Marketing Trends : London Eye

February 1, 2008

New Zealand marketers often have a parochial view of change. To kick off 2008 NZ Marketing Magazine went to London correspondent Rachel Helyer Donaldson to gain a perspective of some of the emerging marketing trends that may hit our shores in the not-too-distant future.

As 2007 signed off, all eyes were on the global economy as it teetered towards a possible downturn, triggered by fears over the crisis-ridden US mortgage market and rising oil prices. In Britain, marketers watched anxiously as high-street retailers desperately tried to impress cautious consumers – once happy to put Christmas on credit but now all too aware of possible mortgage hikes and job instability.

Coming on top of a dismal summer that meant rain kept pavements empty, things looked dire for retailers; the last six weeks of the year is usually last chance saloon – the period when they usually make up to 20 percent of their annual profit. But desperation pervaded the over-the-top Christmas campaigns – worth around half a billion pounds, according to UK Marketing.

December’s ad breaks were brimming with high-end productions, packed with all-singing-and-dancing celebrities. Antonio Banderas smouldered, Bogart-style, for Marks & Spencer’s Christmas campaign along with regulars Twiggy and Lizzie Jagger. The reunited Spice Girls gave Tesco a helping hand, while celebrity chef Jamie Oliver once again fronted Sainsbury’s Christmas campaign, this time assisted by dozens of little elves in a fantasy food workshop. Boots the Chemist opted for unknowns but recruited thousands of them in a ‘golden age of Hollywood’ version of the office party.

“Watching TV right now is a bit like being the most attractive person in a pub at the end of Saturday night,” quipped the Guardian’s advertising columnist. “All the high-street retailers are bounding around desperately trying to impress, flashing their cash and showing off their cool mates as they bid to get you in bed, in a strictly financial sense.”

As NZ Marketing Magazine went to press it was too soon to see whether showbiz-style glitz was enough to convince consumers to part with their cash this Christmas. But what it did show is that in 2008, marketers need to get much more savvy with their sales pitch in the face of a possible slowdown.

Gaining consumer confidence will be key for marketers in 2008, says the UK chief executive of international branding consultancy Interbrand, Rune Gustafson. “Marketers and brands have a strong role to play in continuing to support consumer confidence. Confidence is a very fragile quality and I think brands will have to fight hard in what will be a tougher market.

“I don’t want to be all doom and gloom but managing consumer confidence will be very important,” he says. Achieve this through consistency and brand leadership. “Do it by trust, and the trust consumers build up in you. People will only trust you as a brand if you are honest, you are on their side and you deliver what you promise.”

Such factors are already crucial in successful marketing but will come to the fore this year, Gustafson predicts. “The credit crunch is one of the factors driving this but consumers have also become more demanding, they expect more.”

Brand engagement will be a big theme in 2008, he adds. “Brands will have to implement different ways of relating to customers. Fragmentation of channels, fragmentation of markets will mean brands not only engage well during the point of purchase, but that they look after customers well before the point purchase and well after it.”

Interbrand client BMW is an example of one European marketer putting these ideas into practice. In October it opened BMW Welt (world) in Germany, a stunning, architecturally designed hi-tech events centre situated next to BMW’s Munich plant. For a small premium, those who buy a BMW can collect their car themselves, getting a tour of both the factory and BMW Welt as part of the experience. “Consumers get a good understanding of how their car was built and see the quality involved first hand,” says Gustafson. BMW, meanwhile, gets to engage with its customers and strengthen its relationship.

Neil Jones, London managing director of media agency Carat, says he is “cautiously optimistic” about the economy, and how that might impact on both marketers’ budgets and consumer spending. “I don’t see any dramatic decline in budgets just yet. Some media are almost talking us into a recession.”

When NZ Marketing Magazine caught up with Jones in early December, Christmas spending had so far been “relatively sluggish” for retailers. “But maybe some people are leaving it late this year. It’s also worth remembering that online has undergone dramatic growth and often people forget to include that.”

He argues that two important events in 2008 could actually fire up the economy: the Olympics in Beijing and the American presidential election. “The years that these happen there’s usually not a downturn, it usually goes the other way. I don’t see too much negativity next year.”

Despite the fragile economy, there will always be consumers who want to impress their peers and are prepared to spend in doing so. International consumer trends firm Trendwatching.com tips ‘status’ as a major trend for 2008.

What credit crunch? asked one London nightclub in December when it launched the world’s most expensive Christmas cocktail, costing £35,000 – more than the annual wages of three-quarters of the British population. The Movida nightclub’s creation, the Flawless, blended Louis XII cognac, half a bottle of Cristal Rose champagne and some flakes of gold. Thrown in for good measure was an 11-carat diamond ring at the bottom – the main reason for the price tag. Customers included celebrities, footballers and property developers, keen to splash out on something a bit different.

“Everything always comes back to status,” a Trendwatching analyst observed last year. “In a traditional consumer society, he or she who consumes the most, the best, the coolest, the most expensive, the scarcest or the most popular goods, will typically also gain the most status.”

The rise of the middle class in countries like China, India and Russia has fuelled that obsession with status. There are now millions of consumers in these developing economies who want to consume more and covet premium brands.

But the rise of individuals with a high net worth of at least US$1 million has also had a significant impact. According to a 2007 report on world wealth by Merrill Lynch and Capgemini, such people increased 8.3 percent to 9.5 million worldwide over the past year. The number of ‘ultra’ individuals in the world – those with net assets of at least US$30 million – increased to around 95,000. As these groups burgeon, there’s a need to redefine what constitutes luxury. Status has gone supernova.

“In an arena that has become crowded with middle class and high net worth consumers, expect luxury goods to take on more outlandish forms and shapes, at ever-higher costs,” writes Trendwatching.

Such goods include Bling H20, the bottled water embellished with Swarovski crystals and costing as much as US$480, airport terminals for first-class passengers only in Frankfurt and Doha, and Lenovo’s US$5000 12-inch ThinkPad Reserve Edition laptop which comes encased in leather and is sold by invitation only.

However in 2008 brands also must realise the traditional status symbols – flash cars, quality watches – are not prized equally by all consumers. In a mature market like Britain, many consumers are now affected by guilt and concern over unbridled consumption, or are looking for other ways to impress peers, through experiences or alternative lifestyles. Status can be attained in many different ways. Some of the ‘status spheres’ identified by Trendwatching.com include:

Transient: Consumers, or ‘Transumers’, who are driven by experiences. Such people have an obsession with the here and now, are driven by entertainment and by discovery and want to collect as many experiences and stories as possible.

Eco: Status among the environmentally aware is increasing in value, as consumers actively try to choose eco-friendly products and governments finally put the environment on their agendas. Among these individuals, Prius drivers are praised while SUV owners are scorned. Such behaviour is likely to accelerate as more and more design-minded and brand-savvy eco-firms push to the forefront in 2008, says Trendwatching.

Online: ‘Social status 2.0’ is all about who you connect with and who wants to connect with you online. Social ranking in the virtual world comes from the number of Facebook friends you have, to the number of times your photos on Flickr are viewed, to the attractiveness of your Second Life avatar.

It’s been the phenomenon of the year, but in 2008, will Facebook turn out to be a fad? Marketers will hope not: the social networking site that currently clocks up 250,000 users a day allowed advertisers on board as members in November. Marketers, including Sony and Coca-Cola, created more than 100,000 branded Facebook pages within the first 24 hours alone.

They aim to employ the Facebook ethos to ‘make friends’ with users. Fans of brands can sign up to write reviews, comment on companies, share tips and spread the word about their favourite products. Targeted ads can appear on users’ own pages and be passed on to friends.

Other interactions are even more integrated. In July online flower shop ArenaFlowers.com launched its own Facebook application that allows members to send virtual flowers to their friends. To date the application has been installed 13,000 times. The device – which only took a few days to build – has given the brand great exposure. Around 17 percent of ArenaFlowers’ daily visits originate from the Facebook application and some 24,000 flowers, most of them virtual, have been sent. The site has also clocked up 20 ‘real world’ flower transactions worth £700, meaning the development costs were covered.

For the right brands, Facebook and other sites like Bebo can be marketing nirvana – but get it wrong and marketers could face the wrath of millions. A controversial advertising feature on Facebook has already sparked furious protests about privacy. In December the introduction of an ad programme called Beacon, which tracks the 57 million members’ activities elsewhere on the internet, prompted 69,000 people to sign up to an online petition entitled ‘Facebook, stop invading my privacy!’. Facebook’s billionaire founder Mark Zuckerberg, 23, was forced to apologise and admit his company had done a “bad job” in the way it launched the software.

Beacon works by gathering information from other websites about members’ online spending habits. To the anger of users, the feature was initially set up to work automatically unless they opted out of it. Facebook has now changed it to an ‘opt in’ programme.

Facebook may have been 2007’s biggest online story, but other forms of digital media also took a significant slice of advertising and consumer spend – and look set to continue this trend in 2008.

In the UK online shopping sales exceeded £4 billion a month for the first time in July while year-on-year online sales were up 36 percent. A recent study by price comparison website Uswitch predicts that the UK’s online spending will hit £40 billion for 2007 and rise to £162 billion by 2020, when it will make up 40 percent of total retail sales.

Meanwhile the internet advertising sector rose by 41.3 percent for the first six months of the year – with revenue at £1.33 billion smashing some forecasts that predicted growth would slow.

Classified advertising on the net was up 72 percent year on year – and now accounts for one-fifth of internet advertising spend. According to the Internet Advertising Bureau, advertisers in the recruitment, automotive and property sectors drove the increase, which puts further pressure on the print sector.

Search marketing and behavioural targeting software also continued to excel – with £1.2 billion annual spend in the UK, or some 60-65 percent of total online spend.

Carat’s Neil Jones says the popularity of search marketing will continue in 2008. “It’s so accountable that clients love it. But the important thing is to ask, how do you integrate it into your other activities?”

Many media brands are doing this well, he says. “Newspaper publishers are expanding into multimedia, for instance The Sun shows football goals on mobile phones and the Telegraph Group has a TV channel. Newspapers used to see multimedia as a threat but it’s actually an opportunity to introduce readers to your product.”

Cadbury is another marketer that has successfully embraced multimedia – in one of the year’s most iconic campaigns. A video of a drummer in a gorilla suit playing along to a Phil Collins ’80s pop hit started on TV but became an online phenomenon. Part of Cadbury’s £6.2 million ad campaign for the chocolate bar, the ad sparked 500,000 YouTube viewings in the first week alone on the video-sharing site. This ‘superviral’ went on to spawn its own Facebook page, as well as dozens of spoof tribute videos, including one by Wonderbra.

Its success bodes well for online advertising in 2008 and beyond. In the UK, the growth of online advertising is fast and is showing no signs of a significant slow down. In 2006, online advertising spend grew some 40 percent to £2 billion. Even one of the less bullish forecasts for 2007 by GroupM, the forecasting arm of WPP, predicts a 34 percent increase again and 30 percent growth in online advertising in 2008. A US survey in December found that more than 79 percent of marketers planned to boost their online budgets in 2008, up from 75 percent last year.

The value of online advertising already passed the total spent in the country’s national newspapers last year. Even more staggering is the prediction that by mid-2008, Google will suck in more ad pounds than all of Britain’s TV channels put together, according to two top media-buying groups Mindshare and Initiative. This means that Google will earn more than £1 billion of UK ad revenue.

By the end of 2008, two in three UK households in the UK will have broadband, says internet researcher agency Point Topic. More broadband homes mean more online consumers who can handle watching increasingly sophisticated video-based messages.

Online creative and strategy is already getting more sophisticated to meet this. Gillette and Paramount took part in a groundbreaking sponsorship this summer when they took part in Kate Modern – an online drama inspired by web-based video series Lonelygirl15 (starring Kiwi actress Jessica Rose). “The sponsorships are really subtle and not like advertising on a banner ad,” said Joanna Shields, president of Bebo International.

Meanwhile, as the internet evolves into three dimensions, virtual worlds are seen by many as becoming the next big thing. Some pundits predict they will be as important as the industrial revolution. Swedish virtual world, Entropia Universe – which had a turnover of US$365 million in 2006 and will soon become the first virtual world to be floated on the stock market – already enables users to draw down money earned inside the game at ordinary cash dispensers. The Finnish-run Habbo boasts 80 million members, of whom more than seven million are regular users. Meanwhile in South Korea, which boasts an extremely fast broadband infrastructure, 43 percent of the population is a member of the virtual space Cyworld. It has most of the features that western online consumers use, such as Amazon, eBay, Second Life and MySpace. Some 90 percent of all picture messages in South Korea are cameraphone photos uploaded to Cyworld.

According to a new book, Digital Korea, by Tomi Tahonen and Jim O’Reilly, 300,000 Korean businesses offer more than 500,000 items of digital content for sale. After all, once you have two out of five members of the population in your virtual world, “the whole economy takes notice and every company wants a presence… In Korea, every consumer brand has to be inside Cyworld.” The sale of virtual flowers may just be the start of something we are only just beginning to comprehend.

With the increasing popularity of mobile internet and slick gadgets like Apple’s much-publicised iPhone, the mobile phone also looks set to introduce another few hundred million people to the online world. At the forefront of this is Google’s Android – described as an ‘open handset alliance’ of more than 30 technology and mobile companies that offers the world’s first “complete, open and free” mobile platform – plans to revolutionise mobile internet.

As Trendwatching.com observes, mobile marketing won’t “happen overnight in 2008” but Google’s initiative is destined to speed things up. And the prize is huge: by 2010 the number of global mobile phone subscribers is expected to be 4 billion, dwarfing the number of desktop internet connections, which currently stand at 1.2 billion. Mobile ad spend could rise from US$1 billion worldwide in 2007 to US$8 billion in 2012, according to one estimate.

Virtual or otherwise, these are exciting new worlds but marketing must still be appropriate to the audience, says Gustafson. “Online advertising must still be relevant and also paced differently to other media. Just because I’ve got an ad on Facebook doesn’t make me a better advertiser.”

In 2008 and beyond the right ‘touch points’ remain crucial for your brand, he argues. “That may be instore as well as communicating with consumers in other ways, from the web to mobile marketing to the back of train tickets… A brand will have hundreds, if not thousands, of different touch points. But the brands of the future will need to recognise which are most important for your brand and for your consumers – and then invest in them as the key ones.

“A top brand remains true to itself and delivers what it set out to do in the first place,” adds Gustafson. “Don’t go out and over promise and be what you are not, because these days your customers will not be fooled.”

Brand Butlers

Instead of bombarding your customers with mega-million, one-way campaigns, says Trendwatching.com, “why not assist them in smart, relevant ways, making the most of your products and whatever it is your brand stands for”. Examples include jeans brand Wrangler supplying a laundry service at a music festival in the Netherlands, Charmin toilet paper providing deluxe restroom services free of charge in New York’s Times Square, and Austrian Airlines offering Vienna tourists free entry to the city’s museums by showing their boarding passes.

Car Sharing Schemes

With the rising costs and environmental impact of owning a car increasing in Britain, car clubs are growing in popularity. There are now 28,000 car club members in the UK, where petrol is now £1 a litre. Cars are kept in designated bays, accessed using a member’s smart card and started with a pin number. As well as individuals, corporates like Shell are using the schemes for staff. Virgin Trains is also promoting car sharing to its customers as a convenient way to get around their destination on arrival at the train station.

Carbon Labels

As if fat and salt content wasn’t enough, consumers of crisps must now also consider the levels of carbon emitted to create and deliver the product they are consuming.

In 2007 a pilot study into carbon footprinting – involving Walkers crisps, Boot’s Botanic shampoos and Innocent smoothies – was extended to apply to a wider range of products and services. Participants include Cadbury Schweppes’ Cadbury Dairy Milk bar, Halifax’s Web Saver Account, Andrex toilet tissue, Fosters lager and 30 own-brand products from Tesco. A voluntary industry standard is expected to be ready by mid-2008.

A study of 1000 people commissioned by Walkers found that 50 percent of consumers said they were more likely to buy a product with a carbon label.

To ascertain carbon emissions in the creation of a packet of crisps, the Carbon Trust measured everything from the fertilisers used in the soil to the manufacturing process, plus packaging, distribution, retailing and the disposal of packets. A bag of cheese and onion crisps emits 75 grams of carbon in its total life cycle.

As with food, the dilemma is how to communicate the information to consumers. The Carbon Trust has developed a carbon reduction label that displays the amount of carbon dioxide emitted, plus a downward arrow to denote the company’s commitment to reducing carbon emissions. If a company fails to make a reduction in two years, it loses the right to use the label.

Make It Yourself

User-generated content has gone mainstream, with millions of consumers uploading their blogs, homemade videos, music and digital photos online. But now there’s real money to be made. Video-sharing site Revver, for instance, splits ad revenue 50:50 with video creators and has so far paid out US$1 million in its first year.

Trendwatching.com tips ‘Make it Yourself’ or ‘MIY’ ventures to become increasingly sophisticated over the next 12 months as Generation C moves into earning money from its creations. It cites New Zealand’s Ponoko.com – which allows consumers the chance to turn their own designs (everything from jewellery to coffee tables) into objects that they can then sell online – as at the forefront of this trend.

“As well as being a manufacturing platform, Ponoko also serves as a community where fledgling one-off fabricators and designers can exchange ideas and help solve each other’s problems. The larger goal, according to Ponoko, is to be a catalyst that helps bring personal manufacturing of individualised products to the masses.”

Going Green

Being eco-friendly is no longer a luxury, argues Interbrand’s Rune Gustafson. “The environment and CSR are hygiene factors, that is, they are givens. Brands that are not cognisant of this, that are not aware of the environment or the community they work in, are yesterday’s brands because they won’t be relevant to customers. It’s got to be part of your DNA.”

Rachel Helyer Donaldson is a London-based journalist. rachelhd@mac.com

 

 

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