DM Magazine October 2020 by Lloydmedia Inc

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Bringing Empathy, Customer Service with AI VOL. 33 • NO. 8 • OCTOBER 2020

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THE AUTHORITY ON DATA-DRIVEN ENGAGEMENT & OPERATIONS

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Agency Transformation Interview with Mark Penn, Chairman and CEO, MDC Partners

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Using AI to Capture Sales from Data

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Bringing Empathy, Customer Service with AI

Vol. 33 | No. 8 | October 2020 EDITOR Brendan Read - brendan@dmn.ca COURTESY FLAIST

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Bringing Empathy, Customer Service with AI BY KRISH GOPALAN

KRISH GOPALAN is the founder and CEO of Flaist,

the AI-powered digital platform. His goal is to democratize the digital transformation process for banks and financial institutions. He has a strong background in both IT and engineering, working in both startups and large enterprises.

OVID-19 has created a customer service shortage within the financial industry as fewer bank employees work at the local branch and more customers call in for help. As a result, customers are spending more time than ever waiting on hold with their banks. At the height of the COVID-19 pandemic, Bloomberg reported banking customers were waiting more than 20 minutes to speak with a contact centre agent. That compares to an average wait time of only 20 seconds in 2018, according to a study from MyBankTracker. Currently, most financial institutions use online chatbots and automated voice messages for customer service. While many of the tools use artificial intelligence (AI), including machine learning, they do not have any of the empathy and advanced thinking that newer AI applications possess. With the new technology, AI agents can have the same human-like characteristics as people. The technology can even detect moods and accents over the phone. It is this personalized customer service that most banking consumers won’t even know isn’t from a human. This new machine learning technology can even detect over the phone whether a customer is from New Jersey, Arkansas, India or even the United Kingdom solely by their dialect.

AI agents can have the same humanlike characteristics as people. And if a customer prefers to speak with a woman or a man, the voice on the other end of the line will also present a voice from their favourite gender. For example, a married couple with a joint banking account might prefer speaking with someone from their own sex. In this situation, AI will automatically send a male voice to the husband and a female voice to the wife, making them feel like their customer service is more personalized. It can also organize the couple’s mortgage needs if they own a home. Entering new conversational era Flaist, a FinTech startup, has incorporated the new AI in its EVA virtual assistant platform. EVA provides ❱ DMN.CA

a multilingual and multi-dialect customer service agent who has the same empathy and human-like characteristics that responds to the personalized needs of customers. EVA’s language detecting technology is extremely valuable across Europe, Asia and the Middle East where dialects are critical to communication. Currently, financial institutions on those continents aren’t able to differentiate among dialects and accents. EVA instantly bridges the cultural gap among countries whose customers may communicate using the same language but with different customs and dialects. The communication is shared over a secure cloud platform, so that customers’ data is never in breach, and in compliance with countries’ data regulations. It seeks out trends from the data of each customer and allows for more thorough, accurate advice without the risk of receiving biased information from in-person operations. The AI can also be programmed as a personal finance management tool for customers who need help with financial planning and budgeting. In Canada, student loan customers can seek information about the student loan repayment suspension program and discuss the various repayment options. And the interaction with EVA can be in English or French, or perhaps a mix of both languages. And when business customers need help with specific issues, like U.S. Small Business Administration loans, the AI can be programmed to share information for them. Making AI affordable In the past, smaller institutions did not have the money to utilize the top tech tools. The EVA technology was specifically designed for those smaller institutions such as community banks and credit unions that do not have the multi-million-dollar IT budgets that the larger financial institutions have. Now, these institutions can customize EVA as an app, widget or through popular communications platforms such as WhatsApp and Facebook Messenger. The plug-and-play technology can reduce an IT customer service budget by 25 percent and can increase revenue potential by 48 percent. As a white label platform, the AI can be customized with a financial institution’s logos and colors, allowing customers to associate the technology with their banks. OCTOBER 2020

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Holiday 2020: Opportunity or Threat? BY BRAD WISKIRCHEN

he 2020 holiday season is a lifetime opportunity or existential threat for many eCommerce companies, as the pandemic has impacted both typical commerce models and consumers’ spending habits. Kount recently surveyed American businesses engaged in digital commerce and found that 84 percent said, compared to last year, the upcoming holiday season is critical to their recovery or survival. Moreover, nearly half of respondents said they will need to catch up on sales in order to recover from the economic downturn. This new research, of both American companies and consumers, reportedly gives the first 360-degree view of eCommerce and fraud prevention this holiday season from the perspectives of both eCommerce providers and shoppers. The consumer survey revealed the driving factors that motivate or disincentivize online shoppers. The business survey, which focused on mid-to-large online retail and eCommerce entities, and which surveyed employees who were at the manager level and above, revealed major risks and opportunities. Permanent behaviour change accelerating shifts More than half of business respondents said their company does not anticipate in-store sales volumes to return to pre-COVID-19 levels within the foreseeable future, even after the pandemic subsides. Moreover, 30 percent of consumers say they will avoid shopping ❱ DMN.CA

in-store as much as possible this holiday season. At the same time, nearly three in four retailers expect higher digital sales than in 2019. These opportunities, risks and trends in digital acceleration mean that businesses need to focus on five key areas: Securing and controlling inventory. Supply shortages and the importance of on-time delivery to consumers make it especially important to protect inventory levels. ❯❯ More than half of all businesses (56 percent) anticipate inventory issues related to having items in stock and shipping items in a timely manner this year; and ❯❯ More than one in four businesses have dealt with a bot attack or inventory manipulation in the past.

Protecting new and existing eCommerce models. Contactless and convenient options, such as Buy Online, Pick Up in Store (BOPIS), Click-andPick and same-day shipping, can make up for reduced in-store sales. ❯❯ 64 percent of merchants think in-store sales will be key for this season, but only 43 percent of shoppers agree; ❯❯ 56 percent of Americans are concerned about receiving orders in a reasonable amount of time; and ❯❯ More than half of consumers say they want free shipping more than any other deal or promotion.

Eliminating chargebacks and manual reviews. An increase in eCommerce transaction volumes can correspond to an increase in payment fraud, friendly fraud and chargebacks. Bad actors know that overwhelming volumes and new channels will be key this season, and they’re looking to take advantage. ❯❯ 40 percent of businesses have noticed an increase in chargebacks since January 2020; and ❯❯ If a consumer does not recognize a charge on their credit card statement, 89 percent would not first contact the company associated with the purchase. Instead, 54 percent would first call their credit card company or bank.

Protecting digital accounts. As shoppers turn to online experiences, many will expect to have loyalty accounts, stored value and saved information readily available. All of these are targets of fraud, and consumers and businesses are thinking about data breaches. ❯❯ Over one in five business respondents say they expect more frequent data breaches to be a significant challenge to their business this holiday season; and ❯❯ Six out of every ten consumers say they are most concerned about the credibility of online retailers or data breaches to their personal information when online shopping.

Reducing friction can drive conversions and loyalty. With stiff competition for digital business, fast and exceptional customer experiences will be key. One in four shoppers said they would not return to a site that turned them away from a legitimate transaction. Switching costs are low for shoppers, and businesses need to create every advantage to keep them on their sites. The reasons Americans choose to abandon their online shopping carts include the following: ❯❯ High shipping costs: 52 percent; ❯❯ Long estimated shipping/ delivery times: 40 percent; and ❯❯ Complicated ordering and checkout processes: 7 percent.

‘Unprecedented’ may be said a lot this year, but this upcoming holiday shopping season truly brings unknowns. Businesses are faced with high stakes and the need to make up for lost revenue, and they must also be scaling and protecting digital commerce. Now is the time to be reviewing, analyzing and implementing the resources needed to address the accelerated shift to eCommerce, which is sure to continue beyond this season. Kount has created resources to help businesses navigate this season and has additional research results. BRAD WISKIRCHEN is CEO of Kount. Kount protects many of the world’s largest card-notpresent merchants, and some of the largest acquiring banks and payment platforms. OCTOBER 2020

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INSIGHTS

The Five Myths About Your CFO BY MO DEZYANIAN

Myth One: CFOs only care about profits or revenue Well that one is partially true. Of course, CFOs are concerned about their businesses’ profitability, but things change drastically when a business is a crisis: such as the current pandemic. Unsurprisingly, CFOs default to protecting company cash flows (65 percent). In contrast, only 27 percent of CMOs are concerned about cash flow. Instead, most CMOs aim to control expenses. There is a tremendous opportunity here for marketers to shift budget conversations in a crisis away from “how much money we need?” to “where we will get the money to spend?” It’s incumbent on us to have deeper conversations with our finance counterparts in order to move our organizations past the pandemic. Myth Two: CFOs are short-sighted It is true that CFOs evaluate businesses in cycles of months, quarters and years. That is, after all, how businesses work. But that does not mean that CFOs are only focused on those cycles. Our research shows that 24 percent of CFOs think balancing long-term marketing success with short-term goals is the greatest challenge in approving budgets. Interestingly, 27 percent of CMOs agree. Both parties are on the same page yet find it difficult to reconcile short and long-term objectives. Which brings us to Myth Three. Myth Three: CFOs know what the ROI on marketing should be To a large extent, the idea of balancing short and longterm marketing success hinges on the “R” in ROI (return on investment). But the challenge is that this return is not clearly defined between CFOs and CMOs. 91 percent of CMOs believe they have adequately demonstrated past ROI. By contrast, 29 percent of CFOs see proof of past ROI as the biggest challenge to approving budgets. Similarly, 24 percent of CFOs are skeptical about the CMOs’ OCTOBER 2020

abilities to prove future ROI in marketing. The evidence is clear: marketing and finance should seek to agree on how marketing is to be evaluated in the short and long term before having any budget discussions. Only when both sides speak the same language around what the expected returns are on marketing can budget conversions be effective. Myth Four: CFOs approve budgets only based on cashflow Let’s say we now agree on what marketing success looks like in the short- and long-term. How do we set budgets? Yes, it’s true that CFOs determine budgets based on how much money the company has (cashflow): or at least is expected to have (forecasting). That is the primary driver for budgeting (29 percent of CFOs). But CFOs also agree that it is not an ideal way of setting budgets. Ideally, budgets should be set based on how much money our organizations need to achieve our objectives. That is, we should be using market intelligence (71 percent of CFOs) to determine marketing budgets. Of course, marketers agree: 64 percent of CMOs think market intelligence should be the primary driver of budgets. This brings us to our final point. Myth Five: CFOs and marketers just want different things Both CFOs and CMOs actually agree on what it takes to close the gap between them during budget season. The skills they all feel are lacking from organizations are analysis and insights capabilities to better interpret data and, more importantly, external research capabilities. At the end of the day, both parties feel like they do not have the resources to truly determine if marketing can be successful in the long and short term and how much money they need to ensure that success. Moving forward, CMOs and CFOs need to consider the following five ways to better communicate and bridge this gap: 1. Alignment on what the ROI on marketing should be ahead of time. 2. An evidence-based approach to measure marketing performance. 3. Agreement on short-term and long-term objectives. 4. Investment in resources to extract insights from the market (via market research), the competition (competitive research) and available data in the organization. 5. Contingency planning ahead of time for drops in revenue due to a crisis. Through better communication and understanding, both parties can ensure that marketing’s now outsized role in helping its organization navigate today’s new world will be successful. MO DEZYANIAN is the president of Empathy Inc. and has co-written the curriculum for the Chartered Marketer’s media course. You can reach him at mo@empathyinc.ca for a copy of the study.

Mo Dezyanian

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t’s that time of the year again. The trees are turning, cozy sweaters are back and pumpkin spice is in everything we eat. To the marketer that means only one thing: budget season. But this year isn’t quite the same as the years before. This year is weird. Budgets were first cut and then they came back, maybe. And no one knows what’s going to happen next month or next year. At the same time, marketers are all very nervous about our jobs since those depend on budgets. It doesn’t help there are some deep-rooted tensions between the chief financial officers (CFOs) and the chief marketing officers (CMOs). All because of some misconceptions about how CFOs look at marketing budgets. In partnership with Leger, the American Marketing Association, the CFO Center and McMaster University, we set out to find the gaps between marketing and finance during budget season. Here are the five top myths about CFOs and marketing budgets, busted once and for all:

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INSIGHTS

How to Mitigate Ransomware Threats BY ELEANOR BARLOW

hink of ransomware and the first thing that often comes to mind is the extortion of multimillion-dollar corporations. The association of ransomware with high-profile organizations, such as the National Health Service in the UK, FedEx and Nissan, is largely shown in the news. But ransomware comes in all shapes and sizes. And the malware that accompanies a ransomware attack is the cause of constant concern for many IT departments of varying sizes. What is ransomware? So, what is ransomware, exactly? Ransomware is any type of malicious software designed to block access to a computer system until a sum of money is paid. Ransomware has become a scary fact of life, particularly for marketers and customer operations departments that are often charged with the responsibility of the flow of data between the company and its clients. Data and its channel of flow between marketing and IT can be a particularly vulnerable pipeline that, if attacked, can lead to measurable damage to both clients and customers. The term ransomware is relatively new. Added to the Oxford English Dictionary only three years ago, it signifies the branch of malware that demands payment after infecting a computer. ❱ DMN.CA

But since then ransomware has increased dramatically both in terms of the number of attacks, but also in terms of the range of methods used to conduct said attacks. And because there are now many varying methods of incidents, we know, and can guarantee, that it is not just large organizations that are being targeted. “Ransomware maintains its reign as the most widespread and financially damaging form of cyberattack,” Europol director Catherine De Bolle recently declared. Spawning ransomware Ransomware began to emerge in the early 2010s. This was mainly due to rapid improvements in the performance of PCs. Computers are now so powerful that they can encrypt their own files in a matter of hours. This means that areas including cryptocurrency have also developed. That progress makes it relatively easy for threat actors to blackmail and receive payments without getting caught. As a public security breach would cause mass panic and potential lawsuits, organizations will often pay off cybercriminals into anonymous cryptocurrency accounts rather than suffer the loss of client data. How an attack works First of all, for a ransomware attack to be possible, a breach needs to be made. To create a

breach, bad actors need to target an organization or individual, and send out phishing emails. Once a phishing email attack is successful, then through this breach, and without the victim knowing, a malicious payload is dropped. A malicious payload is the element of the attack which causes the actual harm to the victim and contains the malicious code.

gain access to personal and private data and, using this information, to extort money or assets of value from the victims. Every business, no matter the size, holds something valuable that an attacker could use to their advantage, which makes every business sector a target, from finance to charities, and from education to healthcare services.

Ransomware has become a scary fact of life. Once the attacker has access to the victim’s network, this leads to data exfiltration. Which is what the victim is being held to ransom to. Following this the payload is deployed. The payload is activated over time: sometimes staying inactive for months at a time. A threat is meaningless without proving that the data is actually stolen/accessible. So, the bad actor needs to exfiltrate the victim’s data, and threatens to make this data public. By shutting down systems, or reducing access, the victim then knows that the threat is not a bluff. This usually is the catastrophic moment when the target recognizes the gravity of the situation. Who’s experiencing attacks? In a word…everyone. The end goal of the majority of cyberattacks is to

In a recent ransomware attack on London’s Hackney Borough Council, the BBC reported how ransomware attacks “are a growing problem for public services, from councils to hospitals. In such attacks, hackers take control of computer systems and data and demand payments in order to unlock them.” The concerning issue is, when it comes to ransomware attacks, no one knows the true number of attacks, as many victims do not report them for fear of losing money, their business or personal or private data. This means that the number of attacks is actually far greater than those provided by Statista who recorded 187.9 million cases worldwide in 2019 alone. New York Times journalist Nathaniel Popper recently noted that “The frequency of ransomware OCTOBER 2020

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INSIGHTS attacks – among the scariest and most costly online assaults – has been hard to pinpoint because many victims quietly pay off their attackers without notifying authorities.” What makes an organization vulnerable? The statistics provided by Statista, sourced from leading managed service providers around the world, gives some indication. They show the percentage of respondents which reported that: ❯❯ 67 percent of infiltrations happened via spam/phishing emails; ❯❯ 36 percent due to a lack of cybersecurity training; ❯❯ 30 percent because of weak passwords and access management; ❯❯ 25 percent due to poor user practices; ❯❯ 16 percent because of malicious websites and ads; and ❯❯ Clickbait (16 percent). What is evident from these statistics is that more training is required, across all organizations, in cybersecurity procedures and policies, especially when it comes to insider threats. Many employees are completely unaware that they are a threat in the first place. Take, for instance, an employee working remotely. This employee may be sitting at a local café where they decide to work on a company-owned device. If this device was unknowingly hacked while using a different Wi-Fi connection, the user may be completely unaware that they are spreading malicious malware via their device throughout the company. To pay or not to pay? This is purely a business decision. But it is crucial to remember, whatever the business decision is, that there is no honour amongst thieves. Attackers are extremely sophisticated. Once they have your data, there is no guarantee that if you pay them off that your data will be given back or decrypted. There is also no guarantee that you will not be a target a second time around. Often, once an attack is made, the bad actor will sell the details on to their associates to come after the victim again after deployment, OCTOBER 2020

because the payload can still be there, and be activated and deactivated. Criminal helplines The ironic thing is, there are stateof-the-art helplines, run by the criminals behind attacks, offering help with the logistics of an attack 24/7. Traditionally, bitcoin is used to pay these ransoms. But lots of people don’t know how to procure bitcoin, so they need the criminal helpline services to guide them through the payment process.

can ensure that your downtime and data loss will be minimal. Here your employees are key. Educate them on the latest email phishing scams and social engineering. Give your staff the right training, so that they are aware of their security, the security

Ransomware strategies In the end, the best way to respond to a ransomware attack is to avoid having one in the first place. Backup data regularly. Scan the network infrastructure for vulnerabilities and patch the latest security updates to avoid ransomware infection. That way, if attacked, you

ELEANOR BARLOW is the content manager at SecurityHQ, an advanced managed security service provider delivering engineering-led solutions to clients around the world.

How to Avoid Being a Ransomware Target ❯❯ ❯❯

Money or time? Monetary loss is the number one concern for the majority of businesses affected by ransomware. But it all comes down to business priorities and financial calculations. For many, the greatest cost in the event of a successful ransomware attack is downtime. The cost of retrieving the encrypted data and making it accessible again can add up quickly and, for a large business, downtime can prove to be more costly than the initial ransomware payment itself. Sometimes victims speak out, but this does not always end well. Take Travelex, the currency exchange company, for instance. Following an attack by a Sodinokibi ransomware, $6 million was demanded in exchanged for 5GB of personal data. Since the attack, Travelex has fallen into bankruptcy, with PwC saying that the “foreign exchange firm was acutely impacted by COVID and the recent cyber-attack.” We can debate the merits and drawbacks of paying a ransom, based upon the cost of the attack, at length. But at the end of the day, the chief concern of the organization will either be the cost of restoration or the ransom amount demanded. Which is why the methods used to react to a ransomware attack will differ between each organization.

of the devices and data they process and the procedures and policies they need to maintain.

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Back up your computers and servers regularly; Secure mapped network drives with a password and access control restrictions; Avoid handling files or URL links in emails, chats or shared folders from untrusted sources; Update your anti-virus solutions with the latest virus definitions; Keep your operating systems, networks and security devices at the current release patch update; Run software with the least privileges; Monitor your endpoints 24/7 by deploying endpoint detection and response (EDR) technology to detect advanced cyberattacks; Have business continuity plan in place to endure user downtime; Align with better IT security practices and tools; and Associate insurance policies that cover cost in case of an attack.

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FEATURE

Agency Transformation

Interview with Mark Penn, Chairman and CEO, MDC Partners BY STEPHEN SHAW

of Kenna, a marketing solutions provider specializing in delivering a more unified customer experience. Stephen can be reached via email at sshaw@kenna.ca.

COURTESY MD

Mark Penn is the Chairman and CEO of MDC Partners and the author of “Microtrends Squared”.

C PARTNERS

STEPHEN SHAW is the Chief Strategy Officer

he complexity of managing marketing communications across multiple touchpoints is overwhelming for most brands. But where do they turn for help? Traditional agencies have been slow to embrace technology. Consultancies offer strategic muscle but come up short on creativity. And digital specialists often lack the bench strength to tackle the intricacy of designing an end-to-end customer experience. All of the global agency holding companies recognize the growing gap between customer expectations and the disjointed brand experiences offered by their clients. But before they can ride to the rescue, they must undergo a radical transformation of their own: offering clients a more unified service model that makes it easier to take a collective approach to problem solving. Mark Penn, the CEO of MDC Partners, which is one of the largest agency holding companies in the world, recognizes the urgency of transforming his $1.5 billion enterprise into a modern marketing company of choice. Last year he made a calculated bet that MDC could respond more nimbly to the needs of clients than its much larger competitors, buying into the company with a $100 million investment from his private equity firm The Stagwell Group. He took over the company at a critical time as its stock price was in need of resuscitation. Now, after a year of fixing the balance sheet, Mark has set out to reinvent the company’s service model, knowing that clients are looking for answers to their business challenges beyond advertising. The “partner firms”, as MDC likes to call its family of 50 agencies, have been clustered into synergistic hubs referred to internally as “tentpole networks”, making it easier for their leaders to collaborate and pitch new business together. While the COVID-19 pandemic may have put a crimp in his plans, Mark is renowned for turning emerging trends into opportunities. He earned fame as former U.S. president Bill Clinton’s pollster for six years, helping him win re-election in 1996: partly by convincing him that he needed to win over a new swing voter called the “soccer mom”. Mark went on to serve as chief strategist to Hillary Clinton in her 2008 campaign to win the Democratic Presidential nomination. He has also been a senior adviser to such high-profile leaders as Bill Gates, Steve

❱ DMN.CA

Ballmer, former British prime minister Tony Blair and the late Menachem Begin, former prime minister of Israel. A decade ago, Mark published a ground breaking work called Microtrends which posited that opportunity can be found by identifying small slivers of the population who have a disproportionate influence on social, cultural and political trends. His latest book, Microtrends Squared, builds on that original work, describing a new set of forces at play shaping the direction of society.

Shaw: Penn:

What is a microtrend exactly?

The basic notion of a microtrend is a small, somewhat imperceptible group which is becoming super important. It might only represent 1 percent or so of the population, but it punches above its weight. For every trend there’s a countertrend: what we call “Newton’s Law of Trends”. Take the example of people buying smartphones: a megatrend, right? But a microtrend is people buying flip phones who say: “I can’t stand this smartphone technology, it’s too complicated. It’s not for me.”

Q: A:

How do these groups become noticeable?

It takes a leap of creativity, combined with data, combined with validation. I once had this hypothesis that parents at work were much stricter with their kids. That turned out to be false: it was the other way around. Because they were at work so much, they felt bad about being away all the time. So they were easier on their kids: the opposite of what I expected. One of my favourite microtrends involved pet ownership. In the past, pets were bought by families mostly, usually because kids demanded them. But then a lot of single people began to buy pets as household companions. They tended to spend more on products like GMO [genetically modified]-free pet food. Then there were empty-nester couples who bought pets because they didn’t like their houses being so quiet. And so they pampered their cat or pooch with premium pet food. These trends may seem trivial and insignificant, but they can have enormous impacts on society.

By their nature, are microtrends transient? That is, as society evolves, new niches evolve while others disappear, in contrast to classical segmentation, which is more static. I don’t think they rise and fall overnight. The reason there was an interval of ten years between my two books is that’s how long it can take for a microtrend to mature. Take “Internet Marrieds”, for example. When I wrote the first book, it was just the beginning of that

OCTOBER 2020

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FEATURE microtrend. Ten years ago, people were reluctant to admit they met online. Today that stigma is largely gone. I thought that microtrend would result in a tremendous mixing of the classes, that people would broaden their social circle, since they could marry anyone from anywhere. But the opposite happened: people began to segment themselves. In “Microtrends Squared” I assess whether a trend turned out the way I expected. And oftentimes, unfortunately, the answer is no. A balkanized society

You make the case in your book that society today is at a crossroads, that it is being pulled in opposite directions. How do you see that playing out over time? In “Microtrends” I was hugely optimistic. We were moving from the ‘Ford Economy’ – you can have any colour you want as long as it’s black – to the ‘Starbucks Economy’ – coffee any way you like it. Personalization would become the driving force of marketing and product manufacturing. But then fast forward to today and people at Starbucks just say, “Give me the regular.” People move in the other direction. They get comfortable with the choices they make. They stop experimenting. It’s the paradox of choice. The more choices I give you over time, the fewer choices you make. I always use the analogy of a restaurant that just serves chicken or fish. Then they decide to add steak and sushi. One group gravitates over to steak every day and one group gravitates over to sushi. Then the steak people say: “Sushi can kill you, there’s lots of bacteria”. And the sushi people say: “Steak leads to heart disease”. Just like Fox News and MSNBC. People get stuck in their niches. We’re actually balkanizing society more than I expected, and that is having a more negative impact than I thought.

Q: A:

Have we passed the point of no return? Not necessarily, but it takes leadership to really change course. There’s a schism between OCTOBER 2020

the Old Economy [industrial age] voters and the New Economy [information age] voters. Those who have benefited the most from the growth of the New Economy have a different sense of values then those in the Old Economy. The Old Economy voters wound up with so small a share of the GDP relative to their numbers that they rebelled. Leadership came along that crystallized those sentiments. Will leadership come along and be able to crystallize the desire for society to operate on a more cooperative and collaborative basis? So far, no, right? Several U.S. presidencies have run on that basis but they didn’t achieve it. G.W. Bush ran as a “uniter” versus a “divider”. Obama ran on “hope and change”. Trump didn’t run that way. He simply supported the Old Economy voter. But I don’t know that the result is any different than at the end of the Bush or Obama administrations. They all wound up at the same divided place because a lot of these forces are pulling the two parties apart. It will take someone who really says it and means it to bring society together. Brand response

In the face of these dueling forces, brands are being asked to consider what their purpose should be: whether they should take a stand on certain issues or not. How do marketers reconcile the conflicting values of their customers? Well, oftentimes, they don’t do a very good job of it at all. I always remind people that for the Ford Motor Company the number one product is the F-150. And the F-150 appeals to a very different customer than someone who is buying a sedan. Brands have different customer bases. But I do think that marketers have to think about what can unify us. If everyone picks a side, then society itself will just get more divided.

But what about Nike, Ben and Jerry’s, Patagonia? There’s a long list of companies that have picked a side. Is there an expectation now that

brands show leadership on certain issues? Well a lot of polls out there ask questions like, “Do you think the company you buy from should stand for social improvement and justice?”. Now who’s going to say “No” to that question? Remember, at the end of the day, consumers are buying products that they expect to work. And what brands do in the political and social realms can’t be used to cover up inferior products. And so, I do think that people can get carried away with taking a position. Some brands like Nike will be more successful than others. During this pandemic, look at the companies that rose up in the minds of people: Amazon, Walmart, FedEx. People really appreciated the fact that they were able to come through for them under these adverse conditions. And people now have a better appreciation of technology companies. Technology didn’t collapse just because everybody went online. Quite the opposite, it worked, right? So people’s trust in companies immeasurably improved.

Pandemic impacts

Just on the subject of this pandemic, it’s clearly having a major impact on people’s attitudes and spending. There are all kinds of speculation now on the possible aftermath effects. We know from past pandemics that they leave indelible imprints. What microtrends are likely to emerge from this current health crisis? Well, I do think it’ll be interesting to see what changes. A lot of customers fell out of their habits: they stopped going to the movie theater, going on a cruise, going on a plane. And that’s going to be a very big job for marketing to win those customers back. And then there are new habits people formed, like ordering groceries online and videoconferencing. Looking at it generationally is fascinating. For the younger generation, this is the first actual crisis they’ve experienced. Their level of fear over this virus is just as high, if not

higher, than older people, despite it being a disease that primarily affects older people.

Don’t you also have a whole generation coming along thinking they can’t do as well as their parents? Well when you look at polling on that question, it’s the older generation who think their kids won’t do as well as they did. The younger generation have a very optimistic image of how they’re going to do. And a lot of that is fuelled by the fact that they see themselves living in a world of wondrous technology that didn’t exist for older generations.

The technology triopoly

On the subject of technology, my takeaway from your book is that you don’t quite view it as a liberating force. And certainly today, there’s loads of concern around the “triopoly” – Amazon, Google and Facebook – are they friend or foe? A lot of people are thinking about stricter regulations to curtail their power. What’s your perspective? Well let me say that I’m a technology enthusiast: have been ever since building my first computer in a kit. And of course, I was chief strategy officer at Microsoft. And so I’m a huge believer in its power for good. Having said that, there are certain aspects [of technology] that really are going the wrong way. As a consumer you have to be very careful as you trust technology more and more to do things for you. We’re going to need some standards with proper third-party appeal processes. For example, about 40 percent of people think that liberals are being censored on the Internet: and about 60 percent think that conservatives are being censored. [As a result] everybody thinks they’re being censored.

State of advertising industry

I’d like to talk about the state of the advertising industry. The holding company model has been under siege in recent years. What are the major factors that have contributed to their decline? DMN.CA ❰

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FEATURE

First, the traditional players that were formed many years ago were slow to understand the changes that were underway. And they also got too big; it became impossible for them to move easily and quickly. And then marketing itself went from mass marketing to performance marketing where most of the money is now being spent online. When I ran the $2 billion budget at Microsoft just five or six years ago the digital budget was an afterthought. Today, it has to be integrated into every aspect of a campaign. Performance marketing is an integral part - loyalty and CRM are integral parts – [of marketing]. And they have to work together with offline marketing. So now, if you’re going to do the best job that you can, you need to bring all of those things together.

Q: A:

How is MDC different from the much larger traditional holding companies? I think MDC has always been less encumbered with traditional media. Being smaller, we’re also more manageable. And I created Stagwell with the idea of having a digital-first holding company in the digital age. We also offer top-flight creativity that is almost impossible to find in the holding companies. And we’ve grown our digital offerings, both within MDC and in Stagwell, representing the components of the modern marketing machine that you really need to serve clients. We also have an alternative model, built around global hubs, that will enable us to compete for larger and larger accounts against the bloated holding companies, which have been slower to adapt to this disruption. As I often say, [these traditional companies] were a disaster before the disaster, although this disaster has helped them clean house faster than they might have otherwise. After all, I was at one of them [WPP] before I went to Microsoft. My principal takeaway was that these companies didn’t manage high-level talent in the way you needed to. And they weren’t making the transition to digital integration that is really the hallmark of modern marketing. ❱ DMN.CA

Marketing complexity

Given the disarray the media world is in today – ad spending has dropped off a cliff, digital ad spending is almost entirely gobbled up by the triopoly – are we at an inflection point? I’m not as pessimistic as you are. Online spending is down single digits while offline is down double digits. We’ll see where it all ends up. You see a lot of movement to eCommerce and online transactions. And then you see the growth of addressable media. You really have a dataoriented marketing world now. Part of the issue in a market with so few suppliers is whether advertisers are getting enough benefit from digital targeting. It should be fundamentally cheaper than old-style marketing. But I’m not sure that it is any cheaper.

Q: A:

There’s a lot of waste baked into programmatic advertising. I think the world’s best digital ads have yet to be created. The formula for how you impact people in a noninterruptive way hasn’t been fully cracked. A lot more of marketing online is going to be click-based, rather than provide the kind of brand storytelling that is still done best on TV. This year, we have the U.S. Presidential election. I always tell people that we used to spend a lot more money marketing a hamburger than we did on elections. But now that’s reversed. There’s probably $5 billion being spent on this election. But the marketing world continues to get more complex. And I think the more complex it is, the more it requires experts to figure out the best ways to reach customers, and the best creative format to use. And that means it’s really hard for in-house operations to do the same kinds of things that agencies do.

Strategic & creative integration

To your point about complexity, are agencies today positioned to deliver the answers? You have the big consultancies moving onto their turf, leading with the promise

of digital transformation. How do agencies respond to that threat? Look at Code and Theory, which is part of Stagwell. They have hundreds of digital designers and engineers. They can design it and they can build it. The same goes for Instrument at MDC. And YML is even more advanced in terms of technology. I think that agencies have to combine technology and creativity in effective ways. And we’re lining up the resources to do that. If you’re a consultancy, with a big digital transformation practice, you’re trying to graft on creativity. So is it technology first? Or creativity first? I do think it’s got to be a very strong combination of both. Right now, the consultancies are over weighted on digital transformation: and we’re underweighted.

Q: A:

Then to build “weight”, as you put it, what will that take? You need people who are great in CRM, in understanding current customers, in performance marketing, and in attracting new customers and engaging them online. And then people who know how to manage your offline media and position your brand. And then you have to bring them together with the creative people. Today, for example, 72andSunny and Instrument are walking with their clients in lockstep.

A keyword certainly is collaboration. But given the complexity, it also calls for a generation of T-shaped people who are multidisciplinary. I always say that the cost of data keeps dropping to zero, but the value of analysis keeps rising to infinity because we face more and more difficult problems. It takes people to set the strategy. And that’s why some of our companies, like Anomaly, offer a very tight integration between strategy and execution.

Future of marketing

What I see today is that marketers have a diminished stature in most businesses. How can marketing

reclaim its place at the strategy table? How does it help lead the way to a post-pandemic recovery? It’s a good point, because I think for the last few years, as marketing has undergone transformation, the question has been, what kind of person has the right skills to be the CMO? Is it someone who’s more dataoriented? Someone who’s more of a professional manager? Someone who’s creative? Is it someone who really understands brand positioning? And the truth is, you need to be a master of all of that. Marketing has to create opportunities that are not going to happen otherwise. No C-suite should be without the CMO in the room. Especially coming out of the pandemic, marketers have a bigger role than ever to play. You always have to get out ahead of the CEO, to lay out the questions the company is facing before the CEO does. And then marketing will be looked at as offering tremendous value.

The answer clearly isn’t just an ad anymore. There’s also discussion that brands going forward have to be humanized. Is the role of the marketer to also serve as the conscience of organizations? I think that’s one of their roles. However, I think that if they’re the conscience of the company, as opposed to the central driver of revenue, the CFO will say, “God, I just can’t wait to cut that unnecessary marketing budget we’re wasting …”

Q: A:

They think that today!

That, by and large, is true. But hopefully we’ll develop more tools that can trace ROI more effectively. There’s never been more data to prove the effectiveness of marketing. So I’m generally optimistic about the future of modern marketing. You’ve seen offline media go down, news and print collapse and radio go down. But then you saw digital billboards go up, and you saw search, social, online shopping, all those things, taking off, growing 20 percent plus a year. That is where marketing is, and that’s where it’s going to grow. And that’s where MDC will be playing. OCTOBER 2020

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EXCELLENT EXECUTION

Using AI to Capture Sales from Data BY SEAN BYRNES

n today’s business climate, understanding the trends behind your victories can be just as important as analyzing those behind your failures. For marketers, unpacking customer behaviour and its impact on sales can provide direction for all types of programs, including marketing and sales content, organic social and digital campaigns, events, pay-per-click and other paid promotions. When positive behaviour leads to success, companies have an opportunity to analyze the actions leading to success and put marketing programs in place to repeat or encourage similar behaviour. Ultimately, this drives upticks in awareness, interest and conversion. Similarly, when customers behave in unexpected ways, it is beneficial to understand the root cause of this behaviour so it can be either encouraged or discouraged through marketing and communications.

SEAN BYRNES is CEO of Outlier.

The limits of human analysis To find truly useful and actionable points of data requires looking at huge volumes of information and distilling them down into useful reports. Often this entails combining behavioural data points from digital or foot traffic, sales and CRM systems, customer support, search, advertising and other sources with demographic, psychographic, geophysical, weather and other types of external data. But most companies and marketing teams don’t have the bandwidth or the skillsets to dive deep into behaviour analysis, even with data scientists on board. Typically, these data sources live in siloed information systems, may reside outside of the organizations and often are not easily or directly accessible to marketing teams. Simply put, using data to optimize marketing has become necessary, but it has also become too big of a job for human analysis alone. Applying AI Luckily, marketers have access to intelligent artificial intelligence (AI)-driven analytics that can automatically monitor data from unrelated sources and distill huge volumes of data into usable information. Even better, these tools, often called automated or augmented business analysis, can uncover the root causes of behaviours, helping marketers get to the “whys” of customer behaviour instead of just the “what.” Here’s an example. In April 2020, a telemedicine provider noticed that its company blog was receiving record-high page views from organic search. The marketing team was excited, but wanted to know why this was happening so they could continue to create interesting content and drive organic traffic.

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As a telemedicine provider, the team could easily understand why the brand was getting new traffic in the middle of a pandemic. With health concerns and people staying inside their homes, telemedicine was generating a lot of new interest. So additional traffic was expected. But why these pages and why was the majority of traffic coming from Google search? With an automated business analysis platform in place, the team didn’t have to work hard to find their answer. As soon as a threshold for unexpected customer behaviour was reached, the Outlier AI platform automatically alerted the team to the increase in visits, provided the data analysis and offered an automatic root cause analysis suggestion. The analysis helped the marketing team determine that three of the top five record-breaking blog posts visited used specific keywords that addressed the pandemic and the public health crisis. This, in turn, created a direct path from search to the blog site and greatly increased organic traffic. By using automated business analysis, this process happened in real-time; the marketing team didn’t need to ask for access to data or wait to see their traffic trends in a weekly or monthly report. Within a 24-hour turnaround time, the team could proactively take advantage of this unexpected — yet positive — behaviour to reinforce it through marketing. It gave them an opportunity to immediately post additional content using similar keywords or create other marketing campaigns using language they know potential customers are using in search. In another example, an online retailer using automated business analysis was alerted to visits trending up for search terms “sleepwear” and “candles” in mid-April 2020. Interestingly, visitors spiked for the search term “food storage containers” around the same time. With these unexpected patterns revealed, the marketing team had a clear understanding of product searches by consumers who were now sheltering-in-place and changing their buying habits. They were able to change the homepage to feature trending products, meet customer demand and capture new sales very quickly. By driving up qualified traffic in both cases, the marketing teams could effectively streamline their efforts and decrease the cost per lead, all key metrics for any marketing team. Without AI-enabled automated analytics, these opportunities would have gone unnoticed and potential sales might have been lost to competitors. But simple tools that can do the analysis and provide actional insights on a daily basis are now giving marketers the power they need to drive business forward. OCTOBER 2020