No. 312: The Evolving CMO

On Accenture’s acquisition of Droga5 and the evolution of the full-stack, digitally-native agency. A lot can be said for the evolution of the early-stage CMO. It’s now common to spot data-driven, b-school graduates employed at early-stage retailers. Just five years ago – chief marketing roles were typically reserved for sales-minded creatives. This shift may be influenced by the position’s updated responsibilities; in earlier years, these responsibilities would resemble more of a CEO or CFO’s stake within the company.

These priorities include: cost accounting, personnel accounting, attribution sciences, and applications of Six Sigma principles: define, measure, analyze, design and verify. Equipped with paid marketing budgets and a creative director on staff, the traditional CMO is more data-driven than ever. In a early-stage meeting with a DTC retail CMO, I asked what his priority was over the next 6-12 months:

Paid, for now. It’s measurable.

This pivot towards the data-driven marketing approach is not without consequence; blind spots can develop. Modern CMOs are more likely to focus on shorter-term, tactile decisions at the cost of the brand-building strategies that may lead to better long-term outcomes. If there isn’t an ROA or an ROI assigned to the opportunity, it is rarely justified in the DTC era. As the adage goes, what can’t be measure cannot be improved. Droga5 founder David Droga suggests that this approach to marketing is incomplete at best. Here’s a recent quote by Droga:

CEOs, CMOs, and CIOs all need to be on the same page, because they all affect each other now. This isn’t a nice-to-have. I think it’s going to be crucial for any brand going forward. This is future-proofing.

On Droga5 and Accenture

Accenture. Spun-off from Arthur Anderson in 2001, Accenture serves as the leading management consulting firm that provides services to include: operations management, strategic insights, and consulting. A Global Fortune 500, the company serves clients in over 120 countries with over 250,000 employees. Accenture reported net revenues of nearly $40 billion in 2018.

Droga5. Based in New York and founded in 2006, Droga5 is an award-winning, global advertising agency with a roster of high-impact, advertising successes. William Morris Endeavor invested in Droga5 in 2013. This allowed Droga5 to combine their advertising resources with WME’s entertainment connections, allowing Droga5 to develop a cache of major advertising partners. Accenture’s acquisition suggests that the combination was a successful one, and WME reportedly profited on the Accenture acquisition. The impact of this deal is a significant moment. Fast Company explained:

In easily the highest profile deal the ad industry has seen in recent memory, Accenture Interactive announced this morning that it has fully acquired creative advertising agency Droga5, which counts Under Armour, HBO, the New York Times, Amazon, Covergirl, and more major brands as clients. The deal will see all of Droga5’s 500 employees across offices in New York and London become a major creative cog in Accenture Interactive’s massive $8.5 billion digital customer experience and marketing services machine.

The report goes on:

Droga5’s founder and creative chairman, acknowledges that folding his company into Accenture Interactive reflects a larger reality: Brand communications have gone far beyond just advertising, into every time and place a consumer interacts with and experiences a brand–from retail to e-commerce to, yes, even ads.

The Droga5 Signal

This new category of full-service agency will surely influence other mergers and acquisitions. But most importantly, this will require new brand CMO to reimagine their roles and address the brain lateralization that has led to an increased dependency on Facebook and Google over the last five years. In June 2018, 2PM published “The Patreon Signal.” In it, I wrote: “Patreon’s acquisition of Kit and Memberful has signaled an uptick in M&A and partnership activity throughout the creator space.” This is a similar moment for the agency space.

Accenture has invested in sponsored media to advertise Accenture Interactive for some time and was best-positioned for this type of partnership. More agencies in the shape of Droga5 will be sought after as top management consulting firms like Deloitte, McKinsey, and KPMG look to compete with Accenture’s groundbreaking acquisition. Just this week, eCommerce and branding agency BVAccel acquired Katana, a paid media agency that may help BVA address more of the needs of its clients.

Agencies that combine the best practices of traditional advertising, data science, and creative expression will make its way to the DTC space. Accenture’s acquisition of Droga5 signals that for chief marketers, relying on the instant gratification of data-driven marketing will be an insufficient strategy – especially for those early stage companies that seek to develop lasting brands. AdAge’s Penry Price on these developments:

Rising agency players like Giant Spoon, gyro, Heat, Oberland, and Phenomenon are leaving their marks on the industry by combining speed, data, creativity, digital products (apps) and marketing optimization. Rest assured that Accenture Interactive and Droga5 will do their level best to provide a similar combination of services as soon as possible, and they will likely succeed.

Late-stage digitally native retailers will seek out the style of full-spectrum services offered by the Accenture-Droga5 partnership or the many creative consulting hybrids that this acquisition will further influence. This is not only attributable to the services that Accenture will give, rather due to how their offering influences the agency’s overall approach to problem solving. But for the brands that feel their strategies should stay close-to-vest, the CMO role must evolve to meet four goals that the new consumer economy will need.

  • CMOs will be responsible for digitizing all traditional (offline) marketing communications. These marketing leaders must apply a layer of measurement to in-store marketing, physical retail operations, print marketing, and other forms of traditional marketing.
  • Marketers must be tasked with leading workforce education and evaluation. Rather than partnering with agencies to discuss in-house weaknesses, CMOs will lead training efforts that insure that their teams are aware of the latest data, industry developments, and technologies that are most useful to the company’s revenue targets and brand defensibility.
  • CMOs must be able to find and invest in the brand, agency, and media partnerships necessary to move concepts and strategies from proof of concept to reality. These partnerships must be prioritized to keep up a forward-thinking posture and an emphasis on the insights necessary to pursue longer-term goals.
  • And CMOs must combine skill in data-driven marketing with the willingness to adjust to a rapidly changing digital environment that may offer better, more cost-effective opportunities elsewhere – both online and offline.

Coaches tell their quarterbacks to keep their eyes down the field when they leave the pocket. For marketers, that analogy is more relevant than ever. Within digitally native brands and traditional retailers-alike: chief marketers have long-leaned heavily on what was measurable, even if that approach has cannibalized longer-term prospects. The Droga5 acquisition suggests that marketers may begin realigning their resources to pursue a more holistic approach to brand messaging, awareness, and sales – efforts beyond the dependency on paid media spend.

Marketers will tolerate more brand-side experimentation and risk-taking. But unlike the marketing and advertising efforts of earlier years – the goal is to use observations to de-risk opportunities as quickly as technologies will allow. Risk aversion is still an objective but more chief marketers will grow to become the explorers of their industry. More than ever, these executives will be tasked with forging new paths and modernizing their approach to measuring the data that tells the story.

Read the No. 312 curation here.

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No. 311: Whoop and The Flywheel

Image: courtesy of Gear Patrol

It was a saturday morning in Columbus and Central Ohio was on its last day of hosting the Arnold Classic. Arnold Schwarzenegger hosts an annual event for athletes across fitness, strength, and endurance in town and while we avoid most of it, there was one meeting that I had to take. Alexis (my oldest daughter) and I met for brunch with Iceland’s Katrin Davidsdottir, one of the most recognizable alternative athletes in the world, a two-time “Fittest on Earth”, and family friend. The two athletes discussed the typical sports topics: hard work, diligence, and resilience. Katrin is at the top of her craft and Alexis is an athlete in her own right. The conversation was between two top competitors who recognized each other’s talents, drive, and natural abilities. In this part of the conversation, I was just a bystander.

We quickly moved to more practical matters: the economics of commerce and product marketing. Davidsdottir is also the most marketable athlete in her field and one of her sponsorships is with Whoop. Whoop is a physical band that measures athletic analytics like: strain, depth of sleep, and heart rate variance (HRV). The band allows you to subscribe to an athletics analytics SaaS. In a recent podcast with Whoop, Davidsdottir discussed her journey from a small country to a lucrative, American lifestyle as a competitive athlete. She swears by it; so do I – but for different reasons.

When we recognized the distinct-looking bands wrapped around our respective wrists, we began talking about our affinity for the product. We viewed Whoop from two vantage points: she’s an elite athlete and I’m an entrepreneur – both career paths are stressful to the body, mind, and central nervous system. We went on and on about how often we see the in-app metrics and how it influences our daily decisions. I knew that Whoop would be a force, this conversation confirmed it.

Linear commerce is a core tenet of 2PM’s understanding of the commerce ecosystem. It’s the active prioritization of audience-growth. Product manufacturers typically seek to outsource demand generation. Brands, that are ahead of the curve, emphasize their audience’s growth as much as they address their physical product’s development. And vice versa, digital media companies that follow linear commerce prioritize organic and loyal growth over commodity clicks. By building a system that allows peers to privately compare their lives, Whoop has – perhaps mistakenly – developed its most effective flywheel.

A flywheel is a device that stores and distributes energy. Retail management will use  the term to describe the sociology of keeping customers engaged, allowing engaged customers to attract like-minded consumers.

Jonathan Poma is the Founder of Loop and the Chief Evangelist Officer at Brand Value Accelerator; he recently stepped down from the Chief Executive role to spend more quality time with his family. Part of this decision was stress-driven. He’s also an avid technologist. Poma was in the first 1,000 users of Slack, an early Uber user, and when he finally joined Whoop – I knew that it was only a matter of time before he began to maximize the platform’s functionality. In a recent conversation with him, we discussed the platform’s latest development for us non-athletes. A consumer will be hard pressed to find Whoop branding or messaging that represents consumers like us. When Poma made the request to Whoop for group reporting access, Whoop allowed him to use the “team” functionality for a test group of colleagues. After a few weeks of this using this group setting, Poma chimed in:

Whoop is 100x cooler than I even thought it was two weeks ago.

Prior to this in-app solution, we found that we’d screenshot our best fitness and recovery days and send them to one another via iMessage. Our Whoop group began to grow until we averaged 1-2 new buyers per week; we’d often pitch our friends on buying one so that we’d be able to compare our data. All high risk entrepreneurs, Whoop’s ability to track fitness, sleep, and strain on the central nervous system became a necessity for early-adopting entrepreneurs – a group that traveled often, slept sub-optimally, and works long hours. Our crude iMessage format evolved into an ability to check, compete, and support colleagues.

Through the mobile and desktop applications, we have full visibility of one another’s holistic health. It drives conversations around work ethic, reduction of alcohol / sugar, and improving physical capacity. In this way, Whoop has successfully duplicated the value of the group fitness experience and replaced it with personal software. In essence, the grouped colleagues are always working towards health and training goals in concert.

Despite a selection of elite athletes as sponsors and a top podcast, Whoop is primed to jump the chasm by promoting this functionality for its civilian consumer. In this way, Whoop’s latest offering may become its greatest (and most timely) marketing asset. Why? Data suggests that consumers are evaluating their relationships with: health, community, and luxury – at scale.

2PM Data: On Telemedicine

In a recently published index, 2PM tracked 45+ of the top companies in telemedicine on the DTC Health Index, a list that comprises a list of companies that are privatizing the healthcare industry. Whoop, a company that’s raised $49.8 million, is part of a larger trend towards consumers owning more of their own health and wellness. It is showing, Whoop’s on-site traffic has doubled in the last six months. Of this traffic, only 6% of is by way of paid customer acquisition. The flywheel is spinning.

On desktop and mobile web in the last 6 months

Anticipated growth in digital health systems and analytics are driving a lot of this interest. For instance, Apple recently innovated around this effort to democratize consumer care with its ECG app. And Core is launching a meditation device that actively tracks its effects by tracking HRV. Whoop is one of a handful of platforms that tracks heart rate variance, a measure that allows consumers to quantitatively measure the strain on their central nervous system. Entrepreneurs and other high risk professionals have used this measure to discuss their levels of stress and depression for a time; however, HRV’s interest is growing quickly in non-athletic spaces.

What is HRV? It is the delta between successive heart beats. The heart’s irregular rhythm causes heart beat timing to change. It was initially used by emergency room healthcare professionals to predict patient mortality rates post medical emergency. The application of HRV is now being studied as a measure of physiological response to stress and exercise. The higher the number – on your 30-day baseline – the more recovered the body.

2014-2024: digital health market size ($ billions)

2015-2020: projected CAGR for the global digital health market

On Health and Modern Luxury

In a recent report by Business of Fashion: “The Future of Luxury is Freedom” , the magazine’s resident retail prophet discusses the changing definition of luxury. Doug Stephens writes:

Today, luxury is evolving once again and brands are wrestling with the fact that consumers are increasingly shifting spend from products and services to experiences. This is especially true among young consumers in the West. According to a 2018 Harris Poll study of US millennials, 78 percent say they’d rather spend money on a “desirable experience or event over buying something desirable.”

In No. 265, we discussed this in the context of Peloton, the in-home cycling and media phenomenon that shares a somewhat similar target consumer with Whoop.

Теперь уже недостаточно определять предметы роскоши по тому, насколько трудно их достать. Время - самый дефицитный ресурс и высшая роскошь. Быть современным брендом класса люкс - значит осознавать себя. Такие бренды продают время как дефицит, а затем создают продукты на его основе.

Health and wellness – a scarce resource measured by time and ability – is emerging as one of the most foremost American luxuries as traditional healthcare costs skyrocket. For direct to consumer (DTC) healthcare companies like Whoop, their platform has somewhat accidentally entered the conversation. While designed for athletes working to peak their physical performance, Whoop has found its software co-opted by normal consumers who use the software to measure the markers that influence the scarcity of a consumer’s time and ability.

Whoop is a company of about 100 workers who more than likely train, sleep, and work with the band that they’re helping to build, improve, and market. As the trends around healthcare, luxury, and self-quantification continue to converge in the company’s favor – consumers will will see more of HRV in the context of quantification.

In this way, Whoop and its community are contributing to more than its own marketing flywheel. The long-tail effect of the popularization of HRV means that we’re bound to see more products that address one of the top questions in Whoop’s community: “how do I improve my HRV?” This is the question that will launch its own consumer product sector.

Read the No. 311 curation here.

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№ 310: Кривая Бонобо

bonoboscurve.jpg

История цифровых вертикальных брендов (DNVB) насчитывает всего 12 лет. Однако за это время изменились рамки отрасли и ее терминология. Введенная основателем Bonobos и нынешним руководителем Walmart Энди Данном в 2016 году, аббревиатура DNVB уступила место более простой версии: "DTC" или direct-to-consumer. Она легко слетает с языка и является всеобъемлющей - репортеры, аналитики и источники, такие как 2PM и Lean Luxe, могут применять эту терминологию повсеместно. Для Bonobos и Данна в пути компании и руководителя есть своя символика. Это символизирует кривую, по которой пойдут многие компании и руководители.

К концу этой статьи вы, возможно, поймете, насколько недальновидным может быть дескриптор DTC. Я считаю, что этот акроним следует рассматривать как название канала продаж или, возможно, как эмблему основной компетенции ритейлера. Когда производители товаров получают название DTC, это неправильно, как будто основной канал продаж обозначает характер всей компании. Для простого наблюдателя потребитель эволюционировал. Для операторов, работающих в цифровом ритейле, это сложный разговор.

Платформы, подобные Shopify, демократизировали возможности для производителей товаров на ранних стадиях. Во главе с Тобиасом Лютке генеральный директор возглавил развивающуюся торговую платформу в начале Великой рецессии 2008 года и остается на этом посту по сей день. Под его руководством компания торгуется с рыночной капитализацией в 22 миллиарда долларов. Время восхождения Shopify имеет большое значение. К 2009 году Wall Street Journal публиковал статьи вроде "Рецессия превращает торговые центры в города-призраки".Учитывая отсутствие электронной коммерции у многих брендов, которые жили и умирали благодаря большой розничной торговле, макроэкономические последствия самой тяжелой рецессии в истории человечества помешали устойчивости брендов. В некоторых случаях производители товаров были вынуждены обратиться за защитой от банкротства, поскольку общий потребительский спрос в период с 2007 по 2010 год сократился. Эпоха веб-ритейла оказалась удачной: она пришлась на самое слабое место для традиционных брендов за последние 60 лет.

Изменилась розничная индустрия, но не потребитель.

Молодым брендам практически некуда было обратиться, чтобы эффективно продвигать свою продукцию. С их бережливыми командами и недорогой архитектурой эти бренды были способны выжить в коварных водах американского консьюмеризма. Вот что мы с Кевином Лавеллем написали для Wall Street Journal в 2013 году:

Стартапы, подобные нашему, могут сосредоточить свою энергию на развитии продукта, услуги и бренда благодаря доступным сегодня платформам и инструментам. С появлением новых веб-приложений и плагинов лицо электронной коммерции кардинально меняется. Бизнес может запустить продукт или услугу по всему миру и охватить миллионы людей без огромных инвестиций в инфраструктуру, которые требовались всего несколько лет назад.

[...]

Такие платформы, как Shopify и Stitch Labs, позволили Mizzen+Main, а также множеству других компаний, сосредоточиться на бренде и продукте - по сути, демократизировав электронную коммерцию. Это не революционная новость, но с помощью надежных облачных дополнений мы действительно можем управлять целым бизнесом с двумя партнерами в двух штатах и почти всеми системами виртуально. 

В 2007-2014 годах большинство брендов-претендентов сосредоточились на прямых потребительских продажах, потому что дистрибуция через универмаги, Walmart и Target была внутренней игрой, в которой разбирались ветераны индустрии. В сочетании с историческим экономическим спадом доступ к этим каналам был практически закрыт. А если они и были, то технологию ERP было сложно освоить новым брендам. Короче говоря, заключать сделки с дистрибьюторами было сложно.

Таким образом, эффективность прямых продаж потребителям служила своего рода социальным доказательством для потенциальных контрактов с крупными розничными сетями. Теперь заключить такие контракты стало гораздо проще: крупные розничные сети приглашают на свои полки новые бренды-претенденты. Это позволяет традиционно цифровым компаниям расширять свое физическое присутствие за счет собственных магазинов и оптовых соглашений.

Кривая Bonobos: путь распространения от разрозненного метода прямого обращения к потребителю (DTC) к целостной организации онлайн-каналов (native, marketplace), физических фирменных магазинов и оптовых партнерств.

К тому моменту, когда Энди Данн написал о возвеличивании вертикальных брендов, основанных на цифровых технологиях, его компания успешно привлекла более 120 миллионов долларов, открыв по меньшей мере дюжину магазинов Bonobos Guide Shops и заключив общенациональное партнерство с Nordstrom. В своем знаменитом блоге он подробно рассказал об этом:

Хотя DNVB родился в цифровом формате, он не обязательно должен быть только цифровым. Это означает, что бренд может распространяться и в офлайне. Обычно оффлайновое воплощение бренда происходит через собственную эмпирическую физическую розницу, стратегию pop-up или очень избирательное партнерство. Почти во всех случаях партнерства с третьими лицами бренд контролирует свою внешнюю дистрибуцию, а не контролируется ею.

Если предположить, что экономика будет оставаться стабильной, а торговые центры уровней А и В продолжат перестраивать недвижимость, чтобы привлечь эту новую волну брендов и их последователей, то мы увидим, что кривая будет продолжаться, причем за редким исключением. Даже такие компании, как Glossier, которые, как известно, выступают против отхода от безрецептурного маркетинга, начали инвестировать в физическую розницу. И их будет еще больше. Таким образом, розничная торговля получила бумеранг. Изменилась индустрия розничной торговли, а не потребитель.

Ниже представлена "Кривая Bonobos". Это поведенческий путь к зрелости продаж, которым будут следовать бренды-победители этой эпохи. Поэтому многие из наиболее успешных брендов сотрудничают с Nordstrom, Macy's, Target, Walmart или напрямую с прогрессивными компаниями по развитию торговых центров.

Типичный путь, по которому идут бренды DTC | Источник: 2PM

Лишь немногие бренды останутся только в онлайне. В недавнем разговоре с Betakit компания Shopify рассказала о своих планах по устранению "кривой Bonobos":

Пара видит широкие возможности для развития Shopify на рынке кирпичной и стационарной розничной торговли. Цель Shopify, по словам Блэка, - охватить всю экосистему, чтобы удовлетворить потребности всех продавцов. Он подчеркнул, что неважно, обращаются ли продавцы к Shopify с точки зрения Shopify Plus или Shopify Retail, компания надеется создать бесшовные решения, которые будут охватывать оба рынка.

Маркетологи традиционных продуктов, такие как P&G, оснастили свои команды бренд-менеджеров многими из тех же инструментов и практик, которые стали популярны у их коллег из претендующих брендов. Правда, в зрелом возрасте эти бренды-претенденты будут иметь в качестве основной компетенции розничные онлайн-операции. Учитывая возраст многих сегодняшних основателей, для них цифровая компетентность станет такой же естественной, как ходьба или прием пищи.

Но DTC никогда не был целью этих ритейлеров, а потребительское поведение не так сильно эволюционировало, как нам хотелось бы верить. Для многих брендов, таких как Bonobos, целью было развитие бренда, а такие платформы, как Shopify, WooCommerce и BigCommerce, на некоторое время уравняли цифровые игровые поля. Время покажет, кто получит преимущество, пока бренды конкурируют на традиционных площадках, но Энди Данн теперь является руководителем Walmart. А Bonobos - это бренд Walmart с флагманскими магазинами и дистрибуцией Nordstrom. Это означает конец кривой и закрытие книги DNVB.

Читайте материал № 310 здесь.

Доклад Веба Смита | Около 2 часов дня