The New Era of Advertising
Apr 1st 2013 11:29AM
Updated Apr 1st 2013 11:30AM
In this full interview with Doug Levy, he discusses his new book, Can't Buy Me Like. In the book, Levy tackles the changing marketing space, believing that companies must either adapt or continue to put blind faith on increasingly ineffective advertising. Levy also explains a new era that we've entered, dubbed the 'relationship era', and describes how this will change marketing for all companies, big and small.
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Brendan Byrnes: Hi, I'm Brendan Byrnes and I'm joined today by Doug Levy. Doug is the author of Can't Buy Me Like, and also the founder and CEO of MEplusYOU. Thank you for your time.
Doug Levy: I'm delighted to be with you.
Brendan: My first question is about the book. You talk about this Relationship Era that we're now entering. Can you describe that, and what that means for marketers?
Doug: You bet. First, a little context. We have entered a new era. We got here by way of a couple of preceding eras. The first era of marketing I call the Product Era, where marketers just talked about the product and the features of the product.
That gave way to a new era around the 1960s, when marketers realized that they could not just talk about their product but really get to know the people who were intended to buy their product, and win over hearts and minds, so marketing shifted from the Product Era to the Consumer Era.
We've now moved out of the Consumer Era. We've moved to a new era. This new era is called the Relationship Era, and what we're seeing is that marketers who continue to do business in a way that was prescribed by the Consumer Era are struggling, relative to those who have fully entered this new era.
Brendan: How do you enter this new era? What are some principles that you can use to be successful in the Relationship Era?
Doug: Chief among them is that companies that care about something bigger than selling their product sell more of their product. It's counterintuitive, but that's exactly it. What I'm talking about is not moving away from caring about selling your product, or not caring about profit.
The companies that have been the most successful in the Relationship Era care deeply about selling things and about profit. In fact, they've been extraordinarily profitable. They care about something in addition to that, something bigger than that, also.
Brendan: What's the biggest mistake that marketers are making nowadays? Is it not adapting to this new way of thinking, or are there other mistakes that they're making as well?
Doug: Yeah, they are. I think some marketers are mistaking media channels for the relevance of their approach to marketing.
In other words, they may mistake what I'm calling the Consumer Era with old media -- TV, radio, print -- and the Relationship Era with new media -- digital, social, mobile -- but that's not it at all. What we're talking about isn't a channel or a tool or a technology. It's a mind-set or an intent.
Brendan: What about trying to measure this? Obviously when it comes to advertising, marketing successes, back in the old days you threw ads on TV... Now we have a way of directly measuring that with the Internet and how many clicks something's getting. It comes directly to these advertising executives. How much does that affect the way that things are changing, if at all?
Doug: It does, in part because some things are more difficult to measure, so what gets measured most often in corporations are the financial metrics.
What we're talking about here is not moving away from those financial metrics, but also fully embracing a non-financial component of business, namely trust. The degree to which there's trust between a company and an individual has a significant impact. For a company, it can look like deeply understanding the customers you're in relationship with, and how much they love you.
What we've seen now more than ever is that companies that have not just people who buy their product that are OK with them, but they have at least a handful of people who are crazy about them. Those people now have a megaphone to scream the message about the company in question.
Brendan: And their friends trust them more, than coming from the company, right?
Doug: Precisely, yeah. Nielsen reports that trust in personal recommendations is 92% and growing, whereas trust in what companies say, advertising, is 26-47% and shrinking. People don't believe what companies say. They believe what their friends say.
Brendan: Let's talk about some companies that are doing a good job adapting to this. What are some success stories that you've seen with companies changing the way they market, as far as the Relationship Era, as you call it?
Doug: One success is in the quick-service restaurant industry, which is a little ironic. This is an industry that's known for cost-cutting and efficiency, not necessarily humanity, but one company in particular, Panera , has done a phenomenal job.
They have 1600 bakery/cafés. They're known for a healthy menu, at least by chain restaurant standards, and friendly service. They bake fresh bread in the morning and they donate what isn't sold that day to charities in the communities in which they operate.
I've gotten to know the CEO, Ron Shaich, and when I talk to him he tells me stories about what happens in the stores, about a woman in Florida who came in after chemotherapy and the woman across the counter noticed that something was up and reached across the counter to give the customer a hug and a free lunch.
What's happened there has been amazing. This is a company that just launched a new ad campaign very much in line with this way of thinking. They launched it on TV and on social media, again demonstrating that it's not about channel.
You'd think that this care for customers and this care for communities would cost them financially, they'd be making less money, but no. In reality, the average Panera café has grown from $1.1 million of revenue to $2.4 million of revenue. The Dow Jones Average over the last five years is up 13 points; Panera is up more than 300.
Brendan: It goes into the old thing, it's easier to keep a customer than to attract a new one.
One of the things I wanted to ask you about was one of the examples you have in the book; Citibank , which is interesting because you can go all sorts of different companies. A lot of people think Citibank has this bad reputation among some people, but they're actually one that you cite as doing a good job in this respect?
Doug: Yeah. One of the things that they've done, I think, is ...
First, some companies do embody a Relationship Era approach to doing business kind of intuitively, automatically. Some get there because they've experienced pain. Citibank's clearly in that latter category. They've experienced a tremendous amount of pain, and I think it was a wake-up call to at least some people at Citi.
One of the things they started doing is really listening to their customers, I believe. They did that by using the Net Promoter Score -- you were asking about metrics before; that can be a great metric to assess the degree of trust in the relationship between a company and an individual -- and putting into practice some of the things that they heard customers declaring an interest in.
Brendan: Another thing you cite in the book is companies that are doing it the wrong way. You say McDonald's , Progressive Insurance, United Airlines , at least in some instances. Could you talk about that a little bit?
Doug: Yeah, sure. I'll start with the last one you mentioned, United Airlines, because it's such a good example of how marketing has shifted.
It used to be that it was the marketer's job to shape perception of the brand, to define what the brand is. To that end, United has spent billions of advertising dollars trying to shape a message. They've done that with ads that show beautiful airplanes in the sky, and this amazing flying experience. They use George Gershwin's "Rhapsody in Blue," this uplifting tune, to talk about the experience of flying on United.
There's only one problem; that's not the experience of flying on United. The actual experience is not the beauty of the ads, it's pretty darn ugly; reduced services, pay-as-you-go food, lost luggage. So, though they've spent these billions of ad dollars, the actual experience that people have is what's actually resonating.
Brendan: What was the example? The guy with the guitar?
Doug: Yeah, it's such a great example. Dave Carroll was on a plane. He was looking out the window before the plane took off. This band leader was going to a gig and looked out the window, and he saw a guitar being thrown across the runway, and when he arrived his guitar was broken.
Being an enterprising musician, he penned a tune about it and recorded a video which he put on YouTube, which was seen more than 10 million times, and the stock dropped in the next few months 10%. Analysts wondered whether it had to do with Dave Carroll and his video.
Brendan: That's got to drive marketers crazy, because that's not really something they can control. McDonald's, they had a bit of an issue with something they could control, though. What was their problem?
Doug: Well, what marketers can do is have what they're saying being in sync with the actual experience, and even more specifically, what they believe. McDonald's is a great example of a disconnect between that. It really didn't even need to be that way.
McDonald's asked people to share actual stories of the experience that people had in the restaurants expecting, I believe, these nicely packaged beautiful stories of what it was like. In reality, they got some of that, but they also got people talking about dirty Band-Aids in their food and other gross stuff like that, much to their dismay.
Brendan: You kind of wonder how that one made it out of the vetting process ...
Let's talk about the Internet. We talked about it a little bit earlier. How responsible do you think it is for bringing in this Relationship Era, Facebook specifically? Do you think Facebook can take advantage of this? Do you think they'll have to change the way they have their advertising model right now?
Doug: The Internet's changed things considerably. Another way that marketers have grown up is thinking about marketing as spin. In fact, marketing is often synonymous with spin. "Put your best foot forward. Show customers what you want them to see."
Well, now with the Internet -- Google in particular -- customers can see anything and everything, so marketers no longer have that luxury of just being able to show the things that they want.
The other aspect of the Internet that's changed things so dramatically is social media. The explosion of social media has made it so that people's actual experiences get shared much more quickly, with much more volume, than ever before.
Brendan: Do you think there's one particular medium, be it TV, Internet, maybe even direct communication, that companies can best use in this Relationship Era in order to take advantage of their marketing?
Doug: I do think that social media becomes a great mechanism for marketers in this new era, and they need to use it differently than they're used to using other media. It's not a mechanism best used to broadcast a message about a product. In fact, that's how marketers typically operate. They're talking about what they do.
What we advise marketers to do, in the book and through our agency, MEplusYOU, is take a step back and get clear on why you exist, what your reason for being is, what the world would lose if you disappeared, what you believe, what you stand for.
When a marketer is clear on those things, social media becomes a great way to connect with like-minded people. Really, the whole construct of marketing is less about, "How do we go out and influence people?" and more about, "How do we get clear on what we stand for and attract people who are like-minded?"
Brendan: You cite the Brand Sustainability Map in your book. Could you talk about what that is, and some examples of companies that get high and low marks on that one in particular?
Doug: You bet. First, companies are used to thinking about and measuring transaction; the degree to which people are buying from them.
They often talk about trust, but talk about trust in a way that's very different from our own understanding of trust. They talk about trust as a means to an end, a way to grease the skids for transaction.
I believe thinking of trust as a means for garnering more transaction is like thinking of a child as another tax deduction, right? It's more than that. The beauty of the Brand Sustainability Map is that it takes those two factors of trust and transaction, and acknowledges them as distinct factors that you can look at and measure.
You can look at some companies that do particularly well on that, like Target or Amazon; companies that maybe not everybody has such a strong connection to, or a love of, but at least some people do have a love of.
USAA is another great example of a company that isn't intending to reach everyone or have a deep relationship with everyone; they're focused on the military and military families, and they have love among that group. That would be in the upper right, Sustainable Relationship quadrant.
If you move to the lower left, Limited Relationship quadrant, you have American Airlines. American Airlines has had a slogan, "We know why you fly," which is such a great example of marketing B.S. It doesn't seem to enter into the way they make decisions or think.
Brendan: You're also on the board of Conscious Capitalism. Let's talk about how this fits in with that movement. Obviously, big companies -- Whole Foods, Starbucks, Southwest Airlines, you mentioned Panera -- are active in that movement.
If you had to boil it down, maybe purpose over profit, how does this book and the Relationship Era fit into Conscious Capitalism?
Doug: To boil down Conscious Capitalism, certainly there's an orientation around purpose. There's also an orientation around profit ...
Brendan: You have to have profit, right?
Doug: You have to have profit, and in fact profit is not an end unto itself. It's the result of sustainable relationships. The companies that get that tend to have the greatest level of profit.
This book, Can't Buy Me Like, maps it directly to the principles of Conscious Capitalism; the idea that when you start with that clarity of what you believe and what you stand for, great things happen. You have loyal customers, you have engaged employees, you have happy investors. That's really the essence of what we're talking about.
In fact, this book is the application of the principles of Conscious Capitalism, specifically to the relationship between a company and a customer.
Brendan: One of the things that we don't like at The Motley Fool is we think a lot of companies are too short-term focused instead of long-term focused. Is that what you find when looking at marketing and the way marketers think? Are they too focused on getting people in the door right now, and not necessarily making them a customer for the long period?
Doug: Without a doubt. The average tenure of a Chief Marketing Officer is around two years. The average CEO is thinking about this quarter, so no doubt marketers are putting a lot of attention toward the short term.
What they may not realize is that even in the short term, if they don't have trust in the relationships with customers, they're spending more money. They're spending more money discounting and promoting -- so making less revenue -- because they're having to discount, and therefore making less profit.
They're also spending more money on paid media because they don't have that group of loyal customers that are out there actively advocating for their brand. By increasing the level of trust among their customer base, they have an opportunity to spend less and to generate greater profit.
Brendan: It's an excellent book, Can't Buy Me Like. Thank you so much for your time.
Doug: I enjoyed the conversation, Brendan. Thank you.
The article The New Era of Advertising originally appeared on Fool.com.Brendan Byrnes has no position in any stocks mentioned. The Motley Fool recommends Google, McDonald's, and Panera Bread. The Motley Fool owns shares of Citigroup Inc , Google, McDonald's, and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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