Customers are increasingly “opting out” of adworld. They skip, AdBlock and pay premiums for ad-free entertainment. The rise of adblockers and paid ad-free media platforms from Spotify to Netflix is testimony to consumer desire to opt-out. Even the New York Times announced they will explore a higher-priced, ad-free subscription option in 2017.
Once a surefire way to get customers amped up and informed about your brand, traditional advertising is becoming less essential to brand building. The house of advertising continues to erode as customers lean on search, social and reviews to find things they want and make key buying decisions.
It’s no longer enough to be witty, hilarious or touching for 60 seconds and then deliver a ho-hum product or retail experience. Winning brands in 2017 will take the creativity and customer insights that were once invested in advertising and reallocate it to creating better, more convenient products and an agile organization that can test, launch and scale quickly.
Customers Have The Upper Hand
According to a 2016 study by Mastercard, 82% of shoppers say “I am a much smarter shopper than I was just a few years ago.” And they have good reason to feel more informed. Eighty percent say “technology makes me smarter” because they’re able to easily compare products, prices and reviews. Technology has leveled the playing field – brands can no longer compete on ad budget alone making it easier for unknown brands to totally disrupt a category – think of Dollar Shave Club’s challenge to Gillette and the Honest Co’s upending of the home and lifestyle product category. Both companies turned to advertising as they matured and raised funds, but initial success was due to convenience and desirability of the product. The fast-moving challenger brand will become even more prominent in 2017.
Still think that slick spot shot by an award-winning director will cut through the clutter? That same Mastercard study found that information from friends/family and consumer reviews is more than twice as influential as ads. Even the funny ones.
In his talk ‘Death of the Industrial Advertising Complex’, Scott Galloway of L2 points out that nowhere is the declining influence of ads more apparent than the mega-spend auto and beauty industries. In auto, 4 of the top 5 top advertisers lost share in 2016, bested by younger, more innovative counterparts.
In beauty, savvy shoppers are over adverts that rely on special effects, opting instead for real people posting honest reviews and tutorials—leading some brands like CoverGirl to put beauty bloggers, not models, in ads. The top 15 mass beauty brands continue to fade while the upstart indies they’ve acquired are outshining their parent brands. These “smaller” brands invest in social media influencers and product innovation over expensive broadcast media. Case in point? L’Oreal’s fastest growing labels—Urban Decay, Kiehl’s and NYX—rarely advertise in glossy fashion mags.
For no-ad inspiration look no further than Zara—the fast-fashion giant owes none of its success to advertising. The brand avoids expensive advertising and pricey designers in favor of supply chain investments so they can pounce when trends hit the runway, as well as buying up big on storefronts next to luxury brands to own the title of affordable luxury. Notice brands like Huy Fong Foods (of sriracha ‘Rooster Sauce’ fame), Trader Joe’s, Ted Baker, Costco, and Spanx as members of the no-ads club, and you’ll see that it’s possible to build a beloved brand sans traditional advertising efforts.
Above: Spanish retailing giant Zara shuns traditional advertising in favor of real estate and supply chain investments
Domino’s Australia is another good case to illustrate the creative reallocation of marketing efforts. The company decided to move some of their budget away from traditional ads to create Pizza Mogul, a loyalty platform that rewards customer advocacy. Using Pizza Mogul, customers create their own pizza, promote it across social networks or by any other creative means, and earn a piece of the profit for every pizza sold. In 11 months, the platform had 63,000 users, 130,000 pizza creations, and more than 10,000 pieces of user-generated content.
Now what? Do this instead
What do high-performing brands spend on instead of traditional ads? Real product innovation and better distribution. While the top auto companies continue to crank out ads on winding roads, Tesla has been focused on building driverless cars. In beauty, while traditional brands shot glossy ads of impossible wavy hair, the challenger brands built more desirable products, with higher-quality ingredients and striking, instagrammable packaging. High-performing brands also spend extensively on platforms for product discovery—they make it easy to find and buy with investments in influencers and search.
From the shopper’s perspective: Give me something to do; give me something to share; give me a better way to get it.
So what’s your plan for 2017? Advertise less, innovate more. Organize teams, budgets and culture to build lasting loyalty via better products and experiences, not glossier 60-second spots.
An edited version of this post was featured in the Retail TouchPoints Technology Preview