How digital assistants will change media research between now and 2028

Recently I was invited to speak in a debate at the Media Research Group (MRG) conference in Bratislava. We had to imagine what media research would look like in 2028.  I chose to concentrate on the effect digital assistants will have.  We were encouraged to be a little controversial and it was an enjoyable theme to warm to.  Here is my script:

If I think back now to media research in 2018 I could laugh.

But I won’t laugh because I’d be using laughter as a heuristic cue for you to process in a low involvement way.

In short, it would be weak communication with your weak human minds.

And I’m happy to say that in 2028 we’ve now eliminated human weakness from media research.

Back in 2018 we dressed human weakness up and gave it the name System 1 Thinking. It’s what we do when we’re not concentrating. It’s automatic, emotional … and weak… thinking. It saves us energy but it’s enormously flawed.

Can you believe this; it’s how we used to make most of our choices?

A whole discipline grew up called Behavioural Economics, about the impact of human weakness on economic decisions.

But a big problem for us researchers is that System One thinking made people unreliable witnesses to their own behaviour.

For example, people say advertising doesn’t influence them, but it does.

16 years ago the psychologist Robert Heath wrote a book about how advertising Seduces the Subconscious. The less attention people pay, the more seduced they are. Did you ever have your subconscious seduced by advertising in 2018? Hashtag Me Too!

….

But since then we all got Digital Assistants. They became our very own digital PA, our synthetic butlers. Digital Jeeves to our analogue Woosters.

We delegated our choices to them.

They make all decisions for us in high attention System 2.

There were two phases in our willingness to delegate choice to them.

….

The first phase was about convenience. Even in 2018 we gave away data for convenience – so we were equally happy to give up our choices for the same prize.

It immediately paid off. They made better decisions. We became content.

Studies of human happiness show that people are more content when their purchases fit their lives. Not when they fail to live up to some impossible dream like the subliminal stories in branded advertising. Drinking Nespresso does not a George Clooney make!

So we also gave them our media choices. I used to read The Guardian and The Economist because – it turns out – I thought they made me look dead clever.

My digital assistant pointed out that I was intellectually more suited to watching reruns of Tattoo Fixers – and Extreme Tattoo Fixers – so that’s what I do. It makes me happy.

We called it the “big pivot to content marketing”. Not Content Marketing like Native Advertising Content Marketing (that’s so 2018) but marketing to make me content.

More specifically, marketing to MY digital assistant to help it make ME content.

….

We’re now in Phase Two.

We now give our digital assistants more control because it guarantees us a longer life.

My digital assistant has full exposure to my biology. He knows what I’m going to die of – and how to delay my death.

Marketing has pivoted to Lifetime Value Marketing. I don’t mean marketing based on someone’s estimated total spend on a brand in their lifetime. That’s so 2018. I mean marketing aimed at adding more value – i.e. years – to my lifetime.

When my assistant orders my shopping an old bearded sailor advertising a brand of fish finger doesn’t influence him. He no longer cares about brands that make me content. He’s interested in finding the right piece of fish to protect my heart.

He puts in front of me the media content that will keep me alive by reducing my stress OR keeping me alert OR helping me sleep OR giving me pertinent information.

His KPI is getting me to my 100th birthday.

….

Now, my main KPI, as a media researcher, is still consumer insight. But, these days I only talk to digital assistants.

It is refreshing. I can ask them questions a human would struggle with, like:

Why did you buy this brand?

OR

What programmes have you watched?

 

Qualitative work is fun these days.

I love paired depth interviews with both human and assistant.

It’s a bit like paired depth interviews used to be with married couples….

…Where he’d say:

“I like a bit of chutney on my cheese sandwich”

And she’d say, “You don’t, you’ve never liked chutney on your cheese sandwich”

Except now it’s a bit more like this.

Human, “Telly? Dunno. I just like watching football”

Assistant, “He’s saying that because he’s in his ‘Comfort’ needstate. Give him some sugar and he’ll tell you what he watches in his ‘Indulge’ needstate”

….

So, digital assistants have brought a new age of media research. It’s a return to asking somebody questions to get answers only this time you get answers.

It’s not asking people for an unreliable commentary of their own life.

Nor is it asking questions of big unstructured datasets that those datasets were never designed to answer. That kind of big data, these days, looks… small. Or… weak.

Digital assistants have only one job, to understand their human inside out, what makes them content and what keeps them alive.

It’s not big data; it’s strong data – about individuals.

And THAT absence of weak data is what characterises media and advertising research in 2028.

THE END

 

 

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To Print or Not to Print: The Publisher’s Dilemma

I’ve recently joined with a few industry luminaries in a venture called Red River Blue.  As a freelancer it is always good to join forces occassionaly with others to see what might come of collaboration.  To get their site up and running we’ve been writing blog posts.  Here is my first contribution and you can see it on the Red River Blue site here – or read it below.

To print or not to print, that is the question publishers are asking themselves as their audiences increasingly turn to smartphone screens.

On one side of the argument is economics. When The Independent stopped printing it was selling 55,000 copies a day but there are around 30,000 independent retailers in the UK and 13,000 supermarkets. Sending one or two copies to each of them just isn’t good economics.

It doesn’t help the economics when the costs of newsprint and glossy paper go up. Nor does it help when the public are increasingly concerned about the use of paper, no matter how much of it is recycled.

If you stacked up every copy of the Evening Standard distributed in one evening the tower would be ten times the height of the Shard. That’s an awful lot of paper to buy and recycle.

But print is resilient. Kindle reading didn’t take off as thought and book readers still buy paper books. Metro and Evening Standard reading is still high even though 55% of the London Underground is over-ground where the newspapers compete against smartphones.

And then there are the Lazarus titles that made it back into print despite going ‘digital only’ with great fanfare. Centaur brought The Engineer back into print and readers rejoiced, saying how much they’d missed it – but its content never actually went away!

Some work has been done to understand just what it is about print that makes the experience different to screens. In a nutshell print reading requires a different sort of energy and you learn more from it.

Research by NewsUK discovered that reading The Times via a tablet triggers more electrical activity so it encodes into memories faster than print. Screen reading is the hare but print reading is the tortoise. Reading The Times in print encodes the information into memories more slowly but in a more relaxed way.

Compare that with the findings of researchers in an Israeli Institute of Technology in 2011. They had people prep for a multi choice exam either using screen based or print based course material. When given only 7 minutes to prepare both groups did equally well. When given an indefinite period to prepare the print group did much better. The researchers put it down to print encouraging people to read with goals and revisit paragraphs to ensure they understand. This is consistent with the idea that print is Aesop’s tortoise.

Funnily enough there’s a new news organisation called Tortoise Media. It is the pet project of James Harding, ex Times editor and BBC News director.

Harding’s gamble is that slow news is better than the constant wearing whirl of breaking news and that people want to take time to learn and make sense of news. Slow Down, Wise Up is his slogan. Tortoise will run digital editions but their “small book of big reads” called the Tortoise Quarterly will appear in print.

Harding has had the advantage of building from scratch and deciding on his ideal use of print. Notably it’s less central in the proposition than digital content, despite his willingness to throw out the worst of the new.

The Guardian, with a strong legacy print history, are also re-thinking ink. David Pemsel, CEO recently said, “You can imagine at some point there will be a brief, saying, ‘What are the various ways that print can add value to people’s lives?’ But then there’s this binary thing of, ‘When are you going to turn it off?’ – it’s much more nuanced than that. People in this digital age love the tangibility of print and we’ve got to respect that.”

Romantics might like to think his brief will uncover aspects of print unique to print. More likely he’ll look at the benefits of print and ask if they can be replicated digitally.

Notably The Times has been more successful at finding and keeping digital subscribers by adopting digital editions (they publish three daily digital editions) rather than chasing breaking news. The idea of daily editions has been taken from the print world.

It’s probable that other print tactics will find their way into digital publishing. The ability to annotate articles, for example, is like the age-old learning aid of jotting notes down in the margin.

Print isn’t dead yet, not by a long chalk, but nor are attempts to replicate the best of it in the digital world. Publishers should keep an eye out for emerging examples.

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Holiday mCommerce – the new Jackie Collins

woman wearing sunglasses at the beach

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This week I presented at a breakfast conference given by JC Decaux Airport to mark the launch of their new “Possibility Guaranteed” proposition to the market.

When I was helping myself to coffee before the event I spoke to someone from a media agency. She said that what she’d most like to hear about is money spent via mCommerce by people on holiday.

It was great to hear that because it was exactly what I was about to present! It put a spring in my step.

I gave my paper the quirky title, ‘The New Jackie Collins’ and my point was that the time holidaymakers would traditionally spend reading (and Jackie Collins has to be the ultimate holiday novel writer) can now be spent shopping on their mobile phone.

I’m very interested in the idea that traditional reading occasions are now becoming shopping occasions too. Previously I’ve conducted research looking at the money people now spend via mCommerce on their commutes. Now, along with JC Decaux, I’ve investigated the time people spend on sun loungers and deck chairs and in airports – and the money they spend via mobile from there.

Holiday mCommerce, as I call it, has gone from nothing to a market worth £4.4bn a year in just a few years, according to my research. If it rises in line with mCommerce projections it will be worth £7.5bn four years from now.

Here are ten highlights from the research:

  1. 83% of those who flew on holiday from a UK airport last year took a smartphone and half took a tablet computer. In fact, 95% used at least one Internet enabled device.
  2. 29% of people who flew on holiday last year downloaded something at the airport on the way out. 11% downloaded something on their flight and 10% downloaded something at an airport they changed planes at.
  3. 43% of those flying on holiday make at least one online purchase at an airport, on a plane or at the destination.
  4. A third of those who fly on holiday describe online shopping as a BIG ACTIVITY on holiday these days and say they’re doing more of it now than ever before.
  5. 20% bought groceries online at the airport and half of them spent over £100 on groceries. Have you ever worried that if your plane is late on the return trip you’ll miss your Sainsbury’s order?
  6. 12% bought clothes online when at the airport. Half spent over £90.
  7. 67% of people who download things at the airport or on holiday love looking at airport advertising. They’re 22% more likely to enjoy it than the average air traveller.
  8. 72% of people who buy online at the airport or on holiday love looking at airport advertising. They’re 30% more likely to enjoy it than the average air traveller
  9. Two thirds of downloaders and buyers say they’re thinking about things to buy in airports. Two thirds also say they’re less price-sensitive than usual when in airports.
  10. Four out of five holidaymakers’ look for accommodation that has WiFi. No wonder most sun lounger shoppers say they will be doing more of it in the future.

The research breaks out the spend data by category so there is plenty in it that will be super-useful to media agencies. It is a neat little project and certainly worth re-visiting in time as this market place really takes off.

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Tomorrow’s Advertising World: What will become of media context and gentle nudges?

white and clear glass syringe

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Recently I finished a thought-provoking book called Homo Deus: A Brief History of Tomorrow by Yuval Noah Harari. The author theorises about the future of everything from democracy to longevity.

What lessons did it have about the future of advertising and media?

First, let me describe two current obsessions of the media and advertising worlds.

At this moment in time media advertising teams talk about the importance of context. They know their audiences aren’t hard to reach anymore (an ad buyer can bypass their title and reach their audiences on another site, like Facebook). Therefore the media ad sales team talk a lot about reaching their audience in the mindset created by their particular title or programme.

Mindsets might include ‘fun and relaxed’ (Heat Magazine), ‘serious and engaged’ (The Spectator), ‘busy and fast paced’ (Metro) and ‘tired and hungry’ (the commuting audience of The Manchester Evening News).

The theory goes that you can guess the moods they are in and talk to them, via your advertising, in an appropriate tone of voice. A tired evening commuter or a Heat reader enjoying a light-hearted break might be more susceptible to chocolate bar advertising than the same people in different day parts.

Also at this moment in time the shelves of advertising practitioners are filled with books about behavioural economics (for example Richard Shotton’s The Choice Factory: 25 behavioural biases that influence what we buy) and psychology (like Robert Heath’s Seducing the Subconscious: The Psychology of Emotional Influence in Advertising).

They’re fixated with the point at which advertising meets the human mind. They know most people pay little attention to most advertising and know that can be good for them.

Behavioural economics tells them System 2 thinking requires heuristics that nudge people towards particular brand choices rather than persuasive features and benefits.

They know advertising works best when it doesn’t trigger the part of the brain that rationally appraises and counter argues messages. The more peoples’ brains do those things, the less advertising influences them. After all, the human brain is, right now, the most sophisticated intelligence tool we have.

So media context and the moment advertising hits human brains are obsessions, right now. But what happens right after right now?

Two long passages from Homo Deus stand out.

The first is this:

“For four long years I may have repeatedly complained about the PM’s policies, telling myself and anyone willing to listen that he will be ‘the ruin of us all’. However, in the months prior to the election the government cuts taxes and spends money generously. The ruling party hires the best copywriters to lead a brilliant campaign, with a well-balanced mixture of threats and promises that speak directly to the fear centre in my brain. On the morning of the election I wake up with a cold, which impacts my mental processes and induces me to prefer security and stability over all other considerations. And voila! I send the man who will be ‘the ruin of us all’ back into office for another four years.

I could have saved myself from such a fate if only I had authorised Google to vote for me. Google wasn’t born yesterday, you know. Though it won’t ignore the recent tax cuts and election promises it will always remember what happened throughout the previous four years. It will know what my blood pressure was every time I read the morning newspapers, and how my dopamine level plummeted while I watched the evening news. Google will know how to screen the spin-doctors empty slogans. Google will understand that illness makes voters lean a bit more to the right than usual, and will compensate for this. Google will be able to vote not according to my momentary state of mind and not according to the fantasies of the narrating self, but rather according to the real feelings and interests of the collection of biochemical algorithms known as ‘I’.”

And, of course, if you turn it around, Google will know when I’m susceptible to political ads and chocolate bars and all sorts of other choices.

Homo Deus talks a lot about the new collaboration between biology and technology and how we will gladly give away our biological data in return for extended lives.

If our biological data tells ad servers when we are tired or low on blood sugar or happy or experiencing a high, what need is there for media contexts that simply suggest audiences might be in certain moods?

Another interesting passage is this:

“Cortana is an AI personal assistant that Microsoft hopes to include as an integral feature of future versions of Windows. Users will be encouraged to allow access to all their files, emails and applications, so that it will get to know them and can thereby offer advice on myriad matters, as well as becoming a virtual agent representing the user’s interests. Cortana could remind you to buy something for your wife’s birthday, select the present, reserve a table at a restaurant and prompt you to take your medicine an hour before dinner. It could alert you that if you don’t stop reading now, you will be late for an important business meeting. As you are about to enter the meeting, Cortana will warn you that your blood pressure is too high and your dopamine level too low, and based on your past statistics, you tend to make serious business mistakes in such circumstances. So you had better keep things tentative and avoid committing yourself or signing any deals.

Once Cortanas evolve from oracles to agents, they might start speaking directly with one another on their masters’ behalf. It can begin innocently enough, with my Cortana contacting your Cortana to agree on a place and time for a meeting. Next thing I know my potential employer will tell me not to bother sending a CV but simply allow his Cortana to grill my Cortana. Or my Cortana may be approached by the Cortana of a potential lover, and the two will compare notes to decide whether it’s a good match – completely unbeknown to their human owners.”

And if all that can happen why can’t my Cortana be approached by the Cortanas of all the supermarkets? They can discuss my cholesterol level; my blood sugar and family history as well as my upcoming 10k run and decide who will deliver the best basket of groceries to my house. The decision is made and the deal is done without my any part of my brain being triggered (consciously or subconsciously). Plus it was all done in System 1 thinking (because artificial intelligence doesn’t need to think in System 2).

Where is advertising now?

Where is media context and where is marketing’s interest in behavioural science and psychology? The marketing director’s day job will move to ensuring access to the best biological data and the most up to date and best informed Cortanas. How different our world will look.

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Data and Me: The Privacy Statement of Neil Sharman Ltd

door handle key keyhole

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If you’ve read my blog or website (or business cards or LinkedIn page) you’ll know that Neil Sharman Ltd is a business that deals with market research data and, sometimes, other forms of data such as digital analytics.

Data security is a hot topic these days (not least because of the arrival of GDPR) so this blog piece is my public statement about my use of data – and my privacy information notice.

Please read on if you’re someone who is considering taking part in research for Neil Sharman Ltd or if you have a general interest in what I do. Anyone considering taking part will need to freely and specifically give his or her consent – and feel informed (this blog piece should help with the latter).

Firstly I should say that, as a research consultant, I work on very varied projects so I’ve based this statement on projects I’ve done in the five years that I’ve been working for myself.

When a company employ my services they typically hire me to do one or a few of several things.

They might employ me to do desk research (pulling together information in the public sphere e.g. in articles and books) or to interrogate research or data they already own.

They might employ me to generate new primary market research data, which I do by employing a research agency to conduct research with the general public or amongst business audiences.

One client company employs me to do employee research, which I do through an external research agency.

Finally, a client company might ask me to conduct qualitative research, which means I conduct depth interviews with individuals or focus groups with a handful of people in a room.

In the majority of cases I am the recipient of anonymous data. I get figures to analyse and individuals cannot be identified from the data. For example, I might see a figure that tells me, “15% of people surveyed read a certain publication in the last year” but I’ve no way of knowing who they actually are as individuals.

However, because I am involved in commissioning the production of some of the anonymous data I receive I do have responsibilities relating to the rights of the people whose data has helped build the output that I see. For these reasons I ensure all the suppliers I work with (and any companies they might outsource to) have a sensible approach to GDPR, identifying, mitigating and addressing data risk.

As research companies collecting the data they have access to identifiable data and pseudonymous data, which means they can identify individuals either directly or by using additional information (e.g. a list of respondent names and ID numbers).

They, like me, take on the role of Data Processors in the projects we work on. My client, who I am ultimately commissioning the project for, has the role of Data Controller as they determine the parameters of a project and pay me to deliver the data as specified.

Both roles (Data Processor and Data Controller) carry legal obligations and both have legal liability for any breaches. For example, Data Processors will report any breach to the Data Controller and they will report it to the ICO within 72 hours of the breach if they determine it to be a significant breach. Any individuals concerned will also be informed, where appropriate.

As a Data Processor I’m obligated to ensure the tools I use (cloud based tools, for example) are compliant with data law.

The research agencies I work with, as the holders of identifiable data and pseudonymous data, will typically undertake a privacy risk impact assessment, which may involve my clients and I if necessary, in order to determine the type and level of risks and how such risks might be mitigated and addressed. They are also well placed to write the log of what is processed, do any necessary audit relating to the project and be the point of contact if a respondent has queries.

Earlier in this blog I say that individuals cannot be identified from the information I receive. However, I should add that sometimes I receive ‘open ended responses’. This means that a respondent might have typed a response to a question into a questionnaire, rather than ticking a box.

From a researcher’s point of view it is interesting to read people describe something in their own words and open-ended responses often tell us what we didn’t know we didn’t know. When I read these open ended responses I can’t usually tell who wrote what but sometimes a respondent might give away information within their reply that might identify them.

For example, someone might write, “I’m the last remaining male in St Cuthbert’s church choir”; information from which a keen sleuth might find them.

For this reason, and for reasons of general security, I password protect all the data I receive in spreadsheet form and I keep all hard copies in a locked cupboard. I use encryption software and Secure Transfer Protocol sites too. I also delete or otherwise destroy data (e.g. by shredding) a year after collection.

Similarly, when I conduct qualitative research (like depth interviews and focus groups) I collect a lot of ‘open ended’ responses from respondents. Qualitative research is effectively a structured conversation with people and I can’t predict what they will tell me within the conversation. Again, what they say can identify them.

Also, when I conduct qualitative research I’m in possession of names and contact details of the people recruited for the research (typically by a qualitative research recruitment agency). I know their names and, of course, refer to them by name during the focus groups and interviews. I keep these details password protected and delete them once the work is done. Hard copies are destroyed.

I do record the conversations (and recorded voices can be even more easily identified than written quotes) and transcribe them later. I password protect the transcriptions (keeping hard copies and recordings in a locked cupboard) and destroy the transcriptions within a year. Recordings are deleted in less time; they are destroyed soon after transcription.

For such qualitative projects, where Neil Sharman Ltd is the main body collecting the data (i.e. there is no research firm employed to collect the data), I write the risk assessment, identifying the level of risk and how I might mitigate and address it. In these instances I am, again, the Data Processor and my client is the Data Controller.

When I’m hired to work on employee research a list of employees with an ID number allocated to each employee as well as an email address is typically sent to the research company and they send out the questionnaires to the email addresses. I shouldn’t receive this data (I’ve no need to see it) and, if I am copied in, I delete it.

However, when I receive the responses to the questionnaires I see the ‘big picture’ data and don’t see the responses at an individual level. In fact, I can’t see responses to any question where fewer than five people have responded, so that it is unlikely that an individual can be identified from the quantitative part of the results.

Therefore the main risk of someone being identified is from open-ended responses. Being employees, they might be identified by either a piece of information that can pinpoint them (“I’m the only member of marketing with a window seat”) or a turn of phrase or opinion familiar to people who know them (“as I often say to my boss, our strategy is like the 1998 FA Cup Final game”).

Consequently I apply the same processes of passwording, locking and deleting. It is noted in the risk assessment that the familiarity that bosses have with employees means there is a slightly higher risk of open-ended responses leading to identification of individuals. To mitigate and address this risk, employees are also reminded of this risk by the research agency when they are approached to take part in the research before they commit to participating.

So, there we are. I hope this explains clearly what I do and how I work with data. I hope it also demonstrates that privacy by design is my default culture. If you are a potential respondent thinking of taking part in research for Neil Sharman Ltd then agreeing to take part will be agreeing to me dealing with your data in the manner described.

If you’re interested in finding out more you request my Data Protection Policy. Also, here are the Market Research Society’s Code of Conduct and GDPR research guidance. Additionally you can contact me at neil@neilsharman.co.uk

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The research led re-design of George Osborne’s Evening Standard

mastheadEarlier this month the Evening Standard was re-launched by its editor, the ex Chancellor of the Exchequer, George Osborne.

I was commissioned to conduct the focus groups for what Osborne described as “extensive research” amongst readers. YouGov conducted the quantitative element of the research.

The re-launch has caught attention and Osborne has been interviewed by the trade press. He has also been interviewed by Anne McElvoy in a live session at Ad Week Europe.

Below I’ve captured the ten best quotes from Osborne that describe his ambition for the paper, his role, the redesign and the role of advertising in the newspaper.

“[The redesign will] turn up the volume on the Evening Standard”

“What I’ve tried to do is just give the paper more influence, to give it more clout, to make it the go to paper in the country… I want its political coverage and international coverage to be credible and move events at Westminster or Whitehall or around the country”.

“To remind readers that we’re still a paper that’s heart is still in London we’ve tried to reflect the values of London, which is pro-business, socially liberal and internationalist, we’ve taken the Eros and really enhanced that and made it red”.

“My role now is to get to the things that in my previous job I would not have told you. My job now is to be the editor and I have a little bit of an advantage because I know where to look”.

“Where is the paper with a large readership that’s saying we don’t have to have Jeremy Corbyn or Jacob Rees Mogg running this country, we can have something in the middle? That to me feels like a big vacated space in the middle of the British media market. Yes, there are some broadsheets that aspire to be that but with much smaller readerships. Some of the middle market tabloids have got pretty shrill. That leaves a sodding great gap in the middle and I want to park the Standard right there”.

“Your Evening Standard reader wants to know about Kim Jong-un but also wants to know about Kim Kardashian. You can pitch to both interests. You can talk about Brexit but you can also tell people the best place to get breakfast in London”.

“Because I was talking about entertaining as well as informing, we’ve more ability [on the front cover] to puff things inside so people are drawn in [note that this can include commercial content]”.

“Good advertising can make it [the newspaper] look better”.

“Very simply our paper is available for free so we’ve got to raise money in advertising and sponsorship to provide that product for free and we’re not proud of that in any sort of sniffy sense. We will work with every advertiser to design a product that works with the newspaper and we will wrap the paper as many times as we’re asked to wrap it”.

“[On sponsorships] I don’t feel in any way compromised by these partnerships. I think they are enormously strengthening to the paper because they allow us to invest in good quality journalism and, in some cases, things we would not have been so well staffed to cover we can cover more. As of last week we now have a three-page travel section that we didn’t have before”.

The new look paper looks pretty smart and includes many ideas generated by the reader research. They were fascinating focus groups to moderate and we covered a lot of ground. Londoners are opinionated and passionate about their paper and I suspect it will dominate their commutes for years to come.

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What do city investors think about brands, ad spend and media? Take outs from the Citi Research paper at the @Newsworks_uk Shift conference

pexels-photo.jpgThe Newsworks Shift 2018 conference began with a particularly interesting, scene setting presentation from Citi Research’s Catherine O’Neill.   It was billed as, “what investors really think about brands, advertising and marketing.”

Below I’ve listed what, to me, were the key points and quotes. Against a dark sky of short termism there are rays of hope for ad spend and the established media.

Advertising hasn’t been seen as appropriate in the current, low growth economic climate. “A&P is generally linked to sales growth and since the recession advertising as a proportion of GDP has been falling… The low inflation environment has also put the emphasis on promotion, i.e. price discounting [rather than advertising]”

Their faith in advertising has been eroded. “There have been market share gains made by new entrants with limited traditional marketing support”, “Advertising is not seen as the barrier for entry that perhaps it once was for new entrants. So if advertising is a cost and sales growth is slow does that mean advertising isn’t working anymore?

The practice of zero-based budgeting has reduced ad spend and focussed companies on the short term. “In the past two years specifically we have seen cuts to advertising in one of the largest advertising category – consumer staples – and it has come by the adoption of what they call zero based budgeting which basically means they start the budgeting process from scratch every year, they don’t just carry on doing what they were doing in previous years.”

The lever companies are using to preserve their margins is advertising spend. “In the first half of last year 90% of the margin improvement of consumer staples came from a cut to brand support and a reduction of A&P as a percentage of sales. At the same time you can see falling growth for that industry.”

The Internet is responsible for a significant amount of money leaving advertising altogether. “In the US we estimate the rise of the Internet has led to $100bn of advertising spend coming out of the market. If the Internet had not been invented advertising spend would have been a lot higher than it is now and digital has been the answer to cutting costs, pushing down the pricing.”

Advertising has been repositioned in their minds as a different sort of outgoing. “Advertising was once seen as an operating expense but it has increasingly become a cost of sale, which means it has become more performance driven, more measurable and ROI has to be assured.”

They are slowly realising that advertising was doing a job after all. “The evidence suggests that brands cutting investment is not necessarily the right decision and we might be reaching that realisation now. There is a correlation between brand support and market share and we think this has strengthened since 2014.” “The reason the market struggles with brands is that it isn’t tangible; it isn’t easy to put into their financial models so it is very hard to put a value on it. But the share prices of the top brands tend to outperform. Brand Z data plotted against the share price performances of the market show the top 30 global brands have doubled their returns against the market.”

New entrants to markets might establish themselves with little traditional marketing support but investors are now realising it isn’t a reason for incumbent companies to cut ad spend. “Cuts to brand support may have exacerbated the structural erosion they’re facing and allowed new entrants in more easily… Underinvestment in brands, we think, risks long-term volume declines as new entrants get footholds in the market.” “If barriers to entry are lower for new brands then brand support does become more important over time.”

Companies have been able to cut ad spend but still deliver for shareholders – but their ad spend may return. “Organic sales growth for US food companies [some of the first to cut advertising two or three years ago] pretty much slowed to zero over the last couple of years. At the same time they were delivering the best bottom line earnings per share growth of all of the consumer staples sub sectors. That is because they implemented very large cost cutting programmes and a very extensive brand rationalisation process. Investors are all too aware that cutting costs is not a sustainable long-term strategy and at some point the company has to look at creating growth again… We have seen some of the US food companies talking of increasing their share of A&P again.”

They are realising the importance of context for digital advertising. “It has become clear that not all digital is equal. The concerns about reputational risk and brand safety have definitely reached the boardroom.”

GDPR is changing their view of established media brands. “GDPR and the consent needed for consumers to be tracked could benefit traditional media. We do think that companies with a strong relationship with consumers will find it easier when GDPR comes in… It’s a chance to clean up websites, in terms of all of the trackers that are on there. Use it to prove the effectiveness of the media.”

The Direct to Consumer trend will increase the relevance of B2C media. “We expect to hear more and more about Direct to Consumer. Brands or products that have not had a direct relationship with consumers in the past will be reviewing and repositioning their model. Some will have to move from a B2B to a more B2C type business and therefore communications will become more important and they will need a strong brand to ensure they don’t get lost”

You can read more about the Newsworks Shift conference here

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