncan Watts’ books. I’m guessing almost everyone reading this column has heard of Malcolm Gladwell. I further guess that almost none of you have heard of Duncan Watts. And that’s a shame. But it’s completely understandable.

Duncan Watts describes his work as determining the “role that network structure plays in determining or constraining system behavior, focusing on a few broad problem areas in social science such as information contagion, financial risk management, and organizational design.”

You started nodding off halfway through that sentence, didn’t you?

As Watts shows in his books, “Firms spent great effort trying to find “connectors” and “mavens” and to buy the influence of the biggest influencers, even though there was never causal evidence that this would work.” But the work required to get to this point is not trivial. While he certainly aims at a broad audience, Watts does not read like Gladwell. His answers are not self-evident. There is no pithy “bon mot” that causes our neural tumblers to satisfyingly click into place. Watts’ explanations are complex, counter-intuitive, occasionally ambiguous and often non-conclusive – just like the world around us. As he explains his book “Everything is Obvious: *Once You Know the Answer”, it’s easy to look backwards to find causality. But it’s not always right.

Marketers love simplicity. We love laws. We love predictability. That’s why we love Gladwell. But in following this path of least resistance, we’re straying further and further from the real world.

Google’s New Brand Launch – Function Driving Form

What would happen if you created an advertising agency run by engineers?

You’d have Google. That’s what.

Last week, I was on the road. I went to Google something on my smartphone, and noticed the logo had changed. I thought at first it was a Doodle commemorating some famous typeface designer, so I didn’t spend too much time digging into it. But on the next day, when the new Google word mark was still there, I decided to see if this was deliberate and permanent. Sure enough, Google had quietly swapped out their brand identity. And they did it in classic Google style.

I wasn’t a fan – at first. But I was looking at it from a purely aesthetic perspective. I prefer classic serif faces. I love the elegance of the curvatures and strokes. Sans serif faces always seem to me to be trying too hard to be accessible. They’re like the puppies of the design world, constantly licking your face. Serif faces are like cats – stretching luxuriously and challenging you to love them on their terms.

But the more I thought – and read – about the branding change, the more I realized that the move was driven by function over form. Google was creating a visual and iconic language with the change. It was driven by the realities of maintaining an identity across a fragmentation of platforms and contexts. One can almost imagine the requirements document that had been put forth to the design team by the various Google engineers that decide these things – a logo that minimizes visual friction and cognitive load – scales well on all screens from nano to peta configurations (and eventually yocto to yotta)– acts as a visual wayfinder no matter where you are in the Google universe – and looks just a little whimsical (the last of these being a concession to the fine arts intern that was getting lattes and Red Bull for the group).

In the last month, Google has announced a massive amount of corporate change. Any other company would have taken the opportunity to mount a publicity event roughly the size of the Summer Olympics. But Google just quietly slipped these things into their weekly to do list. The logo dropped on a Tuesday. A Tuesday! Who the hell rebrands themselves on a Tuesday? There was no corporate push from Google other than a fairly muted blog post, but in researching this column, I found commentary on the change on pretty much every major media. And they weren’t just reporting the change. They were debating it, commenting on it, engaging in it. People gave a damn, either for or against.

That’s when I realized the significance of Google’s move. Because function was driving form – because engineers were dictating to designers – the branding had to be closer to its market. The rebranding was being done to make our lives easier. It wasn’t there to launch some misguided agency driven interpretation of an envisioned future, or slide Google into some strategic position in the marketplace. It was done because if wasn’t done, Google couldn’t do all the rest of the stuff it had to do. Google didn’t tell us what we should think of the move. They just did it and let us decide.

If function determines branding, then it’s living in the right place – the intersection between the market and the marketer. I’ve previously chastised Google for their lack of design thinking, but in this case, maybe they got it right. And maybe there’s a lesson there we all need to learn about the new rules of branding.

Why Agencies and Clients are Calling It Quits

“Love on the Rocks – ain’t no surprise.”

Neil Diamond

In yesterday’s Online Spin, Maarten Albarda signaled the imminent break up of agencies and clients. Communication is close to zero. Fingers are being pointed. The whisper campaign has turned into outright hostility.

When relationships end, it can be because one of the parties is just not trying. But that isn’t the case here. I believe agencies are truly trying to patch things up. They are trying to understand their one-time life partner. They are desperately gobbling up niche shops and investing in technology in order to respark the flame. And the same is true, I believe, on the client side. They want to feel loved again by their agency of record.

I think what’s happening here is more akin to a break up that happens because circumstances have changed and the respective parties haven’t been able to keep up. This is more like high school sweethearts looking at each other 20 years hence and realizing that what once bonded them is long gone. And, if that’s true, it might be helpful to look back and see what happened.

The problem here is that the agency is a child of a marketplace that is rapidly disappearing. It is the result of the creation of the “Visible Hand” market. In his book of the same name, Alfred Chandler went to great lengths (over 600 pages) to chronicle the rise of the modern organization. The modern concept of an advertising agency was a by-product of that. Vertically integrated organizations came about to overcome some inherent inefficiencies in the market – notably the problem of geography and the lack of a functional marketplace network that came with rapid expansions in production and transportation capabilities. Essentially, markets grew too rapidly for Adam Smith’s “Invisible Hand” to be able to effectively balance through market dynamics. Organizations grew to mammoth size in order to provide internal efficiencies that allowed for greater profitability. You had to be big to be competitive. Agents of all types filled the gaps that were inevitable in a rapidly expanding market place. Essentially an agent bridged the gap between two or more separate nodes in a market network. They were the business equivalent of Mark Granovetter’s “weak tie.”

Through the 20th century advertising agents evolved into creative houses – which is where they hit their golden period. But why was this creativity needed? Essentially, agencies evolved when advances in production and distribution technologies weren’t enough to expand markets anymore. Suddenly, companies needed agencies to create demand in existing and identified markets through the sparking desire. This was the final hurray of the “visible hand” marketplace.

But the explosion of networking technologies and the reduction of transactional friction is turning the “visible hand” market back into the “invisible hand” market of Adam Smith – driven by the natural laws of marketplaces. The networks of the marketplace are becoming more connected than ever.

This is a highly dynamic, cyclical market. Straight line strategic planning doesn’t work here. And straight line strategic planning is a fundamental requirement of an agency relationship. That level of stasis is needed to overcome the inherent gaps in a third party relationship. Even under the best of circumstances, an arm’s length relationship can’t effectively “make sense” of the market environment and react quickly enough to maneuver in this marketplace. And, as Albarda points out, the client-agency relationship is far from healthy.

The ironic part is all of this is that what was once an agency’s strength – its position as a bridge between existing networks, has turned into its greatest vulnerability. Technology has essential removed the gaps in the market itself, allowing clients to become more effectively linked to natural networks of customers through emerging channels that are also increasingly mediated by technology. Middlemen are no longer needed. Those gaps have disappeared. But the gap that has always been there, between the agent and the client, not only still exists, but is widening with the breakdown of the relationship. Agencies are like bridges without a river to span.

If you read the common complaints from both sides in the presentations Albarda references , they all come from the ever-widening schism that has come from a drastic change in the market itself. Simply put, the market has evolved to the point where agency relationships are no longer tenable. We on the agency side keep saying we need to reinvent ourselves, but that’s like saying that a dog has to reinvent itself to become a fish – it’s just not in our DNA.

The Rhythm of Strategy

I confess – I poked the bear a little last week. Not too much. Just a little. I purposely oversimplified one side of an argument to set up a debate. I knew there would be those that would swing to the other side in defense of strategy. I initiated an action, for which I knew there would be an equal and opposite reaction. I sometimes do that, because I believe in waves, or oscillations, or rhythms. Call it what you want – I believe in them because they always beat stasis or straight lines. Nature doesn’t move in straight lines.

You didn’t disappoint. You very ably defended strategy. And you did it in an intelligent and nuanced manner – unlike, say – Donald Trump. From a post in response by Rick Liebling: “I would … argue that the “seizing of opportunities” is not the antithesis of strategic thinking, but rather the result of it.  A strong brand strategy helps a company understand what it should, and just as importantly, shouldn’t do. This type of discipline is what allows a company to seize those very opportunities.”

And from Nick Schiavone: “I believe that Principles, Vision and Execution are more critical to “success & satisfaction” than strategies, ideations and systems when it comes to launching, building and sustaining brands.  The end result is really an ongoing, experiential relationship between a special “customer” (i.e., a person of need or desire) and the product or service provided under the auspices of a special “preparer.”(i.e.,  a person of art & science). “

Here’s the thing. When I said much of a businesses performance comes down to luck, that sounded disparaging. But it’s far from it. Luck could also be defined as the circumstances of our environment. They are the factors that lie beyond our control. And they tend to be rhythmic in nature. Sometimes they’re good, sometimes they’re bad. Sometimes they’re huge swings in either direction – what Nassam Nicholas Taleb calls “Black Swans.” And if you look as strategy as Rick Liebling does, then strategy is simply being very good at detecting these rhythms and responding to them.

But that’s not how we typically look at strategy. In fact, our entire mythology and methodology around strategy tends to run in decidedly straight lines. Strategy should be decided on high and be disseminated down to the front line masses. In the case of brand strategy, it may be determined by an agent working on your behalf and delivered in the guise of branding guidelines and polished ads. It should be decisive and unerring. It should plough forward, despite circumstance. Phil Rosenweig’s point in The Halo Effect was not that we should just surrender to the whims of fate, but that we shouldn’t kid ourselves about the importance of fate and our ability to control it. There is no single, “straight line,” universally applicable recipe for dealing with fate.

The problem with strategy, as it is practiced in most organizations, is that it blinds us to fate. We tend to execute in spite of circumstance, rather than in response to it. Rather, strategy in the new marketplace should perhaps be renamed “sense-making.” It should embrace the rhythms and oscillations of fate rather than dampen them in the name of strategic thinking. Organizations should become one massive sensory and experimental organ, constantly monitoring the environment and responding in a rational and opportunistic way.

Finally, let’s not discount the impact of effective leadership and management practices. I said last week that leadership, when isolated from other variables, only accounted for 4% of an organization’s performance. Management practices accounted for another 10%. That sounds ridiculously low, but only because we tend to excessively canonize those things in our business mythologies. Let’s approach it in a more rational way. Let’s imagine that two companies, A & B, both launched this year with $10 million in sales. Over the next 20 years, both companies were subject to the same rhythms – positive and negative – of the marketplace. But, because of superior leadership and management, Company A was able to more effectively capitalize on opportunity, giving it a 14% advantage over Company B. In 2035, what would be the impact of that 14% edge? It’s not insignificant. Company B would have grown in sales to $21 million, growth of just over 100%. But Company A would have sales of almost $290 million. It would be almost 14 times the size of Company B!

It’s not that I don’t believe in strategy. It’s just that it’s time to rethink what we do in the name of strategy.

Is Brand Strategy a Myth?

BrandStrategyThemeOn one side of the bookshelf, you have an ever growing pile of historic business best sellers, with promising titles like In Search of Excellence, 4 +2: What Really Works, Good to Great and Built to Last. Essentially, they’re all recipes for building a highly effective company. They are strategic blueprints for success.

On the other side of the bookshelf, you have books like Phil Rosenweig’s “The Halo Effect.” He trots out a couple of sobering facts: In a rigorous study conducted by Marianne Bertrand at the University of Chicago and Antoinette Schoar at MIT, they isolated and quantified the impact of a leader on the performance of a company. The answer, as it turned out, was 4%. That’s right, on the average, even if you have a Jack Welch at the helm, it will only make about 4% difference to the performance of your company. Four percent is not insignificant, but it’s hardly the earth shaking importance we tend to credit to leadership.

The other fact? What if you followed the instructions of a Jim Collins or Tom Peters? What if you transformed your company’s management practices to emulate those of the winning case studies in these books? Surely, that would make a difference? Well, yes – kind of. Here, the number is 10. In a study done by Nick Bloom of the London School of Economics and Stephen Dorgan at McKinsey, the goal was the test the association between specific management practices and company performance. There was an association. In fact, it explained about 10% of the total variation in company performance.

These are hard numbers for me to swallow. I’ve always been a huge believer in strategy. But I’m also a big believer in good research. Rosenweig’s entire book is dedicated to poking holes in much of the “exhaustive” research we’ve come to rely on as the canonical collection of sound business practices. He doesn’t disagree with many of the resulting findings. He goes as far as saying they “seem to make sense.” But he stops short of given them a scientific stamp of endorsement. The reality is, much of what we endorse as sound strategic thinking comes down to luck and the seizing of opportunities. Business is not conducted in a vacuum. It’s conducted in a highly dynamic, competitive environment. In such an environments, there are few absolutes. Everything is relative. And it’s these relative advantages that dictate success or failure.

Rosenweig’s other point is this: Saying that we just got lucky doesn’t make a very good corporate success story. Humans hate unknowns. We crave identifiable agents for outcomes. We like to assign credit or blame to something we understand. So, we make up stories. We create heroes. We identify villains. We rewrite history to fit into narrative arcs we can identify with. It doesn’t seem right to say that 90% of company performance is due to factors we have no control over. It’s much better to say it came from a well-executed strategy. This is the story that is told by business best sellers.

So, it caught my eye the other day when I saw that ad agencies might not be very good at creating and executing on brand strategies.

First of all, I’ve never believed that branding should be handled by an agency. Brands are the embodiment of the business. They have to live and breathe at the core of that business.

Secondly, brands are not “created” unilaterally – they emerge from that intersection point where the company and the market meet. We as marketers may go in with a predetermined idea of that brand, but ultimately the brand will become whatever the market interprets it to be. Like business in general, this is a highly dynamic and unpredictable environment.

I suspect that if we ever found a way to quantify the impact of brand strategy on the ultimate performance of the brand, we’d find that the number would be a lot lower than we thought it would be. Most of brand success, I suspect, will come down to luck and the seizing of opportunities when they arise.

I know. That’s probably not the story you wanted to hear.