Micro-brands: Redefining the way the world shops

Microbrands Cover Image

The past decade has celebrated brands like Walmart, Amazon and Tesco; brands that have been able to scale in size and dominate their categories. In contrast, the last couple of years have seen these behemoths battle not with other big brands but rather with thousands of tiny brands, each with low overheads and efficient customer acquisition tactics.

Through the ages, small companies typically have had profits that match their size, but modern technologies have allowed for a paradigm shift. ‘Micro-brands’ are the latest iteration of small brands that have been enabled by streamlined modes of production and access to a global market. The brands are using a combination of hyper-targeted marketing and small batch inventories to compete against the giants in their industries.

The Long Tail: Why the Future of Business is Selling More for Less authored by Chris Anderson back in 2016 is an illuminating read on this particular subject. His theory delves on the fact that the Internet created a platform for a plethora of retail sites that are cheap and easy to access to shoppers. On the supply side, the Internet also provides the same accessibility to an unlimited number of vendors and their services. This combination assisted a shift for consumer demand from the few ‘mass market’ brands to the millions of smaller niche brands. The chart below illustrates Chris’s theory with the narrow skyscraper of traditional gigantic retailers on the left and the long tail of micro-brands that seemingly extend infinitely into the distance.

Microbrands Head and Long tail
Image Source: The Long Tail: Why the Future of Business is Selling More for Less

Forbes refers to microbrands as “digital-first brands, direct-to-consumer brands, digitally native vertical brands, challenger brands and so on.”  Brands that are typically mobile-first, hyper-social, channel fluid and deliver the perfect buying experience to net-savvy consumers with extremely high expectations.

Companies such as Casper (mattresses), Warby Parker (spectacles), Dollar Shave Club (men’s razors) and Glossier (cosmetics) were once seen as oddities, new-age e-commerce brands that delivered directly to customers houses. Time has proven that these companies were able to shake up mammoth incumbents who had grown used to uninterrupted global domination.

Operating through a direct-to-consumer (DTC) model and shaped by a combination of customer centricity, ease, and convenience, micro-brands are able to by-pass the traditional middle man and reap the benefits of directly engaging with their shoppers on a global scale. Highly engaged digital communities and access to data streams that can, in turn, inform their strategies for product, pricing, design and market expansion. These differences highlight the gap between what consumers want and what traditional retail offers.

A study that looked at factors of success for brands from 2000-2013 and 2013-2018 illustrates a significant change in the mindset of the global consumer. A change from the established norms of brand equity, familiarity and scale; to a market that prefers innovation, speed, authenticity, personalisation and customer experience. These changes line up with key demographic characteristics of Millennials, reflecting a market that will not settle for the ‘same old’.

20th-century consumers once did trust big brand names, and this helped consolidate and boost the growth of national chain retailers, but today’s shopper is increasingly wary about big brands. According to the Edelman Trust Barometer in 2018, only 48% of people say they trust big brands, down from 58 percent just one year before.  This loss in trust is translating into shopping dollars shifting towards smaller brands who are seen as more authentic and trustworthy.

The table below by Nuxeo Research highlights 5 value drivers that consumer-packaged goods have traditionally benefitted from and their respective digital disruptors.

Microbrands Traitional Value Drivers
Traditional CPG value drivers disrupted by digital evolution

A look at some key factors that helped micro-brands be the successes that can be:

  1. Low barrier of entry into the market place with social commerce platforms like Shopify allow them to sell anytime and anywhere

  2. An efficient usage of social media has created the possibility to build authentic relationships through hyper-targeting shoppers and leveraging user-generated content

  3. A key priority on customer experience enables them to build authentic relationships with customers

  4. Designed with tightly managed supply chains, micro-brands carry low/no inventory and often produce small batches on demand

  5. The ability to harness feedback and roll out iterations almost in real-time creates products that can evolve with the market

  6. Being able to spot emerging niches and rapidly spinning off new product lines

A case study that is FashionNova: A brand that put its ‘social listening’ and influencer marketing strategy on steroids, producing fast-fashion through an Instagram first approach. It quickly identifies trends through its millions of followers and manufactures small orders on-demand which are then pushed out through a network of influencers. This results in its stocks selling out almost always. 2018 saw the brand launch 500 new styles every week, illustrating that the brand excelled at two key pillars – speed and scale.

As consumer tastes become more specialised, big businesses are being forced to accept that a certain percentage of the market will always be lost to agile micro-brands. The other alternative is that they too try to play the game of rapid innovation or buy out the smaller brands before they become unassailable – case in point Gillette buying Dollar Shave club for a billion dollars.

The bottom line is consumers are increasingly empowered and demanding, expecting that brands to wrap around their lifestyles and not the other way around. The world has become an accessible market of unlimited choice and the big brands of yesteryear can either change their established ways or watch microbrands of today become the household names of tomorrow.

The World of Virtual Influencers

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Avatar cultures have been around for years but it’s only in recent times that they have been gaining mainstream attention on social media. Virtual Influencers, cyber models, CGI models, AI accounts or even Brandfluentars (yes you read that right), no matter what you might call them, globally the industry has a potential to reach a value of up to $10 billion by 2020.  The number of names that we have for them is a clear indicator of how confused the world is by their existence.

These models might not have a physical form but that is not easy to understand in the world of social media. Each with their own distinctive personalities and identifying with real racial, social or gender groups, the advances of CGI it is very tough to spot them online without a closer examination. While you might scoff at the idea of virtual influencers being popular, take a look at Lil Miquela, one of the first on the scene is an online star today with over 1.5 million followers on Instagram and Brud, the company that created her valued at $125 million.

Their popularity has not gone unnoticed by brands of the world with the fashion and beauty categories being amongst the first to experiment with virtual influencers. Prada, Chanel, Burberry, Diesel, Moschino, Supreme and Balmain to name a few looked to ride the spike in interest in this new age form of influence. Fashion brands have been able to make the most of the PR exposure that was a result of this unusual choice of models. These virtual influencers have done everything from sporting the brands clothing to appearing with real-world celebrities and even appearing as a hologram within live events.

Balmain campaign
Margot, Shudu and Zhi modeling for Balmain

For brands, virtual influencers have been seen as a natural evolution of the digital world after being burned a number of times over the last couple of years with adverse publicity that has engulfed the influencer economy (artificially inflated follower numbers and volatile personalities). While brands have tried to implement processes that minimize such risks (careful vetting of influencers and rigid terms of conduct contracts), some marketers have decided to jump ship and work with influencers that are made of pixels and are much easier to control. No more coaxing humans to pose a certain way or say a certain thing, virtual influencers hold the potential of complete creative freedom.

If you think about it, human influencers have an expiry date, but virtual IP can be extended infinitely. The newest kind of content system for the influence economy, as after all does it matter if an influencer is fake if they have the same ‘influence’ as someone who is real?

One of the concerns that might leap to mind is the value of authenticity, now that consumers know that the ‘person’ they are being exposed to isn’t real but a digital creation.

Mobbie Nazir, Chief Strategy Officer at We Are Social points out “Many consumers are fed up with overly-contrived social media posts that purport to showcase ‘real’ life, and may prefer unashamed artificiality. This gives brands the opportunity to be openly fake – indeed, owning it and coming across all the more real for it”.

Akin to the world of videogames brands using virtual influencers can benefit from coming across as ‘meta’, sharing that ‘knowing’ bond with its customers of this virtual reality, allowing themselves to suspend their disbelief and play along with the antics of these characters.

From a consumer standpoint, it also helps that we are becoming more and more used to and dependent on technology in the context of everyday life. From digital assistants like Siri and Alexa to chatbots online we are increasingly accustomed to interacting with fictional characters and more importantly being influenced by them.

While Virtual Influencers are seen as a shiny new toy it is by no means a magic bullet and comes along with its own concerns. Foremost, they might not work across all industries, being more receptive in the fashion world rather than healthcare where the same influence might not translate. The other major concern is if human models now have to compete with perfectly animated avatars, there is a huge risk to the ‘self-esteem’ of the human race.

International fashion photographer Manny Roman noted, “While I do admire digital art, I don’t like the non-realistic message that is being sent out to society, I fear the CGI models image will escalate the body and image dysmorphic epidemic”.

Another concern (that we can thank Elon Musk for) is the potential power of AI and what impact that could have on society as a whole. Will AI evolve to a stage that the influence on human-kind is decided and determined by technology and algorithms  (On second thought, it seems like that’s already here). The important point to note is being able to distinguish the lines between technology and reality and acknowledging the mental effects the blurring of those lines might have (As seen in video game addiction in young children).

The future of virtual influencers could range from real models being scanned and working simultaneously across multiple locations in the world to reality TV shows that star hyper-realistic virtual characters, essentially anything could be possible. Ultimately there are still many questions unanswered and many avenues still to be explored in this category that makes it hard to gauge whether it is a positive step for the future of a negative one. But it is clear from the traction it has had so far that virtual influencers have proven themselves worthy of a seat at the table alongside their real-life counterparts.

15 Big Themes For The 2019 NZ Marketing Whiteboard

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  1. We really do need to save the planet now – with genuine alternatives like electric vehicles and without old habits like single-use plastic.
  2. Digital transformation marches on– but in many organisations, it can be a bumpy journey with conceptual disconnects and slow-to-adapt people and systems
  3. Mainstreaming of technology building blocks – marketing automation, AI, bots, voice assistants, VR/AR…
  4. A newly minted government – it used to be ‘justify why you need to spend’, and now it is more a case of ‘what are you investing in to do the job?’
  5. Big tactics, skinny strategy – lots of short-term initiatives in the marketplace, with less attention to long-term strategy (I recommend you read ‘Why aren’t we doing this? care of the Commercial Communications Council)
  6. Swelling in-house teams– with DIY e-commerce, marketing automation, social media and design. But as with home DIY it does vary in quality.
  7. The digital deluge – if you thought traditional media advertising created discontent, the digital world has taken interruption to a new high/low.
  8. Losing Facebook – the giant has slipped in terms of trust and confidence, with young people especially departing in large numbers.
  9. Influencers are the names with the numbers – social media stars with lots of followers are becoming go-to media options.
  10. Shopping events – Black Friday is now a bigger shopping event than Boxing Day and Singles’ Day is the world’s biggest at USD 30 billion.
  11. Authenticity – the antidote to fake news and marketing hyperbole and a must-have for Gen Z. Reviews have replaced ads as the selection driver in many categories.
  12. Personalisation – tools like marketing automation and AI are enabling the next level of direct marketing.
  13. Privacy – the flipside of personalisation -an increasing issue for modern marketing practices.
  14. New ways to pay – we’re seeing a rash of new payment platforms emerging, most of them channelled through our mobiles.
  15. Gen Z – move over Millennials, there are new kids entering the workforce.

What others would you add?

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The 3 biggest problems with in-house agencies

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The rise of in-house agencies is certainly one of the biggest changes within the marketing world over the past few years.  In-house teams are brought together usually to run digital marketing programmes, or design work, or social media.
The business case for an in-house agency is typically a mix of:
  • Focus & attention – no agency can know or care as much as we do about our business.
  • Greater agility – being always on they make businesses more responsive.
  • Managing the digital engine – having the core drivers of direct e-commerce owned and managed in-house.
  • Cost savings – shedding the cost of external agencies in favour of internal teams.
  • Because others are doing it – in-house teams are in vogue and seen as the modern way to go.
There are many companies that operate a mixed model of some in-house, supplemented by external specialists.
While some in-house agencies operate very effectively, there are some problems that are all too common.
Three big ones are:
  1. Ready, fire, aim
    This is when companies are looking for short-term wins, but end up delivering short-term whims that lack strategic purpose or cohesion. Having the means of production at hand can make it too tempting to execute before thinking it through.
    The risk is inconsistency, a lack of relevance, confusion and a dilution of brand strength.
  2. Cars with no petrol
    This is when the creation of in-house capability is a mask for reducing the marketing budget. It can become an excuse for minimising marketing effort.
    The risk is an erosion of brand health through underinvestment.
  3. Drinking our own Kool-Aid
    This is when companies limit their activity to only what they do in-house. An internal focus without debate and the stretch of strategic and creative interpretation can lead to companies limiting the scope and quality of what they do.
    The risk is weak marketing and communications, resulting from limited strategic, creative or technical crafting.
Headlight works with a number of in-house teams, providing expert strategic direction, problem solving and insights to help clients get the best from their marketing investment.
Please get in touch for a chat if you need help with your in-house team.

‘Millennials’: just a buzzword?

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The Millennial generation as defined by Pew Research is anyone born between the years 1981 and 1996. In 2018, this includes everyone age 21 to 37 (That’s about the age gap between Kylie Jenner and Kim Jong-Un) this extends from people just entering the workspace to ‘adults’ with 2 kids or more.
The much-hyped label ‘Millennials’ has resulted in a blanket buzzword that is often met with derision. It brings up an image of Snapchat-happy narcissists who hate hard work and criticism but love ethical products and spending all their money on avocado toast.
Apparently, millennials are killing countless industries, here are a few from a seemingly never-ending list.
  1. Napkins
  2. Cereal
  3. Golf
  4. Motorcycles
  5. Yoghurt ( especially light yoghurt)
  6. Homeownership
  7. Diamonds
  8. Soap bars
  9. Banks
For a more detailed read and more industries that have apparently been brought to their knees, read more here. Some of the other more bizarre accusations range from being afraid of doorbells, bringing about the end of churchgoing, giving up on dinner dates and loving wine but not the process of uncorking it.
In the marketing sense, it is illogical to assume that a 21-year-old and a 37-year-old consume the same media, have similar life interests or even react to the same stimulus. Understandable that “a generational name helps to start a conversation,” according to Jason Dorsey, president and lead researcher of millennials at the Centre for Generational Kinetics, a research firm that studies millennials and Generation Z. “Otherwise, we might be saying ‘twentysomething’ and ‘thirtysomething,’ which is not actually generation-specific but a demographic.
The Wall Street Journal has admitted that the term ‘Millennials’ has become a sort of snide shorthand in their reporting, Fortune has suggested dropping the title, millennials themselves hate being clubbed together and research too has shown that most resist the label.
Author and journalist, Summer Brennan, came up with an interesting idea aimed at getting people to accurately understand the term ‘millennial’. Every time you see a headline that mentions ‘millennials’, replace it with ‘adults under 40’.
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If you do that for the examples stated above, ‘adults under 40′ killed the napkin/cereal/yogurt/diamond industry; ‘adults under 40’ are afraid of doorbells does sound a little absurd. It does help to take a deep breath and objectively take buzzwords out to get a real understanding. This all comes down to the way we frame conversation shapes our worldview. Specific words and phrases have the power to change minds.
A famous quote from Winston Churchill (originally describing Israel) seems to sum up the generation pretty well “a riddle wrapped in a mystery inside an enigma”.
On the other end of the spectrum, one of  Deloitte’s startling revelations was that media consumption behaviours of Gen  Z,  Millennials,  and  Gen X are now so similar, they nicknamed this combined group the “MilleXZials.” But that definitely needs a blog post in itself and a revamp of the way we compartmentalize and understand the world.

Clients doing it in-house

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One of the big trends at the moment is client companies building their own in-house agencies, or at least taking on things they previously outsourced.
Mark Pritchard, CMO for P&G recently mapped out their plans for a DIY agency approach at Cannes. In particular, he points to digital media wastage as the main problem.
He claims… “We’re reinventing media from mass blast to mass one-to-one, we’re getting advertising from less push to more pull, we’re reinventing agency partnerships from less outsourcing to more of our people’s hands on the keyboard.”
(read more here)
This is a phenomenon that’s been growing for a while now with more and more design studios, social media, and digital marketing teams emerging in-house.
Having seen quite a few of these in action, there is no right answer. Some clients are saving costs and delivering effective work. But others are struggling for quality in what they do, and lack creative impact and strategic insight – satisfying themselves without the benefit of professional expertise.
A while ago I wrote an agency selection best practice guide for the 3Cs and ANZA called “Navigating the agency selection process” (have a look here). In it there is a section that maps out different agency/outsource models and their implications, including in-house alternatives. I recommend you have a read if you’re contemplating going in-house. And if you’re not sure, get in touch for a chat (lew.bentley@headlight.co.nz)

 

 

 

12 Steps to a High-Performance Campaign

With the Effies on our doorstep, it is timely to consider what goes into creating a high-performance campaign.
A few years back I did an analysis of all the campaigns over a 3-year period that won a Gold Effie for effectiveness as well as significant creative awards. Once I had identified the (surprisingly few) high performers, I interviewed the agencies and clients who had created them in order to identify insights into what made the difference.
While quality creative ideas are obviously important, the processes around creative development and nurturing a campaign are just as important. Here are the 12 steps to creating a high-performance campaign.

The 12 Steps…

1. Get the relationship right first

Consistent across the board was the insight that great campaigns come from great client:agency relationships. This creates a climate of trust and an openness within which to develop good work and effectively deal with any challenges along the way. In contrast, strained relationships or cold client:supplier relationships tend to stifle creativity and lead to compromises.

2. Avoid political interference

Great campaigns are safeguarded against the perils of organisational politics that can distort campaigns. This retains a purity of purpose for the task at hand rather than satisfying internal agendas.

3. Be open-minded

Letting campaigns take their own shape, rather than being pre-determined, gives creativity a chance. In particular, the creative process involves building something from scratch that does not exist. There are typically several interpretation steps along the way for the campaign to take shape. These steps require a leap of faith, and the more challenging the creative concept, the greater the leap required. Great campaigns tend to benefit from an open-minded approach within the context of a relationship of trust.

4. Talk first

Great campaigns do not flow from isolation. A common factor with top-performing campaigns is that there is a high degree of healthy debate about the task at hand and the environment in which the campaign needs to operate. This ensures there is a common understanding of what is required and the most appropriate way to approach the brief.

5. Get the brief right

Client briefs and agency reverse (or creative) briefs can be deceptive to write. Great briefs definitely help create better campaigns. They rise above being a bland work order by adding accuracy and potency. They define the task clearly. They provide relevant insight about the target and the market. They focus on an inspiring and creatively interesting proposition. They avoid red herrings. They frame the scope of the task accurately. Perhaps most importantly, great briefs do not try to provide the answer – thereby limiting creative interpretation. Instead, great briefs act as a powerful springboard for the creative imagination.

6. Translation

Great campaigns are never literal expressions of the task. They involve a series of translations: from the problem to the strategic insight on how to solve it; from the brief to the creative concept; from the brief and concept to the right media solution; from the creative concept to the finally produced work. At each stage the best campaigns gain further strength as value is added at each stage.

7. Emotional X-Factor is the secret ingredient

Each of the top campaigns examined had an X-Factor about them. This is a special, hard to describe creative dimension – the humour, the emotional power of the idea, the anticipation, the coolness of the technology – that made the campaign irresistible to work on and brought out the best in people throughout the development process. Campaigns without some kind of X-Factor don’t draw the same amount of passion and desire for success.

8. Alignment and connection

Great campaigns don’t sit in isolation. They present powerful concepts that seamlessly align with all relevant connection points such as sales channels, product development, and stakeholder groups.

9. Know why it works

Great campaigns tend to be well-understood in terms of how they work to influence the target. It is clear what makes them impactful. This is crucial in the refinement and evolution of campaigns over time. It helps the campaign retain its essence and avoid being diluted through ‘fiddling’. It also ensures that clients understand the strength of their campaign asset.

10. Use research wisely

The top-performing campaigns were typically developed using research-based insights up front. This helped develop work with a more subtle understanding of the target market and how to connect with them at a deep level.
The role of pre-testing concepts was generally considered less constructive in the development of campaigns due to the risk of diluting creativity.

11. Be patient

Top performing campaigns tend to have benefitted from having enough time to build their own momentum without unrealistic short-term expectations, micro-management and excessive adjustments.

12. PR

Great campaigns tend to benefit from good PR within the agency, the client organisation, and the wider marketplace. They take on a life of their own as stories of success for the business, the agency and all involved.