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The Flux Paradox - Branding at the Speed of Change

  2. LAW Professor Gordon E Moore is best known for his prediction that the number of transistors on an integrated circuit will double every two years. Having held true over a number of decades, the impact of ‘Moore’s Law’ has been explosive throughout the computer industry. When the prediction was made, the number of transistors on a circuit was around 2,300; the world record currently stands at over 6.8 billion. This has ultimately created a state of flux, in which brands are developing ultra-rapid product innovation that is eroding past notions of brand loyalty. That brands themselves are driving this change, and causing the erosion of their own consumer loyalty, can be described as ‘The Flux Paradox’. MOORE’S
  3. This exponential tide of evolution, that were at first ripples, are now shockwaves through the entire marketing ecosystem. New technology inspires new possibilities, which in turn increase product innovation and shortens replacement cycles. A brand like Apple is a perfect example of this. When viewed in totality, the innovation and creativity they have created not only illustrates a sense of constant dynamism in the category, but also a sense of the accelerating impact this has had on society, culture, revenue models and consumers. In Apple’s first 10 years, they released around 9 products, roughly 1 major launch a year. But in the last 10 years it’s been closer to 30 physical products, not including perpetual software upgrades and the creation of entirely new platforms like iTunes and App Store. Like Moore’s Law, this pace of product development and deployment is not slowing down but accelerating exponentially. A prime example is the iPad. First launched in April 2010, just 4 years ago, Apple has since launched five versions. It is an invention that has turned the PC industry on its head in just 36 months by creating the tablet industry, which shipped over 180 million units in 2013. Add to this the ecosystem of magazines, podcasts, applications and entertainment that have IMPACT ON PRODUCTS all been specifically designed for this segment; all within four years and as a consequence of innovation empowered by Moore’s Law. Perhaps this is to be expected from a tech company but the same pattern has emerged in many sectors. FMCG companies like Johnson & Johnson have announced that they have actively shortened their innovation cycle from 3 years to 18 months. Getting products to market twice as quickly. In some major categories, analysts estimate that as much as 50% of revenue is now derived from products that have been in-market for less than 18 months. It’s not just more, it’s new, it’s replacement, it’s upgraded and updated. And it’s in every sector and exponentially faster. It is life in a constant state of beta where consumers are buying into products and services with the full knowledge that they will be quickly replaced. And it is the brands themselves that are creating and driving this behaviour. IN SOME MAJOR CATEGORIES, ANALYSTS ESTIMATE THAT AS MUCH AS 50% OF REVENUE IS NOW DERIVED FROM PRODUCTS THAT HAVE BEEN IN-MARKET FOR LESS THAN 18 MONTHS.
  4. ? ? ? IMPACT ON CONSUMERS FOR DECADES, ONE OF THE TENETS OF MARKETING WAS TO BUILD STRONG BRAND CONSISTENCY WHICH WOULD IN TURN BUILD LOYALTY. HOWEVER, IN THE PROCESS OF GETTING RAPIDLY TO MARKET, BRANDS ARE CREATING THE FLUX THAT ENCOURAGES CHURN AND CHANGE. This has resulted in a rapidly increasing number of consumers who are becoming firmly of the view, that whatever they own, desire or experience it will be in a constant state of upgrade. And this is also becoming true of the media we consume. Media is now changing, disappearing and morphing perhaps even quicker that the products that are being advertised on them. While this differs from market to market, the global trends are very clear. By 2020 80% of all media will be digitized. And once it is, it can be targeted, auctioned, tailored, accountable, socialized...and of course upgraded. The massive challenge for brands is the dichotomy that, for decades, one of the tenets of marketing was to build strong brand consistency which would in turn build loyalty. However, in the process of getting rapidly to market, brands are creating the flux that encourages churn and change. They are creating the very inconsistency that they have been traditionally fighting against. And all across Asia, we are only seeing the tip of the iceberg of that change.
  5. For example, while 2.3 billion people worldwide are on-line, 80% of Asia’s 4.3 billion-strong population are yet to take that step. And in terms of acceleration, perhaps the most important statistic is that by the end of 2014, the mobile web will take over; more people will access the internet from their mobile devices than from anything else in Asia. In fact, between iPads and iPhones Apple is selling approximately 140,000 devices per hour. Markets like Korea, Australia and Singapore already have over 70% mobile broadband penetration, allowing fast delivery of content to devices anywhere. In 2014, China starts rolling out 4G LTE services as well. This drive towards content rich mobility is also changing how content is consumed. OPPORTUNITY IN ASIA
  6. One of the biggest shows in the world, American Idol attracts on a good night 20 million viewers for 55 minutes. These are respectable numbers commanding a significant advertising premium, with major brands like Coke and Ford deeply engaged in the platform and content. At the same time, Facebook viewers beat that figure by 31 times every day. YouTube has over 4 billion views per day - put into context the 2010 World Cup garnered 2.2 billion viewers. Be it TV or online, the content on these different platforms is interlinked and symbiotic. Content aired on TV finds it ways to social platforms, and vice versa, instantly and continuously. This multiscreen behaviour is both a challenge and an opportunity for brands. One brand that is taking advantage of this is Red Bull. Their sponsorship and activation of Felix Baumgartner’s amazing free-fall from 24 miles straight up is a prime example. The first person IMPACT ON MEDIA CONTENT AIRED ON TV FINDS IT WAYS TO SOCIAL PLATFORMS, AND VICE VERSA, INSTANTLY AND CONTINUOUSLY. THIS MULTISCREEN BEHAVIOUR IS BOTH A CHALLENGE AND AN OPPORTUNITY FOR BRANDS. to break the speed of sound, by simply stepping outside. It became the largest ever simultaneous live web audience, with 8 million people tuning in live. This is 16 times bigger than the previous largest live web event: the opening ceremony of the London Olympics. What is key here is that this is great content, regardless of the platform. Plus, the better the content, the more the different platforms activated and integrated each other. In a world where great content will cut through platforms, Red Bull is taking the lead.
  7. NEW An important question remains, how does all this technology, products and media affect consumers across Asia, the fastest moving and growing region on the planet? In order to understand this, Y&R commissioned a proprietary study into ‘Generation Asia’, surveying 17,000 people across 10 countries. All these people aged between 18 to 35, this is a generation of people born into growth, technology and change – all with a real shot at prosperity. We discovered that the vast majority of people are now addicted to change. In fact, they actively seek it out. They hunger for variety. They live in a ‘click-through’ mentality. In fact over 75% of Generation Asia consumers are now actively seeking more variety in their lives. And it’s not just new. It needs to be both ‘new and first’. The social currency gained by being an early adopter of trends, technology, content and experiences is now becoming very important within Generation Asia. Over 60% now desire to be the first to try new things. Being not just up with trends but being ahead of them is therefore critically important to this generation. This is having a direct impact upon brand loyalty. The drive for ‘new and first’ means that across this generation we are seeing acceptance of a wider portfolio of brands that they will buy into. And the ability to rapidly forsake a brand if they fail to keep pace with the expected level of evolution required to drive their interest and social buzz. Consumers in Asia are not responding to this exponential change in product, lifestyle and media with a desire to find solid ground and security in brands that they have known to be trustworthy or dependable. Consumers are not in retreat mode. They are responding in an active manner that signals a move toward a growing hunger for experimenting with, trailing, switching and even discarding brands if necessary. This is at the heart of the ‘Flux Paradox’; the more that brands push change into the market to win consumers, the more it erodes their own ability to build brand loyalty. GENERATION ASIA Y&R COMMISSIONED A PROPRIETARY STUDY INTO ‘GENERATION ASIA’, SURVEYING 17,000 PEOPLE ACROSS 10 COUNTRIES.
  8. Some brands are learning quite painfully how fickle brand loyalty can be when innovation takes hold within this Generation. Take the mobile phone market. In 2009, nearly 70% of the market was dominated by the Symbian system from Nokia. It only took 3 years for them to lose 90% of their market share to the innovation of Apple IOS and Android. On the other side, Huawei first made a smart phone in 2011. Just two years later, they reached number 3 in global sales. In the process, the telecommunications industry has created an ecosystem where change and flux is to be expected. Consumers have responded with enthusiasm and are beginning to reject the notion of brand loyalty and replacing it with, at best, product or model loyalty. This throws long established models of brand-building into question; it requires brand owners and agencies to create new models of loyalty in a world where that very loyalty is constantly being eroded by the accelerating change that, ironically, they themselves are driving within their own categories. And just like Moore’s Law, the pace of this change is exponential. Just as many cars, phones, products and devices of a few years ago now look, feel and behave antiquated, in a few short years we will feel the same way about what we consume today. LEARNING THE HARD WAY
  9. The next few years will see the evolution of a huge range of technologies which will enter the consumer world and again spur and spin-off countless products and services that will disrupt what is currently on the market, creating new brands and even industries. The devices that we hold, watch, navigate and communicate with, change again with major innovations now coming on-stream. Innovations like bendable and wearable screens to view content and communicate upon. Combine these with tactical screens that will, either through injected liquids or electromagnetic energy, give the sensation of 3D surfaces to touch screens, and this will change how, which and why we use many devices in the home, the office and on the move. This type of technology will rapidly make Google Glass look like an old prototype, which it already is. The companies that bring the best solutions with this technology may create significant value and market share quicker than their trailing competitors can possibly defend their brand loyalty. FUTURE-GAZING TECHNOLOGIES
  10. Finally, let’s now take these mobile-enabled, customisable products and start connecting the dots between them all (and us) and we then have the next level impact of exponential change that is also fundamentally a consequence of Moore’s Law. The Internet of things. Currently there are about 7 billion devices connected to the Internet. But in the next decade it is estimated that this will grow to 50 billion things. Your fridge, your car, your wallet, your house, your dog, your gym, your food. Almost anything we can consume and own will be generating a constant stream of opportunities contained within big data. How will this affect marketing and create new moments of brand choice for consumers? A simple example would be to look at three categories to examine how they are on the verge of connecting themselves. Most premium car brands already have telemetry data and GPS data. The car knows where you are, where you are heading, what time it is and, because it is linked to your social feeds, a great deal about your personal preferences. The digital radio in the car will have advertising inventory that can be auctioned off in real time to brands who will value the space and opportunity based on time, profile and location. As the driver heads home from work, the telemetry and social data will ensure that the digital radio ad server has all the necessary information for a major Quick Service Food chain to bid and purchase advertising space on that car’s digital radio, and download advertising content in real time to the driver. That content can push the driver to pick up dinner at the nearest drive-through restaurant, giving a real time digital incentive and confirming purchase if successful. After purchase, the data will automatically download to the owner’s home gym equipment to update calorie count and convert that into a suggested exercise routine to help burn it off. Plus it will automatically update partners in the house to let them know that you’ve had dinner. This one simple example is already in development with technology companies in leading markets. Tesco’s in the UK announced that they would now use face recognition technology within over 450 stores to start identifying profiles of people entering store. Knowing the age, sex and basic demographic information of shoppers will create opportunities for brands to change promotional and communication messages in real time to take advantage of change. All these examples, and many more that are in development, are simply the next level of technology. They won’t be the end point but a continuous path of evolution driven by the consequences of Moore’s Law. As the communications industry rapidly markets these evolutions, it has the potential to undermine brand loyalty and consistency. In short, the models we have for communication have been established on a platform when innovation moved at a pace far slower than today. The industry needs to look at creating new models of branding, that embrace rapid evolution rather than a steady drive to consistency. 50 BILLION THINGS LINKED CURRENTLY THERE ARE ABOUT 7 BILLION DEVICES CONNECTED TO THE INTERNET. BUT IN THE NEXT DECADE IT IS ESTIMATED THAT THIS WILL GROW TO 50 BILLION THINGS. YOUR FRIDGE, YOUR CAR, YOUR WALLET, YOUR HOUSE, YOUR DOG, YOUR GYM, YOUR FOOD.
  11. So how will brands build loyalty amongst the flux of the ‘new first’ consumer? Brands will need to clearly distinguish between product loyalty and brand loyalty. They will need to understand, build and own the spirit and values that differentiate their brand and create relevance with consumers above and beyond the product road map handed to them by R&D. Marketers who rely only on their next product innovation to under-pin their brand will find they’re building foundations on quicksand; product leadership will be outmoded and replicated almost as soon as it hits the market. The best that product innovation can now do for a brand is to help it keep pace with competitors. This should not be taken for granted. Indeed it is now cost of entry in most categories, but it can’t sustain leadership in the same powerful way it could a decade ago. Therefore, in this context, thought leadership for a brand is now proving more critical than ever. Brands must clearly communicate a unique perspective on their category that is bigger, more powerful and more insightful than their competitors. The opportunity for advertising agencies to be the partners to help brands define and then share their perspective has never been greater. The other significant opportunity that brands are presented with today is to harness technology to build relationships. The promise of data is that brands now have the potential to be more relevant, personal and individual than ever before. Few brands have mastered how to do this well, but many have been experimenting with social models of CRM. Perhaps the most famous is Nike+ Running that creates an eco-system of personalisation and sociability around individual runners. Keeping them connected to the brand and other runners who share their passion and values around the world. The ability to keep runners locked into the brand, independent of the frenetic product cycle in the sports shoe category has been well documented and is just a glimpse at what will be possible. Too many brands are still using social networks as broadcast media and not to better understand consumer needs, let alone individual needs, but this must change as more marketers experiment with platforms and technology. The ones that crack the code first will have first mover advantage in their category and will create for themselves an opportunity to lead and grow market-share at a pace that is no longer dependent on the product road map. Social CRM has the potential to become the glue that holds relationships together amongst, and in-spite of, the instability being created by the accelerating product and software cycle. So as the impact of Moore’s Law continues to feed the fickleness of today’s consumer, thus creating the Flux Paradox, the brands that will lead are the ones that will blend marketing at both ends of the spectrum. Brands will need to be big enough to share their spirit and perspective that is both bold and compelling but they will also need to be small and nimble enough to be responsive and in-sync with individual customer needs. Marketing has rarely had such an opportunity to demonstrate its value to an organisation and in the process step into the boardroom. Moore’s Law has created this opportunity and now it is up to the industry to seize it. LEAD THROUGH THOUGHT AND RELATIONSHIPS, NOT PRODUCT SOCIAL CRM HAS THE POTENTIAL TO BECOME THE GLUE THAT HOLDS RELATIONSHIPS TOGETHER AMONGST, AND IN-SPITE OF, THE INSTABILITY BEING CREATED BY THE ACCELERATING PRODUCT AND SOFTWARE CYCLE.