Insights on how brands can build loyalty at the speed of change - By Matt Godfrey, President of Y&R Asia. The erosion of consumer loyalty, or 'The Flux Paradox', is being driven by rapid product innovation. This dwindling brand loyalty, in Asia at least, is borne out by Y&R’s own proprietary research ‘Generation Asia’; a survey conducted by Y&R Advertising and VML, of 34,000 people across 10 countries.

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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.

12. MATTHEW
GODFREYPRESIDENT – ASIA
MATTHEW.GODFREY@YR.COM
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