Marketing News: January 2018

AMERICAN MARKETING ASSOCIATION

AMA.ORG

JANUARY 2018

WHY WE BUY WHAT WE BUY

JANUARY 2018 NO.

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table of contents AMERICAN MARKETING ASSOCIATION

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SEEN ON AMA.ORG

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ANSWERS IN ACTION • Snapshot • Core Concepts

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AMA INTELLIGENCE • The Middle Market • The CMO Survey

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EXECUTIVE INSIGHTS • David Aaker • Vikas Mittal

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CAREER ADVANCEMENT • On the Record • Personal Branding

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#OFFICEGOALS

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 Read This Story to Learn How Behavioral Economics Can Improve Marketing

Richard Thaler’s 2017 Nobel Memorial Prize in Economic Sciences is a nudge for marketers to learn about behavioral economics. How can marketers nudge quick-thinking, short-attention consumers?

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42  Subscription Box as Stratagem

The fad of subscription boxes is waning, but some shrewd brands have a plan to thrive. Their secret: Each box is not just a widget, but an insight-generating emissary.

Cold & Rainy With a Chance of Detergent Sales

Trends in tech and advertising have made the weather a highly sought-after data point, turning forecasters into predictive modelers of human behavior.

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LETTER FROM THE CEO

The Year Ahead in Marketing

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ating back to the 19th century merchant economy, marketing has evolved to become both an art and a science. The discipline has experienced evolution and revolution, standing the tests of time and change across many eras: the information age, the internet age, the broadband age, the convergence age and the mobile age. What age is next?

Some say our society is in an affirmation age in which we all hang out in echo chambers to hear what we already believe parroted back to us. In those echo chambers, it can be easy to become certain about the way life should be, and along the way we can lose our humility.

Our beliefs can mutate into selfrighteousness. The problem with communication is that it can sometimes unwittingly—or deliberately—become mauled into sophisms that string together a series of technical truths to deceive others on the larger issue at hand. I hope those in

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our industry don’t abuse content marketing in that way.

In the year ahead, I’d like to suggest that marketers begin with a period of self-examination that leads to the humble understanding that customers don’t want your product—they want the solution or benefit it provides. Once you accept the idea that your product is probably a source of annoyance the consumer puts up with to gain the benefit they seek, you can begin to make a difference in their lives. Don’t fall in love with your product; fall in love with solving problems for people. In so doing, you might decide that storytelling is less important than experience design. The majority of consumers abandon brands not because of the product, but because of the experience.

Brands that implement intentional experience design enjoy nearly double the revenue growth of those that don’t. The strongest brands in today’s markets are experience-driven brands, not storytelling-driven brands.

I’m not saying storytelling

doesn’t matter, but no amount of artful, even helpful, storytelling can create customer engagement like a well-designed experience.

Start your new year there, and may Lady Providence visit upon you often!

Positively, RUSS KLEIN CEO

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JANUARY 2018

LETTER FROM THE EDITOR

VOL. 52 | NO. 1 AMERICAN MARKETING ASSOCIATION

Mary Garrett Chairperson of the AMA Board 2017-2018 Russ Klein, AMA Chief Executive Officer rklein@ama.org Andy Friedman, AMA Chief Content Officer afriedman@ama.org EDITORIAL STAFF

Phone (800) AMA-1150 • Fax (312) 542-9001 E-mail editor@ama.org Molly Soat, Editor in Chief msoat@ama.org Michelle Markelz, Managing Editor mmarkelz@ama.org Zach Brooke, Staff Writer zbrooke@ama.org Hal Conick, Staff Writer hconick@ama.org Sarah Steimer, Staff Writer ssteimer@ama.org Bill Murphy, Designer wmurphy@ama.org ADVERTISING STAFF

Fax (312) 922-3763 • E-mail ads@ama.org Sally Schmitz, Production Manager sschmitz@ama.org (312) 542-9038 Michael Gay, Account Executive mgay@yourmembership.com (727) 329-4421 Nicola Tate, Account Executive ntate@yourmembership.com (727) 329-4437 Jordan Berthiaume, Media Sales Representative jberthiaume@YourMembership.com (727) 497-6565 x3409 Marketing News (ISSN 0025-3790) is published monthly except June/ July and November/December (pending) by the American Marketing Association, 130 E. Randolph St., 22nd Floor, Chicago, IL 60601.

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Marketing News welcomes expressions of all professional viewpoints on marketing and its related areas. These may be as letters to the editor, columns or articles. Letters should be brief and may be condensed by the editors. Please request a copy of the “Writers’ Guidelines” before submitting an article. Upon submission to the AMA, photographs and manuscripts will not be returned unless accompanied by a self-addressed, adequately stamped envelope.

Just a Little Nudge

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he year ahead is about people, not machines. When marketers talk about the future, they usually talk about technology—artificial intelligence, predictive analytics, CRM systems. But the stalwart of marketing is people: understanding why people buy what they buy, reaching them at the right time and understanding their needs.

In the wake of economist Richard Thaler’s Nobel Prize in Economic Sciences for his research in behavioral economics, staff writer Hal Conick explores Thaler’s revolutionary theories on how to “nudge” people to behave in certain ways and how that theory remains relevant in the digital age.

“Perhaps you were nudged by a snack wrapper, imploring you to pick up, unwrap and devour its salty-sweet contents,” Conick writes. “Perhaps you were nudged by a mobile notification: respond to a friend request, tip your rideshare driver or—hey, it’s raining— order some delivery food.” Marketing is, in many ways, a long-game nudge.

Subscription boxes were the shiny, new nudge that gave CPG brands an opportunity to get into consumers’ homes. But the model may be shortsighted, according to staff writer Sarah Steimer. The novelty of opening

a box full of goodies every month can get stale. Smart brands in the space— Barkbox, Winc and FabFitFun among them—are finding ways to expand out of the box and into retail spaces and media channels.

What does a good nudge look like in the digital age? Look no further than the AccuWeather app, which boasts as many users as Facebook, writes staff writer Zach Brooke. The weatherprediction mobile app seems to have found a uniquely captive audience, and the company has hired some big guns from the media and advertising space to take advantage.

How do you nudge your customers?

MOLLY SOAT Editor in Chief @MollySoat

CONTRIBUTORS

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KEAN GRAHAM

DAVID HAGENBUCH

Kean is the founder and CEO of MonetizeMore.

He is an avid sports enthusiast and even more passionate about traveling. He lives his dream of traveling the world and growing MonetizeMore.

David Hagenbuch is the founder of Mindful Marketing, a web-based organization dedicated to encouraging ethical marketing. He is a marketing professor at Messiah College and authored the book Honorable Influence.

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5 Common Mistakes Marketers Make When Analyzing Shopper Data

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n some ways, analyzing shoppers is not much different from analyzing product movement, manufacturing quality, advertising expenditures or weather patterns. Data is data, right? Yes, but shopper data comes with its own set of common mistakes. Here are five to avoid:

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Data Overreach

Since some shopper data can be less abundant than other sources, such as shipments or scans, it’s tempting to stretch what you have beyond the bounds of good analytics. A generous sample size can shrink into statistical insignificance as you slice and dice by family status, ethnicity, age, household income, basket size, geography and specific product size. The danger lies

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in extrapolating special cases into broad conclusions.

Another overreach is to combine trends from multiple shopper data sources collected at different levels of granularity. You might try to tie a national trend from a syndicated source with a unique shopper group at your retailer. These shoppers aren’t the same, however, and there’s no way to mix them without risking false correlation.

It’s best to know the limitations of the data and be satisfied with more modest, accurate conclusions.

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Convenience Over Correctness

Sometimes it’s more convenient to reuse data from another analysis because it’s already there, and you can avoid the hassle of querying your shopper system. But do you really know how the

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data was pulled? Are you confident it applies to your business question? Your reduced effort may lead to costly wrong decisions for your company.

Another blunder is to “save time” by relying on one data source over all others—even if it’s shopper data. Analysis may show that shoppers are trending down for your brand at a particular retailer. Does this signal declining interest in your brand and the need for a revamp? Maybe. But store operations data might reveal other drivers like insufficient ordering or rising out-of-stock rates. For a complete picture, take time to draw insights from all relevant sources.

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Loss of Humanity

As you crunch the numbers, it’s easy to forget that shoppers are not data points but willful humans who can surprise you. People have a way of slipping in and out of neat, non-overlapping shopper segments. Millennials don’t all think the same way. Hispanic families cannot be lumped into one segment. Shoppers are not algorithms or rules of thumb. Focus solely on numbers, and you’ll miss important causes and deeper consumer needs.

As an example, consider a study of price points and elasticities for a handful of frequently shopped-for items. The analysis recommends cutting prices by 15% to attract more pricesensitive shoppers. After price reductions, however, market response disappoints. Why? Chatting with a few dozen price-sensitive shoppers reveals something you won’t find in the numbers alone: In their quest to stretch limited budgets, these shoppers feel threatened by what they perceive as a win/lose game where the retailer tries to entice them to overspend.

They experience anxiety just walking into a store, feeling that the retailer doesn’t have their best interests in mind. For many of these shoppers, visiting a no-frills discounter presents a lower-

People have a way of slipping in and out of neat, non-overlapping shopper segments. Shoppers are not algorithms or rules of thumb.

stress shopping experience because they see everything as transparent and full of empathy for their plight. Interviews with shoppers yield phrases like “on my side,” “outsmart the system” and “no stress.” With this better understanding of the problem, it’s obvious that reducing prices on key items must be only one part of a larger strategy to win over these shoppers.

Attitudinal, qualitative insights (aka “thick data”) can be alarming for the decision maker accustomed to orderly columns of figures and statistical significance, but they give power to answer questions that won’t yield to purely numerical analysis.

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Insight Tack-on

Have you ever sprinkled shopper insights onto an otherwise finished analysis? Your audience expects some shopper perspective, so you toss it in, possibly ignoring data points that inconveniently contradict your previous analysis.

This is backward and hazardous. Do you really want to expand a product beyond its test market without knowing who is buying and how they compare to shoppers in other markets? To avoid market catastrophes, discipline yourself to begin and end your analysis with the shopper: her needs, wants, attitudes, behaviors, trends and exceptions. Shoppers are giving you their data, so you’d be advised to listen to it.

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Ambiguous Context

The scope, assumptions and vocabulary you use must be clear to your audience. While this is true for any analysis, non-standard shopper terminology and differing segment definitions can be especially troublesome. For example, you might find that a wine brand selling at $5.99 over-engages with the lowest income quintile of wine shoppers. But these “lower-income” wine shoppers might be in the upper income quintile when compared to your total universe of shoppers across all categories.

The solution is to annotate your tables and charts unambiguously and completely—label everything, so another analyst with the same data can reproduce your work. Your audience will thank you as they confidently interpret your insights and make informed decisions.

Yes, data is data—but taking care to avoid these common mistakes will yield smarter decisions for you and your company.

—BY STEPHEN MAROSI

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6 Steps Publishers Can Take to Fight Ad Blockers

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nline publishers are fighting a high-stakes battle against ad blockers. So far, the future looks dim for publishers who monetize their websites with display ads, especially as ad blockers continue to grow.

MediaPost reports publishers lost $3.8 billion in digital ad income in 2016 alone. If that wasn’t enough, losses are projected to increase to roughly $12 billion in 2020.

It’s impossible for publishers to eradicate ad blockers, but there are ways publishers can avoid losing their digital income. While there’s no cookie-cutter fix—some solutions are very technical, others may achieve different results for different businesses—all solutions are worth testing, and all will require some work on the publisher’s end. Publishers must think creatively and perhaps step on a few website visitors’ toes.

However, toe-stepping is not necessary every time.

One creative solution that worked for Forbes.com allowed the publisher to get on more than 4 million visitors’ white lists, which means it convinced visitors to turn off their ad blockers, thereby creating millions of ad impressions and millions of ad dollars.

Publishers should consider the following options:

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Understand Why Visitors Are Using Ad Blockers, and Adjust Strategy

Before publishers try to solve the ad-blocker problem, they should determine why website visitors are installing ad blockers. Research by PageFair shows that users have ad blockers installed for a few compelling reasons: fear of data being stolen, annoyance with interrupting ads and impatience with slow website load times. With each of these reasons, publishers have options to assure visitors that they’re doing their best to keep visitor interests at heart.

First, publishers should ensure their website is running on HTTPS—or Hyper Text Transfer Protocol Secure, the more secure way to send data online—and should tell visitors what type of information the website will collect.

Then, publishers should test the website’s loading speed against industry standards and improve it by enabling data caches and getting dedicated hosting.

Publishers should only show ads approved by the International Advertising Bureau to avoid being annoying.

They can also speed up their websites and test a light-ad page layout.

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White-listing

One simple way to get visitors to see ads is to ask them to white-list a website, just as Forbes did. Publishers asking visitors to white-list their site should keep messages short, and write in language that visitors will understand.

Some users might not agree to white-list your site at first, so be sure to give them more than one chance to white-list by asking every so often. Publishers can take many smart approaches to gently ask visitors to white-list, including a reminder of how often they consume content on your site and how ads help pay for the content they read.

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Pay Walls and Subscription Services

There are many approaches to pay wall and subscription services. Some premium publishers allow users to read a section of their website for free while charging a fee for other sections. Another approach— reportedly tested by the Financial Times—is to send visitors messages saying that the publisher only allows visitors who use ad-blockers to see one-third of the website’s content.

Other websites, such as Business Insider, completely prevent users from reading articles unless the users join the website’s subscription-based service or turn off their ad blocker.

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Native Ads

Native ads can blend in with a website’s content and bypass ad blockers most of the time. A publisher’s native ads will show even if their regular display ads are blocked.

Native ads promote editorial content and often improve the user’s experience. These ads aren’t usually as profitable as display advertising, but they’re worth trying.

Many native ad networks exist, such as Taboola, Outbrain and RevContent.

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Consider Different Ways to Monetize Content

The ad-blocker issue isn’t going away soon; publishers will always be fighting against ad blockers. Instead of banging their heads against a wall, publishers can consider opening their websites to other methods of monetization.

Publishers can focus on e-commerce, affiliate marketing or selling branded content campaigns as alternatives to advertisements.

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Ad Technology Services

A few services exist that help publishers bypass ad blockers; one is PageFair.​ This smart ad tech company uses its proprietary technology to detect ad-blocker users and attempts to serve unblockable ads.

—BY KEAN GRAHAM

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SNAPSHOT

Young fans twirl a holographic basketball atop their fingers at a VNTANA-run experiential event for Lexus.

Holla, Gram!

One experiential marketing agency was able to help Lexus channel TuPac and “Pokemon Go”—but for cars

BY ZACH BROOKE | STAFF WRITER

 zbrooke@ama.org Goal Team One, the advertising agency behind Lexus, had a problem. The marketers needed to get the 2017 car line in front of the masses, but they were running into some concrete obstacles. Stadium-sized ones.

They quickly decided that sporting venues were the ideal locations to reach their target audience, as these buildings have both the density and the right demographic composition. Lexus already paid a premium to operate inside these

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structures, sponsoring exhibit spaces such as the Lexus Courtside Club at Staples Center and the Lexus Dugout Club at Dodger Stadium. There was only one problem: Building restrictions and transport logistics prohibited the team from installing a fleet of cars inside each venue to present to prospective buyers.

Team One got creative. It also got Ashley Crowder, CEO and co-founder of VNTANA, an augmented reality hologram company that designs scalable and interactive holograms.

“What’s great about the technology is the content can be anything,” Crowder says. “You can really let your imagination run wild. It’s when you create those fun, engaging experiences that your consumers are going to want to share on social media, and that’s what gets you user-generated content that’s so valuable.”

VNTANA’s tech meshed perfectly with Lexus’ desire to create an innovative, engaging fan experience while exposing fans to the latest car models.

Once Crowder was on board, Lexus fleshed out a campaign that included specific benchmarks needed to ensure success of the 2017 line. “[Lexus] spends all this money to sponsor these stadiums, and they get a sign, [but] they don’t really know [about results],” Crowder says. “It’s been very hard for them to quantify how much that is helping their brand.” The campaign with VTANA aimed to address that.

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SNAPSHOT

United Center, Staples Center, Capital One Arena, Petco Park, Dodger Stadium and Angel Stadium.

“Lexus’ goal was to drive dealership traffic,” says Audrey Lundy, a Lexus spokesperson. “An important part of the partnership was using a lead generation tool, which allows Lexus to capture consumers’ data, with permission, and ask if they would like to be contacted by a dealer.”

Action The campaign began at the start of the 2016-17 NBA season in October 2016.

Staples Center, home of the Los Angeles Clippers, served as the initial facility to unveil the holograms.

Booths were set up that allowed attendees to project a hologram version of themselves onto a dark screen next to the 2017 Lexus LC, the brand’s luxury sports car.

Users were able to customize the vehicle, adding specialized door, roof and wheel options, as well as their favorite color. While they were busy customizing their hologram, VNTANA’s technology was busy building profiles of each visitor.

“We have facial recognition, so we can tell their age, gender and sentiment,” Crowder says. “We know what car they designed. We know if they shared it on social media.”

The experience was enhanced by gamified elements fostering a sense of competition among sports fans.

“We created a hologram basketball game,” Crowder says. “You got to see your hologram live and put your hand up on a hologram basketball. [It] spun

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COMPANY

Lexus HEADQUARTERS

Plano, Texas CAMPAIGN TIMELINE

Fall 2016 to present RESULTS

Seven-city experiential campaign. One city garnered 1,225 leads and 1,672 usercreated video views. Total number of qualified leads doubled across all cities.

around your fingers, and you had to try and balance it. It would count the number of seconds.” The competition provided a fun way to entice fans to interact with the hologram and offered the entertainment in exchange for valuable data.

Initial results looked promising enough to roll out the campaign at other venues.

Once all the planned locations were exhausted, Lexus added stadiums to the hologram tour.

Presently, Lexus holograms have been implemented in Madison Square Garden,

Results Success was apparent upon kickoff.

At a single activation, the hologram experience collected 1,225 leads and more than 1,650 user-created video views.

Some participants chose to upload their hologram selves to social media, where they were shared more than 160 times with an average watch time of 1 minute 54 seconds. This may not seem like a lot, considering the work that was put into execution, but it was a considerable amount of interest for a car that can cost six figures. The performance was better than Lexus was used to seeing at these types of events. At Dodger Stadium, for instance, Lexus doubled the leads it generated from the previous two years of activations. And, as Crowder points out, Lexus and its CRM company determined the leads to be qualified.

Lexus is looking to continue using the technology for the upcoming 20172018 Clippers season inside the Lexus Courtside Club at Staples Center. There may be other venues on the horizon for the hologram set up as well, but neither VNTANA nor Lexus are saying where.

Lexus is confident they can successfully deploy the hologram at any location.

“New technology has always performed well for us,” Lundy says. “Whether it’s virtual reality … or a hologram, we see more user engagement.” m

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CORE CONCEPTS

How to Create a Social Media Response Matrix Customers expect instant gratification on social media. Design a response plan to communicate with them quickly and authentically.

BY SARAH STEIMER | STAFF WRITER

 ssteimer@ama.org

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rands have become known for their social media personas. Denny’s and KFC are famous for their Twitter hijinks, and some consumers find it easier to engage with customer service on social platforms than over the phone or in person. How a brand communicates with its audience on social media is increasingly crucial, and many companies

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are proactively designing social media response plans, also known as social media response matrices.

A social media response matrix is a flow chart that directs an employee, such as a social media manager, on how to respond to comments on social media based on the nature of their content, according to Adam Kleinberg, CEO of

interactive advertising agency Traction. “[A response matrix] is important for companies to have because it keeps you consistent, organized and accountable about how to act in various situations that are bound to take place online,” he says.

Interactions between brands and the audience happen too frequently for companies to engage socially without a plan. According to MarketingSherpa, 85% of U.S. consumers say they use social media, and 58% of consumers surveyed say they follow brands on social media.

How a brand responds to consumers online makes a big difference: 71% of consumers who have had a good social media service experience with a brand are likely to recommend it to others, according to referral marketing company Ambassador. In addition, companies that engage and respond to customer service requests via social media see those customers spending an average of 20% to

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CORE CONCEPTS

40% more with the company, according to Bain & Company.

Brands need to be prepared for the good and the bad to avoid an ugly customer experience. Social media interactions are in the public record and can go viral in a heartbeat. Here are some tips for designing a social media response matrix.

Start With Social Listening Before brands can know how to respond, they should familiarize themselves with the topics they will likely see on social.

Brands should listen to their audience and take inventory of what customers typically discuss and how they engage with the brand and its competitors.

“Start by auditing and categorizing the comments you’ve had to date,” says David Greenbaum, head of digital integration and operations at Edelman Digital Chicago. “Then brainstorm contingencies.

What might happen during a crisis? What might we be able to do over the holiday shopping season?”

From a reputation standpoint, a brand can gauge how the audience has responded to its previous social interactions by considering if consumers are responding defensively, happily or with amusement. Social listening can help a brand determine if it should respond using a different attitude in the future, or if its online persona is striking all the right chords as is.

Once a brand has a list of common topics and an impression of how it has been perceived in the past, it can begin to map specific responses.

Respond to Positive and Negative Comments A social media response matrix doesn’t just map out ways to answer angry consumers or negative situations, it also provides ways to interact with happy customers or positive events.

“It’s easy to look at it as a response mechanism to people complaining about you on Twitter or Facebook, but there is also a powerful opportunity to engage with people on social media who love your brand and to deepen and

amplify that love,” Kleinberg says. “A thoughtfully designed matrix can help people on your team [decide] which tweets to like, which to retweet and when to engage with someone directly with a fun, clever or valuable response. When addressed in a prompt and meaningful way, you can often convert someone who is complaining about you on social media into a passionate advocate for your brand.”

A good example is JetBlue Airways. The company responds to negative issues— of which there are plenty in the airline industry—but also engages playfully with customers who’ve posted about a positive experience. When two Twitter users recently tweeted about using in-flight Wi-Fi, JetBlue joined the conversation with a simple GIF of comedienne Amy Poehler winking and a “you’re welcome” message.

“Engaging with those that are complimenting your brand is just as important as responding to those that are complaining,” Greenbaum says.

“Studies show that those that engage with a brand on social have a deeper brandto-consumer relationship, care more, are more brand-loyal and have a higher intent to purchase.”

The Tone of Your Response Should Match the Tone of the Comment Brand voice must be consistent throughout the social media response matrix to avoid confusing customers.

It may seem difficult to sound natural while manufacturing a response matrix, but the human touch is key, according to Greenbaum.

Bank of America ran into this snafu when a user tweeted about being chased away by police for drawing with chalk on a sidewalk outside of a Bank of America branch. The company’s customer service Twitter team @BofA_help responded with a generic statement: “We’d be happy to review your account with you to discuss any concerns.” This same non sequitur was sent to anyone who commented on the original tweet as well.

“Don’t think that just because you have

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rules, you can hire a cheap, inexperienced person to handle your community management—or even worse, outsource it to India or someplace,” Kleinberg warns.

“Like any creative, quality matters. You need to hire people who write well, or else their responses won’t be well-written.”

Using the right tone also means taking a cue from the customer. Your brand may take a tongue-in-cheek approach to most interactions, but that may not work for everything. The customer’s voice or problem should guide the brand’s tone in its response. Your brand voice may be known for silly comments, but that style won’t go over well when a customer has a serious problem.

Get the Whole Team Involved Some of the best social media responses come from brands that use multiple team members to respond to consumers.

This ensures questions or comments are answered by the appropriate party.

Someone on the technical team can likely answer questions about a broken product better than someone on the marketing team. JetBlue, for example, has three different teams running its Twitter account: the marketing team, the communications team and the customer commitment team.

“The most critical steps in developing a social media response matrix are working with the appropriate parties to ensure you have comprehensive, relevant and consistent responses,” Greenbaum says. “First, work with analytics and insight teams to understand the types of questions or comments that are repeatedly arising on social channels.

Then, work with your customer service, issues management, marketing and operations teams to ideate different scenarios and responses.”

Engaging more than one team member can also speed response time.

Consumers expect immediate responses, and taking too long to respond to a negative comment opens the door to the issue going viral. A brand that has a social media response matrix in place is a nimble team that can answer quickly and authentically. m

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ama intelligence

THE MIDDLE MARKET

Benefits Prove Powerful in Middle Market Recruitment Employees are stressed about money and don’t like being surprised by health care price hikes. How can middle market companies leverage benefits to reduce stress and surprise?

BY HAL CONICK | STAFF WRITER

 hconick@ama.org

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rian Nelson Ford grew up loving finance, devouring number-heavy books that would put most other children (and their parents) to sleep. “A lot of people think finance is boring, but I was just blown away,” says Ford, who works for SunTrust Banks and holds a title the company created just for him: financial well-being executive.

Ford is right: People do find finance boring. Not only that, they don’t understand it. A George Washington University study found that only 16% of Americans are financially literate at a high level. However bored, people have paid attention long enough to be stressed.

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Fifty-three percent of employees feel financially stressed, per PwC’s “2017 Employee Financial Wellness Survey.”

Ford says even well-paid people often live paycheck to paycheck.

To assuage employees’ financial stress, 84% of large and midsize U.S. companies have adopted an employee financial wellness program as of 2017, according to the “Employer-Sponsored Health and Well-Being Survey” from the National Business Group on Health and Fidelity Investments. This is up from 76% of businesses with such programs in 2016.

The middle market does a nice job with these financial benefits, Ford says,

but it has room to improve by expanding financial benefits beyond 401(k)s and individual retirement accounts.

“Companies can say their greatest asset is their people, but if they don’t put their money where their mouth is with the benefits they’re providing … people won’t stay very long, and the company certainly won’t be able to attract new employees,” Ford says.

Middle market companies that want to attract and retain the best employees must adopt a solid financial benefit package.

Employee stress lies in a lack of planning, Ford says. A company that helps its employees manage their personal finances creates a benefit package with a trenchant selling point for current and potential employees alike.

To make financial planning easier, Ford started a company, 8 Pillars—which was purchased by SunTrust after Ford used the program to ease the financial stress of SunTrust employees—and wrote a book called The 8 Pillars of Financial Greatness.

The bones of his 8 Pillars method: • No. 1, get an emergency account.

• No. 2, organize and automate.

• No. 3, get out of debt and improve your credit score.

• No. 4, plan insurance and estate matters.

• No. 5, start investing.

• No. 6, save for homeownership.

• No. 7, focus on career development.

• No. 8, start giving back.

Most HR professionals start at the fifth pillar—think 401(k) planning—when adopting financial wellness benefits, Ford says, but employees tend to be most stressed about the first three pillars: creating just-in-case accounts for emergencies, organizing and automating to pay bills on time and getting out of debt (the average American household owes $137,063, including mortgages, per NerdWallet).

If companies are stunned to find out that employees need help beyond 401(k) planning, employees are gobsmacked: Most middle market employees are

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surprised to learn how poor their personal financial wellness is, Ford says.

A company that helps its employees become financially healthy will likely see dividends paid as appreciative employees.

What about the executives who care about employees but must care equally about the company’s tight budget and bottom line? Ford understands this concern, but says investing in the financial wellness of employees can bring companies a 3-1 ratio of return on investment—and that’s a conservative estimate.

“That’s where the CFO’s ears start to perk up,” Ford says. “Most benefits professionals realize that what allowed them to compete for talent 10 years ago is just not what’s going to allow them to compete today.”

The Battle for Better Health Benefits CFOs are showing even more interest in health care benefits. “When we started, we dealt with HR people,” says Craig Hasday, president of middle market insurance broker Frenkel Benefits. “Now, we predominantly deal with financial people.”

Health care plan prices have increased by 5% each of the past five years, according to the National Business Group on Health. These increases have cost employers $14,000 per employee, per year on average (employees pay $4,400 per year, on average).

Companies may be powerless to stop health care price increases—with some increases likely being passed onto employees—but Hasday says executives can lessen the blow felt by employees by communicating with them. Honest communication can help employees understand the unforgiving nature of health care benefits, and perhaps as importantly, help them understand that it’s the market turning the financial screws, not the employer.

Communicating health benefit news to employees helps companies retain good employees more than it helps companies recruit new employees.

Potential employees are likely satisfied by a company that simply has health care

benefits, Hasday says, while long-standing employees can become frustrated with increasing deductibles, switching insurance carriers and restricted access to providers and procedures— especially without notice. To quell these frustrations, executives must divulge all health-related changes—cost savings, cost increases, plan changes, anything.

Even with a financial blitz likely for both employees and employers, Hasday says companies resist changing their health insurance plan, especially when changes make the plan more expensive or less comprehensive. “If an employee is going to have a major benefit reduction— let’s say their premiums spike—there’s a lot of discussion about what the impact to employees is going to be,” he says.

“Employers resist philosophical changes about how they deliver benefits.”

Employers may resist change, but they can only resist increasing prices for so long. To save money, businesses have been offering more high-deductible health plans (HDHPs) instead of pricier (and more extensive) preferred provider organization plans. Forty percent of employers told the National Business Group on Health that HDHPs would be the only plans they offer to employees in 2018, up from 35% in 2017. While businesses may save money on premium costs by switching to an HDHP plan, employees will likely pay more out-ofpocket costs—chiefly employees with chronic health problems or frequent doctor visits.

Before companies make a change, executives must calculate what the change will mean for the financial health of their employees. “Companies can’t spring a change on employees, whatever it is,” Hasday says. “If you’re changing from one [carrier] to another, or if you’re changing from one benefit to another, you have to understand the transition concerns and address the needs of those who might be in the midst of care or about to receive care.”

The Whole Package What arsenal of financial wellness and

ama intelligence

health care benefits will win the talent war? That’s for each company to examine, all while considering additional perks like vacation days, pay increases and shortened work weeks. Benefits have become the battleground in the fight for talent: One-third of organizations increased their benefits in 2017, per the Society for Human Resource Management’s “2017 Employee Benefits Survey.” Employees now have more work choices—including soldiering off on their own as an entrepreneur or freelancer in the gig economy. A 2016 study from Upwork found that 55 million people (35% of the U.S. population) are now their own boss.

Middle market companies may have tighter budgets than the Fortune 100, but they cannot let a taut budget compromise their competitiveness— especially as the fight for talent reaches its crescendo. Small-budget businesses must be creative to win the best-fitting employees. The proliferation of benefit weaponry shouldn’t come as a surprise, as 68% of HR professionals say they’ve had trouble recruiting in the past year.

This heated competition means middle market companies must have their benefit packages locked and loaded.

No matter which benefits middle market companies offer, Ford says employees must feel good about using the benefits. This ease of use may be as simple as letting employees know that managers won’t have access to employee health or financial information. “That’s a big one,” Ford says. “A lot of employees will say, ‘I need this program, but if I start putting my information online, will my boss see this stuff?’” The answer must be a resounding “No.” Ford’s suggestion leads back to Hasday’s recommendation to keep communication open and transparent to help employees understand their benefits—including addressing any worries or anxieties. After all, Hasday says, if employees don’t understand what benefits they’re getting or are afraid to use them, then a great benefit package will be for naught. m

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CMO SURVEY

Marketing Leadership and CMO Roles

BY CHRISTINE MOORMAN AND JENNIFER VEENSTRA

W

hat makes a CMO effective?

The August 2017 CMO Survey posed this question to a sample of 349 top marketers. Ten potential roles were provided and respondents were asked to rank their top three on a scale of 1 to 3, with 1 being the most important (Table 1). Based on interviews with top marketers, CEOs, CFOs and CIOs over

the last year, the list was developed by Deloitte to understand why CMOs often are not successful in the C-suite.

The role most frequently ranked 1, or most important, by survey respondents was “being the voice of the customer at the leadership table.” What does this mean in terms of actual behaviors? Being the voice of the customer does not mean mere representation of the customer. Instead, it means offering multidimensional customer insights that guide company decisions. It

means having a deep, research-based view of customer needs, journey and purchase experiences, usage experiences as well as retention and referral behaviors. It means understanding competition from the customer’s point of view, not from the structure of an industry report. Finally, it means understanding the value of different customers. Marketing leaders in consumer services, retail/wholesale, education and health care sectors placed the greatest emphasis on this role (Table 2).

Aggregating across all three ranks, “playing a key role in company growth activities” was most frequently ranked a top-three role. Our research shows this is important because growth is a

Table 1: What Makes a CMO Most Effective?

(Rank top three from 1 to 3, where 1 is ranked most important)

Percent Who Ranked Role 1

Percent Who Ranked Role 1, 2 or 3

Being the voice of the customer at the leadership table

16.3%

11.9%

Having an enterprise-wide business mindset and understanding

15.1%

13.5%

Having the ability to demonstrate the quantitative impact of marketing efforts

14.5%

14.3%

Playing a key role in company growth initiatives

12.7%

14.7%

Having direct sales/customer-facing experience

11.4%

8.5%

Having significant input to the budgeting and strategic planning processes

7.2%

8.3%

Proactively leading C-suite collaborations to drive cross-functional initiatives across the organization

7.2%

9.5%

Understanding current and future marketing technologies

6.6%

7.3%

Acting with strong leadership and motivation skills

6.0%

6.5%

Knowing how to use customer data and analytics

3.0%

5.5%

CMO Roles

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Table 2: Most Important Roles for CMOs in Different Industries

Most Important Roles for CMOs

Top-ranking Industries

Being the voice of the customer at the leadership table

• • • •

Having an enterprise-wide business mindset and understanding

• Service/Consulting • Transportation • Energy

Having the ability to demonstrate the quantitative impact of marketing efforts

• • • • •

Playing a key role in company growth initiatives

• Consumer packaged goods • Tech/Software/Biotech • Energy

Having direct sales/ customer-facing experience

• Manufacturing • Energy • Communications/Media

measurable outcome against which marketing can demonstrate the value of its customer insights. To become an influential and credible voice among their C-suite partners, marketing leaders should leverage customer insights to drive business growth decisions.

However, the C-suite does not always ask CMOs to drive growth nor evaluate

Consumer services Retail/Wholesale Education Health care

Consumer services Tech/Software/Biotech Education Health care Banking/Finance/Insurance

them on growth metrics. To move the needle, CMOs need to craft metrics that connect marketing’s impact to key growth indicators. Consumer packaged goods, tech/software/biotech and energy industries rated this role as most important.

Three other roles dominate the ranking. “Having an enterprise-wide

To become an influential and credible voice among their C-suite partners, marketing leaders should leverage customer insights to drive business growth decisions. However, the C-suite does not always ask CMOs to drive growth nor evaluate them on growth metrics. To move the needle, CMOs need to craft metrics that connect marketing’s impact to key growth indicators.

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CMO SURVEY

Table 3: How CMO Roles Vary by Digital Strategy (Percent of CMOs who ranked role 1)

Type of Company

No e-commerce

1-10% of company revenues from e-commerce

E-commerce greater than 10% of company revenues

Being the voice of the customer at the leadership table

8%

20.8%

16.3%

Having the ability to demonstrate the quantitative impact of marketing efforts

12%

11.1%

23.3%

Playing a key role in company growth initiatives

18%

13.9%

4.7%

Top-Ranked CMO Role (Ranked 1)

business mindset and understanding” received the second-highest percentage of top votes, with services/consulting, transportation and energy sectors rating it important. This role requires that CMOs effectively collaborate with their C-suite counterparts. Many respondents emphasized this enterprise-wide mindset or ability to socialize it across the company as a defining quality in the success of CMOs. “Having the ability to demonstrate the quantitative impact of marketing efforts” requires CMOs to speak the language of their C-suite peers. Even when marketing has an impact, the challenge is often to effectively communicate its value by translating marketing activities into the financial language used in the board room. This role was most highly rated by consumer services, tech/software/biotech, education, health care and banking/ finance/insurance industries.

“Having direct sales/customerfacing experience” was rated higher by manufacturing, energy and communications/media sectors. C-suite members have increasingly realized the growing power of customers. Organizations are trying to engage customers in ways that speak to their needs and values and establish an ongoing relationship rather than a transactional one. There is no one better-suited to lead the customer-centric charge than the CMO.

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The Impact of E-commerce The percentage of a company’s sales that come from e-commerce also influences the importance of several of these marketing roles (Table 3). Companies that generate more than 10% of their sales from e-commerce valued “having the ability to demonstrate the quantitative impact of marketing efforts” at twice the level of companies with fewer e-commerce sales. Data availability and the ability to perform fast and low-cost experiments are likely explanations for this finding. Likewise, companies with e-commerce valued marketing leaders “being the voice of the customer at the leadership table” at twice the rate that companies without e-commerce did. Our interpretation is that marketers play this role because digital strategies tend to sharpen the focus on customers because the interactions are direct. On the other hand, companies with no e-commerce sales valued marketing leaders “playing a key role in company growth initiatives” at four times the rate of companies with 10% or more of their sales from e-commerce.

Marketing Leader Titles Although marketing roles appear to vary, the title used to capture the contributions of a company’s top marketing leader remains “chief marketing officer.” Sixtyeight percent of respondents selected this title from a set of options that

included chief brand officer (9.1%), chief marketing and technology officer (5.7%), chief growth officer (5.7%), chief revenue officer (4.6%), chief commercial officer (2.3%), chief customer officer (2.3%), chief digital officer (1.7%) and chief experience officer (0%).

An Agenda for CMOs Based on these findings, what role should a CMO take in the C-suite?

• Be the customer expert. Position yourself as the person in the C-suite with expertise on the customer, and tie this knowledge to company strategy.

• Speak the language of the C-suite.

Assert strategic recommendations and growth investments in the language and metrics used by the rest of the C-suite.

• Bring a left- and right-brain mentality. While analytical rigor in the marketing department is more important than ever, be careful not to lose the creative, right-brained ideas that create customer connections and produce growth. m CHRISTINE MOORMAN is the T. Austin Finch Sr. Professor of Business Administration at the Fuqua School of Business at Duke University.

JENNIFER VEENSTRA is managing director of the CMO Program at Deloitte Services, LP.

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BRANDING

14 Reasons Your Brand Needs Signature Stories Stories are the way your message will gain attention and rise above the clutter

BY DAVID AAKER

M

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Signature Stories Can Create Strategies Develop a strategy or set of organizational values by identifying some signature stories. These stories provide insight and proof points for what a brand or organization should stand for and identify the assets and skills that can drive a strategy.

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 daaker@prophet.com y new book, Creating Signature Stories, is designed to help marketing and communication executives communicate strategic messages internally and externally by using stories, a task that has never been more important or more difficult.

Customers and employees are often not interested in your strategic message, so they tune it out. Even when they are exposed to the message, they may think it lacks authenticity and credibility.

Additionally, media is cluttered, and empowered audiences can easily choose to ignore what they don’t find relevant.

Developing and leveraging signature stories provide a vehicle to overcome these challenges. My daughter Jennifer, a professor at the Stanford Graduate School of Business, pointed me in this direction by exposing me to extensive research in psychology and elsewhere that shows the power of stories.

Your audience does pay attention to stories, even if they do not process facts.

Here are 14 reasons why your brand should be telling signature stories.

business strategy or a value proposition with a long-term perspective.

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Signature Stories Take Stories to the Next Level A signature story is an intriguing, authentic and involving narrative that includes a strategic message. It is not a set of facts but can motivate facts that support the message. It differs from tactical messaging in that it involves communicating the brand vision, organizational values and culture, a

Sets of Signature Stories Can Multiply the Effect Multiple stories from different perspectives can add depth and breadth to the strategic message, giving it freshness and energy. The stories can reflect different spokespersons, applications or contexts. Manage story overload with lead stories that become familiar and a story bank that makes the right story for the right context available to executives who face a strategic messaging challenge.

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Stories Are Powerful Stories are more impactful than facts.

Stories break through the distractions, disinterest and content overload and make an audience take notice, stay engaged and remember. A story can involve and even inspire. If you have facts to communicate, your best strategy is to find or create a story that allows them to emerge.

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Content Is King, and Stories Are the Key to Content The social media audience isn’t passive; it is in control. It involves itself in messaging only when it is intrigued by content. Thus, content drives success—and content needs to intrigue, involve and be authentic. Facts, no matter how compelling, rarely gain the attention necessary to emerge from a crowded media landscape. Stories, in contrast, can break through, communicate and influence.

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Signature Stories Add Visibility and Energy to a Brand Most brands need visibility and energy.

Visibility comes from a story’s ability to gain attention and break through the media clutter. Creating visibility by advertising, especially when the product is boring, is difficult and very expensive.

A story will penetrate and even achieve a social presence. A story with intriguing, involving characters and plot can surpass any presentation of facts.

Facts, no matter how compelling, rarely gain the attention necessary to emerge from a crowded media landscape.

Stories, in contrast, can break through.

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Signature Stories Persuade Without Lecturing When a company spokesperson presents facts, the inclination is to counterargue, to cast doubt on the message or messenger.

However, a story will divert people from counterarguing, even when facts are embedded in or follow the story.

A story allows the audience to deduce the message themselves, resulting in persuasion rather than hearing facts.

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Signature Stories Inspire Employees and Customers A higher purpose can give employees a sense of pride in their work and motivate customers to support a brand because they share its values. For example, the Lifebuoy “Help a Child Reach 5” program seeking to compel 1 billion people to wash their hands the right way creates emotional involvement and saves lives.

Videos showing how the program helped three villages garnered more than 44 million views.

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Signature Stories Can Change the Conversation in Crisis When a trust crisis occurs, perhaps precipitated by a product or service blunder or a news event, part of the response strategy can be to start a new conversation around a brand program communicated in story form. Barclays was once the least-trusted U.K. brand in the least-trusted sector. It enabled employees to create their own programs to help communities and the people in them. Intimate “real-people” stories about four of these programs were so impactful that they helped turn around perceptions of a troubled brand.

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Signature Stories Have All Kinds of Heroes In addition to employees or customers, story heroes can also be a product or service, social program, founder, revitalization strategy, growth strategy, brand, brand endorser or supplier.

Looking at the business values and strategy from many perspectives will create a flow of stories that impact.

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Signature Stories Promote the Strategic Message In the quest to find the most intriguing story, the strategic message should never be lost. If the goal is too focused on finding or creating stories, the message can be sacrificed to the desire to entertain or evoke an emotional response.

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Signature Stories Are Multidimensional We know from research that signature stories benefit from characters with whom we can empathize, a meaningful challenge, tension, an emotional connection, relevance (especially in B-to-B settings) and professional presentation. When humor is a natural part of the story, it helps gain attention and inhibit counterarguing.

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Signature Stories Can Be Personal A personal, professional signature story helps you understand yourself, identify your higher purpose, chart your course and gain credibility. Ask what stories define you, reflect on your strengths and weaknesses or suggest where you are headed professionally.

Identify stories of your role models who represent characteristics you would like to emulate.

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Organizations Must Be Story-friendly to Succeed Your organization needs people, structures, processes and a culture that enable it to identify and evaluate story candidates, turn the best stories into professional presentations and expose them to target audiences.

Leveraging great stories does not happen automatically; the organization needs to encourage them to emerge and enable them to be leveraged. m DAVID AAKER is vice chairman of

Prophet, the author of Aaker on Branding and a member of the NYAMA Marketing Hall of Fame.

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MEASUREMENT

Which Customer Metric Best Predicts Financial Performance?

Net promoter score, engagement, satisfaction. The list of customer metrics continues to grow, but which is the most indicative of a firm’s financial growth, and which is just a fad?

Research points to a clear winner.

BY VIKAS MITTAL

 vmittal@rice.edu

R

ecently, one of my academic colleagues said: “Customer satisfaction is so yesterday. There are so many new metrics like customer engagement. It’s high time we abandon customer satisfaction.” That same afternoon, I was in a meeting with the vice president of strategy for an engineering company with approximately $10 billion in revenue, who said, “Our board wants to increase sales, margins and stock price, so they need to see improvements in promoter scores. That’s what they

want, and that’s what we will deliver.”

Both conversations got me thinking about the value of different customer metrics. Executives are confronted with a variety of metrics, such as customer satisfaction, complaints, recommendations, repurchase and net promoter scores. Which metric should they adopt? The market for ideas is efficient and evolving. On the one hand, we should embrace the notion that new customer metrics keep surfacing. On the other hand, executives need an evidence-

based approach to separate the wheat from the chaff.

To select the right customer metric, executives need to consider two factors.

First, they should focus on a customer metric that is an enduring practice, not a fad. Rather than over-simplifying, a customer metric should mirror the complexity of a customer-centric firm, the needs of its customer base and the ability to implement specific customer-based initiatives. An enduring customer metric will not be a magic bullet. Second, an enduring metric should show evidence for improving sales, margins, cash flow and market share. By adopting and improving scores on the customer metric, executives should show demonstrable improvement in sales, margins, market share and other financial metrics.

Customer Metrics that Matter for Financial Outcomes At the crux of measuring customer metrics—whether net promoter scores, engagement or satisfaction—is the belief that improving these scores will improve financial outcomes for a firm. How true is this belief, and is it supported by evidence? If the evidence does not support a link between a customer metric and financial outcomes, what good is the metric as a strategic planning tool?

PREDICTING FINANCIAL METRICS FROM CUSTOMER METRICS Financial Metrics Customer Metrics

Sales Growth

Gross Margin

Operating Cash Flow

Market Share

Shareholder Return

Customer Satisfaction

✔

✔

✔

✔

✔

Repurchase Intentions

✔

✔

Customer Complaints

✔

✔

Word-of-Mouth Recommendations

✔

✔

Net Promoter Score Source: “The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance” by Neil A. Morgan and Lopo Leotte Rego

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A 2006 study of 80 different companies over six years (19942000) sought to answer this question.

The authors of the resultant paper, “The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance,” statistically compared the ability of several survey-based customer metrics to predict key financial outcomes.

They compared five customer metrics: average customer satisfaction, customer complaints, repurchase intentions, net promoter score and word-of-mouth recommendations. They wanted to answer one question: Do any of these customer metrics statistically predict sales growth, gross margin, net operating cash flow, market share and shareholder return?

Before you read any further, do a thought experiment to test if you have a bias. Which one did you pick as being best able to predict these financial outcomes? The table at left shows the results.

Only three metrics—customer satisfaction, repurchase intention and complaints—predict sales growth and gross margins. When it comes to operating cash flow and shareholder return, only customer satisfaction has any predictive ability.

The only customer metric that predicts and improves all five financial outcomes is customer satisfaction. The next-best metric is repurchase intention, predicting three of the five outcomes. Whether a board wants to grow sales, improve gross margins, increase cash flow, expand margins or create shareholder value, the one customer metric to grow is customer satisfaction.

Net promoter scores were related to zero out of five financial outcomes.

Another study in the Journal of Marketing, “A Longitudinal Examination of Net Promoter and Firm Revenue Growth,” examined results from 21 companies and more than 15,000 interviews to find the same conclusion.

“Managers have adopted the net promoter metric for tracking growth on the basis of

the belief that solid science underpins the findings and that it is superior to other metrics. However, our research suggests that such presumptions are erroneous,” the authors of that study write.

Fad and Enduring Practices Management fads are simple, prescriptive, falsely encouraging and lack scientific evidence for their efficacy, yet most followers believe they work. Net promoter scores are not backed by any credible evidence of financial predictive ability but have caught on because they seem simple (one item measures it all), prescriptive (you can compute the promoter score for every customer segment) and falsely encouraging (increasing promoter score is believed to increase sales, revenue, share and profits).

In contrast, customer satisfaction is backed by credible evidence and provides a well-established framework for customerbased execution and strategy. To pull it off, an executive must work with trained statisticians to identify key drivers of satisfaction, understand their relative weights, derive the link between customer satisfaction and financial outcomes, and then make investments to improve key attributes. None of this is simple, nor does it provide false encouragement that satisfaction is the cure-all remedy.

Research on customer satisfaction shows that very high satisfaction can be costly for companies, and satisfaction has differential effectiveness for different outcomes.

Satisfaction Mismatch A 2017 study published in the Journal of the Academy of Marketing Science, “Do Managers Know What Their Customers Think and Why?,” examined 70,000 customers and 1,068 managers from 97 different companies to determine if manager perceptions of customer satisfaction are aligned with customer perceptions. The study showed three results: First, managers overestimate the extent to which customers are satisfied and loyal. Second, managers underestimate the extent to which customer satisfaction drives complaints

executive insights

and loyalty by almost 40%. Third, when manager perceptions are misaligned with customer perceptions, customer satisfaction suffers.

For customer-based strategy, these findings mean that not only are most customers less satisfied than managers believe, but most managers underestimate the loyalty benefits of satisfying customers. This leads to further declines in customer satisfaction. Disheartened, managers chase fads like net promoter scores, which lead to further declines in customer satisfaction. Caught in a vicious trap of chasing fads, executives let customer satisfaction, a proven metric, suffer and negatively impact customers and investors.

Now What: Back to Basics Rather than chasing fads, executives will benefit from going back to basics that help them measure customer needs. To fully incorporate customer needs in the planning process, executives should use a holistic approach that provides concrete guidance for customer-based execution and strategy. Such an approach— measuring customer satisfaction and its components—paints a realistic portrait of customer needs. For senior executives, it provides a roadmap for financial management by predicting sales, margins, cash flow, market share and stock market value. Thus, customer satisfaction can serve as the one metric that advances the cause of customers and shareholders in unison.

When executives chase fads instead of staying focused on customer satisfaction, customers lose with lower satisfaction, investors lose with lower financial performance, and the firm loses to competitors. To avoid this trap, executives need to remind themselves that their main objective is to satisfy customers and create value for investors, not chase fads. m VIKAS MITTAL, Ph.D., is a member of the faculty at the Jones Graduate School of Business at Rice University in Houston.

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Cold & Rainy

With a Chance of Detergent Sales Trends in tech and advertising have made the weather a highly sought-after data point, turning forecasters into predictive modelers of human behavior

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By Zach Brooke

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“Temperature at the airport is 88 degrees, which is stupid, man, because I don’t know anybody who lives at the airport.”

– Al Sleet, Hippy Dippy Weather Man

E

ric Danetz, AccuWeather’s newly installed chief revenue officer, picked up the phone and contemplated the climate. This was autumn in New York, yes, but with highs straddling the upper 60s, the afterglow of summer lingered like a lover’s fragrance, keeping the puffer vests and fiery foliage at bay. As always, Danetz took the weather in stride.

“The weather is always good at AccuWeather, my man,” he says. “Today is partly cloudy, and we’re gonna have some showers later today and early tomorrow, but otherwise not so bad. It’s going to be a potentially record-hot Sunday.”

The ease with which he rattles off the forecast is not innate.

Danetz is new to this job, but he first used AccuWeather 27 years ago as a fresh-faced intern at ABC TV network’s flagship station in New York City. There, he crunched meteorological data for the station’s weatherman, Sam Champion, who would go on to report for “Good Morning America” and anchor shows on The Weather Channel.

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Now, decades later, Danetz’s tenure as an AccuWeather employee spans less than four full seasons. But he’s already drawing on a long career in news to steer AccuWeather’s publicfacing offerings toward a premium media outlet. He came to the company by way of Time Inc., CBS, McGraw-Hill and the Daily Beast. The new gig pairs him with another Daily Beast alum, Bill McGarry, and teams him with Deirdre Daly-Markowski, one-time executive director of digital at Hearst. That’s a lot of media moguls to report cloud conditions.

The staff starts to make sense when you look at the audience.

AccuWeather claims a daily digital reach of nearly 2 billion users—put another way, as many users as Facebook. But whereas Facebook’s audience gathers on the central Facebook platform, Danetz says AccuWeather’s users are counted from a host of media channels that use AccuWeather.

“We provide forecasts for nearly every location in the world,” Danetz says. Users access AccuWeather on smartphones, tablets, desktops, TVs, radio stations and newspapers. They can even view

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AccuWeather’s own TV network on Verizon Fios. “If you go into Westfield Mall, or you’re downtown, here in Manhattan, you’ll see digital displays from us,” Danetz says. “If you’re in an elevator, there’s a company called Captivate [that broadcasts information in the car], and the weather on those screens is from AccuWeather. … It’s a tremendous footprint. I’m not going say we’re the size of Facebook in terms of branded usage, but in terms of people who are engaging with our content on a daily basis globally, it’s that big.”

Any content producer claiming to connect with billions of users is likely to draw attention from the ad market.

AccuWeather is no exception. But digital displays in elevators and outdoor Manhattan only capture viewers’ attention for a few moments in transit. Danetz and others in AccuWeather’s newly assembled brain trust don’t just want people to check AccuWeather, they want them to experience AccuWeather. “We want to provide video. We want to provide immersive content so that they’re spending more time [with us].”

Part of AccuWeather’s strategy to cultivate brand loyalists is its enhanced app. It displays temperature, but so does the Apple widget that’s standard on every iPhone. Very sleek. Very sterile.

Very Cupertino, California. “It’s basic for a reason,” Danetz says of Apple’s offering. “Apple wants it to be basic. They don’t want you there, they want you in the App Store.”

In contrast, AccuWeather’s app occupies a platform that’s closer to Facebook than Old Farmer’s Almanac. Users can toggle between current and extended forecasts, as well as realtime Doppler radar. More environmental conditions, such as humidity, wind speeds and precipitation accumulation are displayed by scrolling down past some ads. Further scrolling

reveals allergen information of particular interest to health care marketers, who can advertise their health solutions next to highpollen alerts. “Health care is a major client for us, whether it’s a Claritin, or other allergy-related medication,” Danetz says.

Beneath the allergy information are news video packages created in house by AccuWeather, mostly reporting footage from severe weather or natural disasters, such as West Coast wildfires or Indonesian volcanic activity. All play after a preroll word from sponsors. Beneath those is the extended local forecast, another programmatic ad and, at the very bottom of the page, astrological data about the sun and moon.

A menu button on the lower right-hand side lets users report their local conditions, upload their own videos capturing weather events and share AccuWeather content to external social media networks. For a certain segment of the population fixated on the weather, this is the place to be.

“Weather is an important topic in terms of content, but it’s also a social one,” Danetz says. “I’ve run news organizations where dwell time is long. The reason you’re going to spend time on weather, whether it’s a site or app platform, is because you want to know what’s happening. You want to understand how to plan for your day. Or if you’re a business, [you want] to understand how your business is going to run predicated on the weather for that day.”

ATMOSPHERIC DATA

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he app is only the beginning of AccuWeather’s beefed up offerings. In a way, it’s merely a lure, used to build the currency it and other weather organizations really traffic

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The Weather Channel App (left) served users an ad for the Prius Prime, which communicated information about the car via a chatbot. AccuWeather’s app (above) includes video news about extreme weather and allows users to share content via social media.

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in: data. Every user that logs in to the AccuWeather app from a smartphone gives the company their location.

Like other apps, this allows weather media companies to build profiles and sell targeted ads based on geography.

Unlike other apps, the extensive weather measurement network means AccuWeather and its competitors can merge location data with environmental data to create a customized ad experience.

Think umbrellas during a rainstorm, or sunscreen throughout summer.

Location data is particularly hot right now. The Location Based Marketing Association finds in its “2017 Global Location Trends Report” that more than half of all companies say they use location data to target customers. A research paper published by MDG Advertising found 72% of consumers report engaging with calls to action if they receive them while near the physical location associated with the message.

Users of the AccuWeather app understand the necessity of sharing their location data. Weather apps only make sense if their information is geographically relevant. Weather and location are so inextricably linked that it makes sense for AccuWeather to be in malls and elevators because conditions there can be different from the home, office or immediate travel destination of users. Weather, location and transit are so interconnected that Danetz is exploring options to integrate AccuWeather information on top of online maps.

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“When you go on Waze or Google Maps, all it tells you is traffic information now and how long it’s going to take you to get to your location,” Danetz says. “What if there were weather information there? It’s one thing to wake up in the morning and check the weather to see what to wear, what type of personal products to use, but we’re serving over 32 billion data requests a day.”

For all the attention AI and machine learning have received, Danetz says AccuWeather has been rooted in data science for 55 years because it’s key to understanding heavy media investments being made by AccuWeather and others. One competitor has coupled media and data solutions with AI engagement to form uniquely powerful personalized advertisements.

WEATHER CHANNELED

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he weather was even warmer the following week as Carrie Seifer, vice president and chief revenue officer of The Weather Company, an IBM Business, traversed the streets of New York en route to a midday rendezvous. “It’s beautiful in New York,” she said by phone.

Six months into her position, Seifer is inundated with requests to tailor her weather data—along with the rest of the Watson product suite—into help for marketers seeking smart, personalized, weather-driven campaigns. “You can imagine weather data is only limited by your creativity. It affects so many decisions made by people and businesses,” she says.

Two years ago, The Weather Company was sold to IBM. The Weather Channel, which it owned, was not part of that sale.

The channel remains in the hands of a consortium of owners, including NBC Universal, The Blackstone Group and Bain Capital. The new owners struck a licensing agreement with IBM to use The Weather Company’s forecast data and analytics on The Weather Channel platforms.

In acquiring The Weather Company, IBM bought a host of technological assets capable of monitoring environmental data points across the globe while serving three distinct segments: consumers, B-to-B and marketers. Adding more confusion into this flurry of activity, the marketers segment is now called IBM

Watson Advertising. The rechristening reflects not just which product gets top billing but how far of a leap weather data has made in the realm of marketing. Weather is now seen as another key data point in Watson’s vast ecosystem. But more than that, marketers can now come to weather media companies with extremely sophisticated asks.

During research for a Pantene campaign, the Leo Burnett agency discovered that women often switched hair products on bad hair days. Armed with that insight, the agency turned to Watson to push out smartphone alerts warning consumers about imminent bad-hair weather. Consumers were urged to avoid a coiffure catastrophe by heading to their neighborhood Walgreens (Pantene’s partner on the campaign) for some Pantene preparedness. The result: a 24% increase in sales of Pantene products at Walgreens stores in July and August of 2013 compared to the same two-month period in 2012.

Yet, even this adroit example eschews mention of the most cutting-edge services offered by The Weather Company. Once, marketers could use weather companies as one of many media suppliers (a space for their current ads) or as a data supplier (information for their future ads). Now a third leg is propping up a table of targeted ads: AI. “I call it DCO [dynamic creative optimization] on steroids,” Seifer says. “Imagine if you could merge Apple’s AI technology to DCO, so that it wasn’t so manual to have a sophisticated conversation in the ad unit,” Seifer says.

“We were bought by IBM and now have access to a lot of their product offerings for marketers, so for us to only bring publishing solutions to the marketer was limiting,” she continues.

“Media, data and technology are what make up Watson Advertising. That weather product that you know and love?

That’s in our media channel. That data that you wish you could apply to your entire buy? That’s our data channel. And do you want to use AI in your business, so you don’t have to hire 4,000 data scientists? That’s our AI channel. That’s our technology channel.”

Picture opening your phone to check the weather only to encounter an advertisement that prompted you to ask questions

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about the product it featured. Without leaving the app or involving customer service reps, the advertisement can respond to specific queries you have about the product: What color scheme does it come in? How does it improve on past versions?

How does it compare to a similar product?

Such an ad is not only theoretical, a case study already exists. Toyota blasted ads for its Prius Prime throughout The Weather Channel App and weather.com for 12 weeks last year.

Billed as an industry first, the ads allowed consumers to have personalized conversations with AI software that informed them in a self-contained, robust experience.

“We were able to use Watson as a [chatbot] that went between our potential customer and the products that they’re trying to talk about,” says Chris Pierantozzi, the executive creative director at Saatchi & Saatchi who spearheaded that campaign on behalf of Toyota.

Through the AI component of Watson’s content management system, consumers could obtain facts about the vehicle that would not typically be featured in a display ad. This information served as a data set in its own right because it informed Toyota and Saatchi & Saatchi on which questions were most likely to be posed by prospective buyers.

“We would have never thought that people would have cared about how fast the Prius Prime can go, but we actually had quite a bit of questions around speed,” says Lily Won, communications director at Saatchi & Saatchi. A common question was how quickly the Prius Prime could accelerate from zero to 60 miles per hour. Also popular were questions about self-driving capability and servicing the vehicle.

The most frequently asked questions turned out to be highly technical. Users who interfaced with the ad wanted to know more about the Prius Prime’s dual-motor drive system and remote climate control. The ads targeted those who were in the market to buy a new vehicle as well as auto-tech enthusiasts, which might also explain some of the wonky questions, Won says.

The campaign performed about three times higher than the

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benchmark it was measured against and showed positive lift in key brand health metrics. While there wasn’t a specific set of weather-related factors that influenced where the ad was pushed, some of the analytics indicated weather conditions impacted effectiveness. People in clear-weather conditions—perhaps more readily able to imagine themselves coasting down the freeway on a sunny day—were more likely to engage than people in a rainstorm.

“The quality of the emotional state is plainly influenced by the weather states.”

– Edwin Grant Dexter “Weather influences: an empirical study of the mental and physiological effects of definite meteorological conditions” (1904)

MORE THAN A FEELING

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he warmth left New York as October closed. By early November, the five boroughs were like one large vegetable crisper. Fortunately for Serge Matta, president of locationbased marketing and advertising platform GroundTruth, he was working off-site in considerably warmer Mountain View, California.

The former CEO of media measurement firm comScore, Matta ascended to the helm of GroundTruth roughly 15 months ago. Around the same time Matta was being onboarded, GroundTruth, then called xAd, purchased the popular weather app WeatherBug. Since then, the company rebranded to reflect its evolution from media supplier to data supplier. A large part of the new iteration specializes in research showing how weather influences consumer behavior.

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The impact of weather on human activity has a long history dating back at least to 1904, when Edwin Grant Dexter, an early biometeorologist, published extensively on the subject. Recent GroundTruth reports first published on The Drum found Americans are happiest when the temperature is between 61 and 75. Months with this type of weather coincide with a 15% increase in retail foot traffic in California. Months with temps above or below this range see a 10% drop. Californians are also 32% more likely to head to a movie theater on rainy days. The same can’t be said of Seattle, where rain is 46% less likely to influence traffic than in the Golden State.

WeatherBug is not alone in exploring the effects of weather on buying patterns. Information provided by The Weather Company concludes that juice sales increase during periods of high winds and low temperatures. Soda sales tick up during snowy or rainy winter weather, liquid detergent sales increase during periods of above-average precipitation and below-average temperatures, and tire sales spike following a string of clear-sky days with above-average temperature.

The weather’s influence on consumption doesn’t only manifest in purchase behavior. Last February, AccuWeather partnered with Spotify to launch Climatune, a music microsite that features playlists of popular song selections in various cities during certain types of weather. The results are based on data from 85 billion anonymized Spotify streams in more than 900 cities from November 2015 to November 2016. The populace of Perth, Australia, for instance, is partial to Gorillaz’s “Feel Good Inc” on sunny days, while clear nights in Chicago mean many locals are queuing up Seal’s “Kiss From a Rose.” Overall, sunny days inspire more positive, high-energy song selections, and rain produces subdued, sad-sounding tracks that are more likely to be acoustic than electronic.

“Weather data predicts emotion, which directly correlates to consumer behavior at a point of need,” Danetz says. One client, he notes, uses AccuWeather-provided analytics to chart the seasonal change in preference for iced or hot coffee.

All weather companies traffic in these insights, but perhaps

none lean on them as much as GroundTruth. Shortly after the acquisition of WeatherBug, the company rolled out Weather Triggering, which purports to enable marketing to target against many weather conditions.

“Anyone can sell a coat in the winter or an umbrella when it rains, but how will a week of high humidity or air pressure impact foot traffic and sales?” Matta asks, quoting GroundTruth founder Dipanshu “D” Sharma. “Our acquisition of WeatherBug and launch of products like advanced Weather Triggering are enabling us to bridge that gap for our partners by combining location and weather data to help brands anticipate and adjust to weather patterns that are less-understood.”

The service, which launched in August, relies on environmental data extracted from the WeatherBug network coupled with biometeorology to pinpoint ideal conditions for brands to blast location-based promotions.

Attitudes can differ widely from one region to the next, so Matta believes marketers should account for seasonality, the increase in weather uncertainty and regional, weather-related foot-traffic trends. GroundTruth has broken these insights down by core verticals and by states.

“Record-low temperatures in New York and New England in early March led to a 27% decrease in [quick-service restaurant] foot traffic,” Matta says. “Interestingly, fast-casual restaurants saw the smallest decrease as consumers wanted to spend more time inside. For the retail category, visits to major toy retailers are 4% higher than average on high-precipitation days. This tells us that brands should be adopting a local marketing strategy that’s customized for their target consumers by region or state. This ensures they’re speaking to their audience’s current behavior and needs.”

Since the service is so new, there’s no telling how much of a difference the weather itself can make for particular brands. But climate has been a prime driver of human actions for thousands of years, and as forecast models predict more extreme meteorological events, it’s a safe bet that consumers will continue to be responsive to outdoor conditions. m

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READ THIS STORY TO LEARN HOW BEHAVIORAL ECONOMICS CAN IMPROVE MARKETING

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RICHARD THALER’S 2017 NOBEL MEMORIAL PRIZE IN ECONOMIC SCIENCES is a nudge for marketers to learn about behavioral economics. How can marketers nudge quick-thinking, shortattention consumers?

BY HAL CONICK

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RICHARD THALER WAS JOLTED AWAKE by an earlymorning phone call from Sweden. Over the days and weeks that followed, he was flooded with felicitations—e-mails, phone calls, media requests— leaving him more than swamped.

The caller from Sweden told Thaler he had won the 2017 Nobel Memorial Prize in Economic Sciences for his research in behavioral economics. “Nothing more between now and the prize,” Thaler wrote two weeks after yet another request on his time, declining an interview to talk about how his nudge theory influences marketing.

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Thaler is busy, caught in the surreal muck of a career-defining victory, but his wake-up call from Sweden should serve as a wake-up call for marketers to learn about his work and field of research. Thaler’s nudge theory carries serious weight in marketing, says Joel Rubinson, founder of Rubinson Partners and former chief research officer at The Advertising Research Foundation.

“You can’t be in a meeting and say, ‘I never read [Nudge],’” Rubinson says with a chuckle.

Everyone gets nudged. If you weren’t nudged by this story’s headline to read on, then perhaps you were nudged by a snack wrapper, imploring you to pick up, unwrap and devour its salty-sweet contents. Perhaps you were nudged by a mobile notification: Respond to a friend request, tip your rideshare driver or—hey, it’s raining—order some delivery food.

This use of “nudge,” coined

by Thaler and legal scholar Cass Sunstein in their 2008 book Nudge, is the potential to alter someone’s behavior without nixing any of their options or changing their economic incentives. Countries like the U.K. and Japan created “nudge units,” nudging citizens to cajole them into paying taxes. One of Thaler’s favorite examples of a nudge is a small decal of a fly placed in a urinal at Amsterdam’s Schiphol Airport.

The fly decal improves men’s “aim”—the airport reported an 80% reduction in men’s room urine spillage after fly decals were installed in all urinals. In marketing, nudges have gone from the bathroom to the boardroom to improve market research, decrease selective attention in stores and convert online shoppers waffling about purchases.

The nudge has elbowed its way to the front of the conversation in behavioral economics, a field of research that blends psychology, economics and the scientific method

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to examine the human rationality of decision-making. Behavioral economics asks questions like: Why do people buy a bag of candy instead of a bag of vegetables when they’re trying to lose weight? Why do people buy $4 lattes when they’re trying to save money? The answer is often irrational.

Economists who believe in rational choice theory are not convinced that nudges change people’s behavior. They say that rational agents—aka homo economicus; the economic man; you—make choices based on available information such as costs, benefits, preferences and probability of events. Our choices are our own, these economists say, and a nudge is merely an additional datum in our free market of information. If nudges work, it’s because the nudge has given new information to a rational decision-maker. However, research in behavioral economics has shown that humans often behave irrationally, changing their action when the same choices are framed differently.

Dan Ariely, professor of psychology and behavioral economics at Duke University,

wrote in his book Predictably Irrational about a “Hershey’s Kiss” experiment. Ariely and researchers sold Lindt Truffles for 26 cents each and Hershey’s Kisses for 1 cent each.

Equal numbers of people bought each. When researchers dropped each candy’s price by 1 cent, 90% of people took the free Hershey’s Kiss. Ariely said the “power of free” makes us irrational.

Daniel Kahneman introduced “prospect theory” with research partner Amos Tversky (who died in 1996) to describe choices that contradict the rational choice theory of economics. In 1979, the duo showed that the psychological cost of losing is twice as big as the psychological benefit of winning.

Kahneman and Tversky’s prospect theory also discovered quirks in how people think about saving money. The Library of Economics and Liberty gives an example: People are willing to drive an extra 10 minutes to save $10 on a $50 toy, but few would drive that extra 10 minutes to save $20 on a $20,000 car. Why? Because people frame the savings as a percentage. In their minds, saving 20% on the toy is more valuable than saving 0.1% on

the car, even if more money is saved on the car.

Thaler and Hersh Shefrin of Santa Clara University’s Leavey School of Business introduced the “economic theory of self-control.” This theory says the brain has a “doer” focused on short-term rewards and a “planner” focused on long-term rewards. The doer and planner are always at war, turning our headspace into a battlefield of today versus tomorrow. In later research, Thaler found that if a company creates a 401(k) choice architecture that automatically saves employees’ money, employees will save more for retirement. Put differently, employees must opt out if they wish to not save money; the choice architecture saves money for them by default.

At the University of California, Los Angeles Shlomo Benartzi, who with Thaler wrote the paper “Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving,” estimates that this nudge has helped employees save $29.6 billion over the past decade.

As the body of behavioral economics research has grown, so too has its influence on marketing.

“Every marketer has to understand

WHY DO PEOPLE BUY A BAG OF CANDY INSTEAD OF A BAG OF VEGETABLES WHEN THEY’RE TRYING TO LOSE WEIGHT? WHY DO PEOPLE BUY $4 LATTES WHEN THEY’RE TRYING TO SAVE MONEY? THE ANSWER IS OFTEN IRRATIONAL.

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what it means, particularly for the brands and products that they’re trying to manage,” Rubinson says.

“You have to study it and have a point of view about it. You have to be able to say that these ideas are somehow embedded in the rationale of your marketing program.”

DON’T WE ALREADY DO THAT?

Marketers who read about nudging, framing and changing behavior may echo marketing legend Philip Kotler, asking, “Isn’t this what we’ve been doing?” Kotler, a professor of marketing at the Kellogg School of Management at Northwestern University and author of Marketing Management, says marketers have known that consumers are irrational for 100 years. “Behavioral economics is just a fancy term for marketing,” says Kotler, who considers marketing to be a branch of economics. “Classical economists never really studied how sellers and buyers made their decisions, but marketing has always tried to explain the motivations of buyers, sellers and their belief systems.”

Not so fast, says Ravi Dhar, professor of management and marketing at the Yale School of Management, director of the Yale Center for Customer Insights and author of the same-name-differenttextbook Marketing Management.

Dhar studied behavioral economics (which he calls “behavioral science”) in its incipient days under teachers like Kahneman and Tversky and now researches its intersection with marketing. While marketing and behavioral science have stumbled upon many of the same ideas, Dhar says behavioral science aims to construct a “uniform framework” that marketing has missed. “If they’re not embedded into the framework, these [ideas] get lost,” Dhar says.

At Yale, Dhar leads a program

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called “The New Science of Marketing.” In this three-day session, Dhar works with CEOs and CMOs to integrate the principles of behavioral science into their businesses. Executives whom he teaches want simple frameworks and a common language for thinking about consumers, which is why CEOs and CMOs have flocked to Yale’s campus. Dhar teaches them the basics of behavioral science: how to use Big Data, find better insights and engage with consumers in a digital world.

Yale is one of the few universities that combines marketing with behavioral science in its curriculum.

Dhar says the average marketing curriculum doesn’t look much different now than it did 20 years ago, but many marketing practitioners have become autodidacts, learning about behavioral science from perusing books written by Thaler and Kahneman. Thaler’s Nudge has sold more than 750,000 copies worldwide, and Kahneman’s Thinking, Fast and Slow has sold more than 1 million copies. Many of the books’ combined 2 million readers are CEOs and CMOs, but Dhar says reading books only goes so far in helping marketers implement and internalize the science.

Dhar focuses his research on devising the common language marketers desire, a language they need to understand how to apply behavioral science. One of Dhar’s recent studies—undertaken by the Yale Center for Customer Insights and the Google Food Team at Google’s offices—examined how people can be nudged toward healthier eating. Researchers found that employees who poured their drinks at a beverage station 6.5 feet from a snack bar were 50% more likely to grab a snack than those who filled their glasses at a beverage station 17.5 feet away from the snack bar. For male Google

employees, 11 feet of proximity correlated with gaining one pound of fat per year.

The Google study underlines a cornerstone of behavioral science: Consumers make quick, intuitive decisions—usually within five to 10 seconds—and rarely reflect on whether their decisions were good or bad. Kahneman would call this “System 1” thinking—fast, automatic and often unconscious.

“System 2” thinking is slow, arduous and controlled. Most marketers still believe that consumers are rational agents who weigh each choice carefully, or System 2 thinkers. To the contrary, Dhar says, consumers tend to shop from the gut, just like the Google snacker who mindlessly grabs a snack because it’s a few feet closer. Marketers, he argues, must think like System 1 consumers.

“Marketing managers spend 70 hours a week thinking about whatever product they are marketing, but the consumer is spending seven seconds,” Dhar says. “To understand the consumer behavior of that seven-second approach is critical.”

CHANGING THE FRAMEWORK OF MARKETING RESEARCH

In the glory days of supposedly slow shoppers and even slower research—the 1970s—Rubinson researched economics on the mosscovered University of Chicago campus, the same campus where Thaler refined nudge theory and researched behavioral economics.

As a student, Rubinson heard whispers of behavioral economics.

He found the topic intriguing, even as other economists pilloried the field as junk science. In 1979, Rubinson began his career as an advertiser, becoming a senior manager of Unilever, and he soon noticed industry changes that reminded him of behavioral

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economics. The market sped up: In 1963, consumers spent about $2 trillion; by 1990, they spent roughly $6 trillion, per the U.S. Bureau of Economic Analysis. Over the span of Rubinson’s next job—25 years as chief research officer of The NPD Group—marketers went from studying retail shops with clipboards and pencils to accessing scanner data from across the country. Then Nielsen and IRI started reporting weekly store data. Billions of dollars shifted from advertising to promotion as consumers spent millions of dollars on the products that captivated them. In the early 2000s, the whisper of behavioral economics became a yell. Data dominated, allowing marketers to target consumers. Marketers could watch in real time as their product campaigns succeeded or failed, changing research tactics to focus on consumer behavior rather than intent. This shift in research became the most important aspect of how nudging and behavioral economics are now used in marketing and advertising, Rubinson says, and the shift carried over to consumer surveys and focus groups.

Survey answers are another series of behaviors, Rubinson says, meaning consumers will answer survey questions differently depending on researchers’ word choice and question arrangement.

Marketers who accept that a survey’s design and language can affect the answers consumers give can solve some of research’s systematic problems, such as enormous and unrealistic sales predictions or products that test well but belly-flop into the market.

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ehavioral economics research has also found that consumers often make shopping decisions on autopilot.

On an average trip to the grocery store, for example, consumers

won’t research every item they put in their carts. Rubinson says half of the items shoppers plonk into their carts will likely be purchased without thought about the product.

Marketers must know how customers shop, especially marketers who craft campaigns for products that consumers likely won’t have the patience to research on the go, like eye drops.

“Shopping is the worst form of torture if your eyes are bothering you,” Rubinson says. “It takes you minutes to figure out all the variants on the shelf for a product you don’t normally buy. Behavioral economics would lead marketers and retailers to change the way they present [that] category to people.”

But here’s the rub: Many marketers are ensconced in their research methods, Yale’s Dhar says.

They’ve put in time, money and effort and don’t want to change because that would mean even more time, money and effort—as well as a complete shift in philosophy.

“That’s a legacy problem,” Dhar says of businesses resisting change.

“As we work with some companies, we can see how hard change is—not because they don’t want to change, but because they don’t want to confuse people. [These processes] need to be embedded in what you’re doing. You’re educating everyone on the insight team, then the marketing team. This is not a threemonth process. For many of these companies, it’s a two- to three-year process. That creates uncertainty.”

However, Dhar says marketers who want scientifically sound results from their research must change.

“When you look at a concept test for a new product launch, researchers ask people to carefully look at the product. ‘What do you like? What do you dislike? Circle this and circle that,’” Dhar says. “Most companies in the world of consumers would say they’re not happy with the test’s

WHAT COUNTS AS A NUDGE?

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n their 2008 book Nudge, Thaler and American legal scholar Cass Sunstein explain the nudge: “To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.”

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LIBERTARIAN PATERNALISM

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haler and Sunstein coined the term “libertarian paternalism,” which is the idea that public and private institutions can nudge people in directions that will make their lives better without eliminating their freedom of choice, Sunstein wrote in a 2007 University of Chicago Law School blog post.

Many people have deemed this term to be “Orwellian,” but Sunstein argues that institutional nudging is a system that insists upon freedom of choice.

“One of our central arguments is that because default rules and starting points often matter, institutions can’t avoid nudging people—and hence can’t avoid a kind of paternalism, or at least a nudge,” Sunstein writes. “If 0% of take-home pay goes to savings, it isn’t because nature so ordained it. In addition, the legal system sets up a wide array of default rules that govern the law of contract, law and tort.

People didn’t specifically choose those default rules, and they greatly matter. If the default rule says that employment is at-will, so that an employer may fire an employee for any reason or for no reason at all, it will much affect outcomes; freedom of contract could be preserved with a different default rule.”

“Libertarian paternalists insist on preserving freedom of contract,” Sunstein writes. “They also want to think about whether some default rules are better than others, by reference to the interests of contracting parties themselves.

Libertarian paternalists emphasize that government officials are also subject to bounded rationality, and hence they are especially skeptical of approaches that ban freedom of choice or impose high costs on those who do what officials don’t like.”

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results.” Consumers make snap decisions—in five to 10 seconds— but marketing research treats them as shopping savants. Dhar questions this method of product research.

Duke’s Ariely wrote in a 2010 blog post on his website that market research wasted time and money, adding that the marketing industry had a “focus group bias.” Marketers were easily swayed by human storylines but dubious of lifeless data. “We need to find a way to base our judgments and decisions on real facts and data even if it seems lifeless on its own,” Ariely wrote.

In 2017, Ariely says marketers have more data and less bias. “Focus groups were easy to get compared to real data about purchasing and behavior,” Ariely says. “But as the ease of getting real data about behavior gets better, people are relying less on inaccurate [data].”

Although the data is getting better, marketers are taking their lumps in the learning process.

At one of Dhar’s recent intensive programs, an insights executive from a bank told him, “What I learned after three days is that I should fire myself, and we should do things totally differently.”

“It’s a nice compliment,” Dhar says blithely, but adds that behavioral economics hasn’t solved all of marketing’s problems. However, as the scientific and business communities interact—for example, Ipsos and WPP’s Kantar now both have behavioral science arms—Dhar says more answers to marketing problems will come.

“I think that’s where the scientific community has lagged,” Dhar says.

“But it’s changing.”

AVOIDING THE ‘DARK NUDGE’

The behavioral economics revolution has been brewing for 20 years, Dhar says, but its integration into business practice bubbled to a

boil when bigwigs from Uber, Tesla, Google, Amazon and Facebook took classes led by Thaler and Kahneman in 2007 and 2008. The New York Review of Books reported that Kahneman taught the audience of Silicon Valley godheads about “priming,” which he said was a crucial area of behavior economics research. An example of priming, Kahneman said, could be flashing a smiley face on a user’s screen at a speed faster than the human eye can detect to influence their mood or behavior. Tamsin Shaw, the author of the NYRB piece and an associate professor of philosophy at New York University, wrote: “If subjects are unaware of this unconscious influence, the freedom to resist it begins to look more theoretical than real.”

Social media companies became the first big investors in concepts like nudging. In 2015, Amazon founder Jeff Bezos told his company’s shareholders that the company sends more than 70 million nudges per week through the company’s Selling Coach program. But with success comes scrutiny; use of behavioral economics in Silicon Valley has drawn ethical questions that marketers would be foolish to ignore.

One ethical question was posed when The New York Times reported that Uber nudged its drivers to work longer hours, possibly pushing drivers into less-lucrative areas.

Used this way, nudging meant less money for drivers, but shorter wait times for customers—and more money for Uber. In another example, Facebook revealed that it performed psychological research on 700,000 of its users. The company showed one segment of users posts ranging from neutral to happy in their news feeds and another segment saw posts ranging from neutral to sad. Facebook then monitored the posts of each user segment, finding users inundated

with positive posts felt happy and users fed negative news felt sad.

Facebook said users had given “informed consent” for the study when they created a Facebook account, but it later apologized for making its users unwitting study participants.

These infelicitous uses of nudging—including nudges in gambling, which Philip Newhall of Technical University Munich has dubbed “dark nudges”—have drawn criticism. Dhar says that while the companies he’s worked with use behavioral science in ways most people would view as ethical— PepsiCo has used behavioral economics to draw people to its healthier snack lines, for example, and pharmaceutical companies have nudged patients into picking up their medication consistently— the question remains whether customers are deciding what they want or marketers and companies are making the decisions for them.

If companies are making decisions for consumers, are they making the correct decisions?

“Consumers don’t know all the forces that influence their behavior,” Dhar says. “If marketers know that and pull those levers, then what’s the boundary of ethics? The boundary of ethics was easier when [marketers] said, ‘The consumer knows what they want, and if you try to give them something that they don’t want, that’s a bait-andswitch.’ Now, we’re in a world where the consumer is not quite clear [what they want], and if I move your preferences around, that gets very complicated.”

Just as Google moved snacks farther away from beverage stations to reduce employee snacking, Dhar says companies could just as easily place a soda at each employee’s desk and watch their staff become sugar fiends. Likewise, marketers could nudge consumers toward

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RITUALS: A NEW AREA OF STUDY?

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abits are something people do repeatedly but stop if nothing keeps them going, but Dan Ariely—author of Dollars and Sense: How We Misthink Money and How to Spend Smarter—says he’s become interested in studying rituals, a “very different animal” from habits.

“A ritual is not about just one activity; it’s about the activity as a whole,” he says. “If we make taking medications a ritual, it’s not just about [taking the pill], it’s about something bigger. It also has a highorder meaning [which means there is some learning and more processing required, but also more benefits]. I think we’ve done a good job understanding long-term behaviors and habits, but the next area will be rituals and how we can make the behaviors more appealing.”

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unhealthy products and habits, such as smoking cigarettes or drinking alcohol. “It raises the question about how marketers should be thinking about responsibility in a world where consumer behavior is impacted by forces outside their awareness,” Dhar says.

Thaler, to his credit, has addressed nefarious nudges by calling out companies that use them, such as businesses that automatically enroll free-trial customers into a purchase if they don’t cancel in advance.

Companies must always nudge for good, never bad, he wrote in a New York Times op-ed, and consumers must always be vigilant against nefarious nudgers. “If customers reward firms that act in our best interests, more such outfits will survive and flourish, and the options available to us will improve,” Thaler wrote.

DON’T BE THE GORILLA

Rubinson has a simple answer to how marketers can best use behavioral economics: Don’t be the gorilla. In 1999, two psychology professors at Harvard University, Christopher Chabris and Daniel Simons, were studying how humans only react to certain stimuli when many stimuli occur at once. This is called selective attention. The professors created a video to test selective attention, featuring two teams—one in white shirts and one in black shirts— passing basketballs. The video asked viewers to keep count of the number of passes between players on the white team. Midway through the video, someone in a gorilla suit lumbers into the middle of the screen and beats their chest. Approximately half of the pass-counting viewers failed to see the gorilla; this is the Invisible Gorilla test.

The moral of Rubinson’s antigorilla advice is that marketers must ensure their products don’t fall into the background of the bustling

media landscape, lest customers lose sight of the marketer’s products.

“Find a way that people are treating you like the gorilla, whether it’s in search results or on the shelf or in your advertising … Find ways that your brand will command their attention,” Rubinson says.

Every company has been the gorilla, he says, and one culprit is ineffective targeting. In 2017, Rubinson worked on a white paper that found advertising is twice as effective when a consumer is probabilistically closer to a purchase.

If a consumer just bought a car or a phone or a snack, even the most targeted ad will be the proverbial chest-thumping gorilla.

If marketers take anything from Thaler’s Nobel Prize win, Dhar says they should realize that consumers have limitless options but a finite attention span. Technology will evolve to take advantage of consumer’s short attention, but marketers who grasp the concept and take the fast-thinking perspective of consumers will ultimately be the most successful.

One way marketers can take the perspective of consumers is to think about their own irrational shortcuts.

In academia, for example, Dhar says professors who are hiring new employees only spend a few minutes looking at each résumé, taking small bits of information and accepting or rejecting the applicant based on trivial information—perhaps a common adviser or a shared alma mater—though they believe they processed it carefully.

Marketers should stay alert to these mental shortcuts and think carefully, using their rational, slowthinking System 2 brain to ask what they irrationally overlook at work, in life or as a shopper. They should realize that consumers are irrational in the same ways. Marketers must use this information wisely and never be the gorilla. m

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BEHAVIORAL ECONOMICS TERMS MARKETERS SHOULD KNOW NUDGE: “Any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives,” according to Thaler and Sunstein in their book, Nudge.

CHOICE ARCHITECTURE: The space—physical, social,

psychological—that influences the choices people make.

ANCHORING: A cognitive bias. People tend to rely too heavily on the first piece of information they are given when making a decision—they’re “anchored” to it.

SYSTEM 1: The faster, intuitive way of thinking and making choices. Think “2+2=4” or “grass is green.”

SYSTEM 2: The slower, rational way of thinking and making

choices. Think “142x431=61,202” or “hypoestes phyllostachya is pink and green.”

PROSPECT THEORY: A theory that describes how people choose between risks where outcome probabilities are unknown.

CONCEPTUAL PRIMING: Using words, images and their

meanings to influence a person’s mood or performance on a task.

FRAMING: How a choice is presented, which may affect how a choice is made.

HEURISTIC: A cognitive shortcut to simplify a decision.

Kahneman says this could be substituting a difficult question for an easier one, meaning heuristics often lead to cognitive biases.

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BOX SUBSCRIPTION

AS STRATAGEM THE FAD OF SUBSCRIPTION BOXES IS WANING, BUT SOME SHREWD BRANDS HAVE A PLAN TO THRIVE. THEIR SECRET: EACH BOX IS NOT JUST A WIDGET, BUT AN INSIGHTGENERATING EMISSARY.

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ONSUMERS ARE FLINGING OPEN THEIR DOORS AND WELCOMING BRANDS

INTO THEIR LIVES THROUGH THE SUBSCRITION BOX MODEL. ALL MARKETERS HAVE TO DO IS BOX UP A FEW PRODUCTS, REPRODUCING THE EXCITEMENT OF A GIFT THAT ARRIVES QUARTERLY, MONTHLY OR EVEN WEEKLY.Â

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Consumers’ willingness to roll out the welcome mat for such brands as Birchbox, Barkbox and Blue Apron—and cough up quite a bit of data—stems from the trendy desire for a bespoke customer experience. They want the sophistication of a personal shopper without the human interaction.

They want a curated collection of products without stepping foot in a store. They want to showcase it all on social media, sometimes for fans they’ve never met. Subscription boxes satisfy this appetite for a detached yet customized shopper experience, and they do so with the climactic bonus of “unboxing.”

Eager to satisfy these desires, companies are wrapping whatever they can in tissue paper: jewelry, pet toys, exercise equipment, socks, bacon, fishing gear and so forth. If it can be boxed and themed, it ships. Working off of the self-gratifying, “treat yo’self ” mentality many customers embrace, the subscription box industry has taken off, and marketers have enjoyed a tantalizing spread of customer data.

We may have witnessed peak subscription box, though, according to experts. At some point a combination of oversaturation and fatigue causes customers to lose interest, and customer acquisition becomes expensive. Marketers must find a way to keep the warm and fuzzy feelings alive when customers outgrow the initial excitement of personalized packages—and that requires thinking of boxes as a marketing device, rather than the core product.

BOOM TIMES

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efore subscription brands considered themselves curators, they were known as introducers. Product-of-the-month clubs gave subscribers an opportunity to try new products, but they leveraged no knowledge of the customer, making blind recommendations writ large. A jelly-of-the-month club, for instance, didn’t take into account whether a subscriber preferred spicy foods or black coffee, tastes that could guide a personalized selection.

Modern subscriptions begin and develop alongside customer preference. Subscribers often take a quiz that helps the company characterize their interests, then rate the items in their boxes to continuously specify their profile. It’s the difference between receiving a present from a distant aunt and a best friend—both are nice, but the latter is more reflective of your current interests.

With the promise of an individualized package,

customers signed up in droves for the likes of Dollar Shave Club and Birchbox—the latter of which was once invite-only with a waitlist. An analysis by Hitwise, an audience insights solution, found visits to subscription company websites grew 800% between 2014 and 2017. Its calculations suggest about 5.7 million people in the U.S. are box subscribers.

Though there’s probably a box that would appeal to nearly anyone, subscribers are most often millennials or members of Gen X, with the sweet spot being those between 30 and 40 years old.

Subscription box customers are more likely to be college-educated, liberal-leaning women. Their household income averages more than $100,000, and they tend to have children between the ages of 3 and 5. Plus, they’re willing to give up their data for a personalized home delivery.

“We hear sometimes that people don’t want to provide that much info to companies,” says John Fetto, senior analyst for research and marketing at Hitwise. “People who subscribe to these kinds of companies actually value that. They’re the people who like it when the company makes a recommendation based on a previous purchase or that a company tries to understand other things based on their browsing habits. They’re OK providing these subscription box sites with information that’s going to help them have a more bespoke, tailored experience and deliver products that they don’t have to go out and find. It’s a way FabFitFun (whose quarterly box is shown here) also has a TV channel featuring fitness videos and a magazine covering health, entertainment, news and beauty.

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for them to have a filtered experience with the products.”

The more customers seek a tighter filter, the more data they disclose to marketers. Even if customers return some of the items in their box and the company doesn’t make money, it marks an engagement that can be monetized in the future.

“Once someone subscribes to one of these boxes, you really have a Trojan horse going into their house once every month,” Fetto says. What that spy brings back to the company (almost immediately) are customer insights that directly guide the brand’s next decision, be it in product development, curation or otherwise. The company and subscriber feed off each other.

Putting together the perfect box is an art and a science, says Leslie Emmons Burthey, vice president of marketing at FabFitFun. The company, which began as a content hub, offers a quarterly subscription box filled with beauty, fashion, fitness and wellness products.

“We have an in-house team getting together every day, testing out products and thinking about the trends that are coming down the pipeline,” she says. “On the flip side is the science: polling members, surveying, figuring out what people want to see. It becomes this virtuous cycle.”

This cycle has boosted responsiveness to both what the audience likes and what the experts deem trendy. For instance, wine subscription company Winc has increased the responsiveness of the wine industry—which is not known for its agility. It was able to nimbly react to the seasonal and millennial favorite rosé by launching its Summer Water Rosé brand and a special membership that included items curated by lifestyle company Yes Way Rosé. Winc’s experts are also leading consumers toward the next trend: most recently, orange wine.

Winc CMO Nishant Mani says the company was surprised to see how well customers took to their Au-Delá Tocai Friulano orange wine—a type of white wine made by leaving the grape skins and seeds in contact with the juice. Mani says the popularity of the unusual wine empowered the company to experiment more.

Winc experiments with small batches and branding concepts until it hits on something customers enjoy. The company will bring a prototype to market, with the winemakers often engaging the creative team to design branding concepts. Some of these are placed in Winc’s marketing materials and social media to gather consumer reactions.

The team uses customer information to make

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buying and growing decisions for the next one or two years, but also for immediate blending, bottling and branding. “We get ratings on a product almost immediately,” Mani says. “We have the ability to learn from and react to those ratings and iterate on branding and bottling in a time frame that is significantly shorter than what it takes to build the whole thing from scratch in the wine business.”

Traditional retailers have found this model appealing as well, whether they have partnered with an existing subscription box company (as William Sonoma has with healthy meal kit Sun Basket) or created their own subscription boxes (such as Walmart’s Beauty Box). Up-andcoming brands find subscription box partnerships particularly appealing vehicles to move into homes and receive customer feedback.

“Working with us is like getting your own marketing campaign,” Burthey says. “You’re getting directly into the home of our subscribers and you get all this really rich data.” FabFitFun asks customers about their intent to purchase items in the future after receiving them in a box. “There’s a ripple effect of being in our box,” she says, “and [our partners] see the fruits of that for months to come as far as increased sales.”

The benefits have caused subscription boxes to spike in popularity, but the afterglow isn’t always long-lasting.

IS THIS THE BEGINNING OF THE END?

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hat goes up must come down,” says Peter Fader, a professor of marketing at the Wharton School at the University of Pennsylvania. “Anytime you look at the diffusion of an innovation through a market, whether you’re talking about classic, old-school 1960s-style sociology; a new consumer product; new business model or a cold going through a daycare center, we know the faster it rises or the faster an adoption picks up in [a] viral-type manner, two things will happen: It will peak earlier than you think, and after that peak, the decline will be [fast].”

Fader compares subscription boxes with flashsale websites such as LivingSocial, Gilt and Groupon, which were once consumer darlings but now seem to have their best days behind them. Part of this may be simple fatigue: Not only are there an estimated 400 to 600 different types of subscription boxes in the U.S. (according to The Washington

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Post in 2014), but consumers may tire of receiving something brand-new all the time. There’s no reason to keep sampling once you find the right mascara or the comfort of a go-to Monday night recipe.

The popularity of these subscriptions are beginning to show signs of slowing or plateauing growth. Fetto says Hitwise’s numbers suggest there is still some growth in the space, but even some of the leading sites have begun to see slight declines. He says there haven’t been many recent breakthrough subscription brands, at least not on the scale of Blue Apron or Dollar Shave Club.

Blue Apron might be the best example of the trend souring, and the drool-worthy depth of data these boxes provide may be their undoing.

The company didn’t recognize the portents of stagnation in the data it obtained. Fader points to Blue Apron’s IPO announcement in spring 2017, during which it provided certain metrics in its S-1 disclosure. Blue Apron didn’t explicitly offer its retention rates or much about its customer acquisition costs, but the company did provide what Fader calls “trophy metrics.” Experts used this data to create relatively simple models that suggested future challenges for the meal-delivery service, including weak retention as well as a decline in revenues, new acquisition cohorts and average order values of aging customers. The models reduced Blue Apron’s per-share goals from $17 to $10. At the writing of this article, Blue

Wine subscription company Winc tests branding concepts for wines entering the market and leverages feedback from subscribers to counsel producers on growing, bottling and blending decisions.

Apron’s stock price is trading at nearly 70% below its offer price at about $3 per share, making it the worst-performing major IPO of 2017.

According to Fader, the subscription model offers the ability to measure and track granular details, but the industry’s ability to do the appropriate accounting and forecasting of valuations is lagging.

“A lot of these companies are opening themselves up for a level of scrutiny that they might not be subject to otherwise,” Fader says. “This is mixed

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news. It’s tough for them but good for the world that we can now really see what’s going on at a much earlier stage. And it’s harder to fool the investors that things appear to be rosier than they are.”

Subscription companies could take guidance from old marketing models. For instance, packaged-goods firms know they can judge a new product or service on the basis of aggregate sales. The trick, Fader explains, is to look at trial (acquisitions), first repeat purchase and the depth of repeat (or length of time customers continue their subscription). Marketers should separate and forecast each of these behaviors and determine where the bottleneck is. In Fader’s view, subscription companies are packing all those behaviors together and focusing too much on trial alone, believing it to be indicative of repeat purchase patterns.

“In old-school direct marketing, firms knew how to look at the data: how to decompose it, project it separately, run little experiments not only to find what the customer will like [or] what the UX would be, but to create enough variation in the data to make these forecasts more effectively,” Fader says. “It’s a shame that a lot of today’s subscription companies are basically reinventing the wheel and coming up with one that doesn’t roll nearly as smoothly as the old one.”

Even with the appropriate measurements, the subscription box model may have an innate

struggle: Each successive customer cohort typically shows signs of declining patterns. Subscription companies need to project forthcoming cycles and be careful not to overestimate the devotion of future customers.

“There’s such a flood of data that they’re drowning in all of it, and they aren’t really sure what kinds of things they should be looking at,” Fader says. “They get all caught up in noisy signals like a lot of engagement metrics that sound nice but aren’t necessarily indicative or predictive of anything.”

HOW COMPANIES COULD SURVIVE— AND THRIVE— IN THE SPACE

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s fatalistic as it sounds, there’s a reason so many believe in the power of subscription boxes. There’s real appeal, especially if it’s just one corner of a larger consumer-brand tapestry.

Marketers can begin with foresight on patterns.

In addition to looking at the appropriate data and signals, Fader recommends nudging and anticipating. To the first point, brands should leave room for experimentation—can they offer subscriptions of different sizes or quantities?—to mitigate future declines. To the latter suggestion,

One subscription box for dogs, which includes treats and toys meant to be destroyed in a month’s time, is Barkbox—shown here with a New York-themed selection.

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Fader says brands need to understand that churn will occur, so they should anticipate it and reallocate their resources accordingly.

“Don’t delude yourself to think it’s a branding issue,” Fader says. “Learn to go with that flow instead of trying to either ignore it or magically turn it around.”

BARK, the company behind Barkbox, understood the limited lifespan of the subscription model. The company anticipated that dogs wouldn’t need brand-new toys every month if the products were built to last. BARK keeps the demand up by creating items that are meant to be wrecked.

“The beauty of the box is the toys and treats are meant to be destroyed and eaten over the course of the month,” says Jay Livingston, CMO at BARK. “We lean into the idea of the joy of destruction of the toys.” Barkbox customizes the boxes to a large degree, and the quality of the toys and their ephemeral nature is what separates them from other chew toys.

The company expanded into one-off sales with an online store where customers can make purchases without being subscribers. Its second, more recent effort is a partnership with Target, where it’s selling some of its most popular products.

Similarly, Winc moved offline by selling its wines wholesale and repurposing its customer data.

Mani says wholesale is the booster rocket for Winc brands that get a particularly good signal from its subscriber base. The company uses feedback and data from subscribers to convince retailers to carry its popular brands. “[We tell them], ‘You don’t need to try this out, we’ve already been doing this for a year and a half or two years. Here’s the market sales data among our online consumer base,’” Mani says. “We’ve been able to build a wholesale program that has not required the backing of a bunch of marketing dollars behind the wines because we already

have data to show that the wine works in the marketplace.”

Content and community can also drive consistent consumer interest. FabFitFun may be one of the leaders in this regard. The company creates content around the products that show up in its quarterly subscription boxes, describing ways to use the items—and it’s often in response to what its customers discuss on their members-only community forum.

“Our customers will tell us very explicitly what they like, what they don’t like,” Burthey says. “When we have a product or a website improvement we want to make, or we’re thinking of inspiration for upcoming boxes from a merchandising standpoint, it’s not unheard of for us to just ask people for their input.”

The FabFitFun box followed the content, and was intended to enhance the community. This could be a useful way for companies to think of subscription boxes: as a value-add for super customers.

“I’d like to flip the business model around,” Fader suggests. “For most companies, buying stuff in a one-off manner is the base business. [For] those few really engaged customers who know that they’re going to have these periodic needs, view the subscription version as a premium service above and beyond the merely occasional transaction.”

This is the model Sephora uses. The makeup retailer’s Play! Monthly subscription box comes with a customized group of samples and access to how-to videos and tutorials for the products. It also includes a book of tips for the samples and a tie-in to its other big customer draw: Beauty Insider points.

The subscriptions that survive beyond the hype years are likely to be the ones that grow beyond their boxes. As customers’ tastes mature, they don’t lose their interest in being delighted, it just takes a little planning once brands get a foot in the door. m

Once someone subscribes to one of these boxes, you really have a Trojan horse going into their house once every month.

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career advancement

ON THE RECORD

The Father of Modern Marketing Will Never Retire Philip Kotler, affectionately known as the “Father of Modern Marketing,” says marketers must stop being wasteful and go back to the original ideas of creating, communicating and delivering value to their target market

BY HAL CONICK | STAFF WRITER

 hconick@ama.org

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hilip Kotler is 86 years old and will never retire; he doesn’t believe in retirement. “Do I ever relax?” he asks in the epilogue of his latest book, an autobiography titled My Adventures in Marketing. Perhaps Kotler relaxes in his own way, but he prides himself on activity.

He answers his own question: “I just enjoy producing more than consuming.”

And produce Kotler does; he still works as a professor of international marketing at the Northwestern University Kellogg School of Management, and he continues to write. He’s written more than 60 books, has more than 60 “episodes” (or chapters) in his autobiography, and for a chunk of time, he may have been the only octogenarian who regularly updated a blog.

Kotler also travels enough to make most marketers homesick by proxy. At the time of Kotler’s conversation with Marketing News, he had just returned from a speaking engagement in Italy and had plans to travel to Japan, Singapore, South Korea and Bahrain soon after.

Each trip brings new friends, he says, to go along with new experiences and the possibility of a much thicker new book. “I could write another 60 stories that have happened to me in the last few years that would be of interest to people,” Kotler says.

Marketing News spoke with Kotler about his travels, his most exciting moments and how marketing can

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make the world a better place for future generations.

Q

What do you consider to be your career’s most exciting moment?

A

My Adventures in Marketing shows a lot of the exciting moments: the time we created the World Marketing Summit and brought it to Bangladesh and had [thousands of] people in that country getting excited about marketing. I’ve also received a lot of honorary degrees—I think about 20. I remember being in Krakow, Poland, to receive the honorary degree from Krakow University; I looked like a pope or something the way they outfitted me. The whole ceremony was done with a real touch of showmanship.

Of course, my favorite experience has been meeting and marrying my wife, Nancy, and having a wonderful family of three daughters and nine grandchildren.

Q

The story about you and Nancy traveling to India early in your career was unique. Most marketers don’t get the experience of seeing how other countries’ markets work.

What have your travels added to your view of marketing?

A

The question I’m always asked is whether marketing is done professionally in the same way in every

part of the world. My experience in India, China and Indonesia shows that there are different levels of customer consciousness, different values and different practices, some not so good. We encountered a lot of corruption in some of those countries, which is a price that the public pays.

Corruption keeps them from the rate of economic growth that they deserve. I wrote about corruption in the new book, but in my textbooks I don’t mention corruption, partly because I don’t want it to be used. That’s an aspect of marketplace behavior that I don’t want to illuminate for anyone to misuse.

The message we’re trying to get out in those countries is that companies can perform better in profits, sales and in their treatment of their workers and employees if they define what values to bring to each group. Marketing is about value creation, communication and delivery, so the country or the company needs to think not [of how] to manipulate the consumer, but what consumers would benefit from, then deliver and communicate it.

Q

You wrote a lot about your influences in this book, saying that people like Peter Drucker, Milton Friedman and even Leo Tolstoy have influenced your career. What can learning from great minds of the past bring to a marketing career?

A

Marketers must understand the evolution of their own field. I know a great deal about economics, which has a longer history than marketing. The history of economics goes back to Adam Smith, who wrote his book The Wealth of Nations in the same year as the American Revolution, 1776. Every economist needs to know about Adam Smith and David Ricardo all the way to modern economists like John Maynard Keynes. Marketing’s history is shorter, only 100 years. The textbooks on marketing were first written by economists—not by marketing people.

Since then, we’ve produced people like Drucker, Theodore Levitt and John Howard.

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career advancement

ON THE RECORD

Ideas often come from great thinkers.

To know more about them is very important. I’ve met some of them, like Drucker and Friedman. They encapsulate a lot of the newer ideas and can use the force of their personality and reasoning to drive these ideas into in the mindset of most economists and marketers.

Q

Do you think this kind of change comes from the strength of the ideas or the strength of individual personalities?

A

Yes, on both counts. We often hear a speaker who has written some great pieces of thinking, but then we are disappointed that their personality is insufficient to carry these ideas further.

We take someone like Friedman: He was passionate about the free marketplace, was so articulate in debates and had ideas that were so persuasive that he had a huge following. The question historians often ask is, “Is our history made by great people or great ideas?” I must unconsciously believe that there is an impact of great minds on public thought in this world.

Q

In your book, you wrote that marketers must leave the world a better place for the kids and grandkids of future generations. How can marketers do this?

A

Companies should be more than profit-making machines. They should be aware that they are using resources and that they’re trying to convert resources into value, so they should make the lives of their target markets better. They should not be wasteful. There are companies that show a lot of waste; they aren’t lean marketers.

I like the concept of lean marketers because everything counts. I get the idea sometimes that when things are left over from a job and are thrown away, whatever was thrown away could have been used as ingredients or turned into something else that’s valuable.

Marketing should be about efficiency and effectiveness. Marketing started with corporate and social responsibility as a big idea. We had some evidence that companies that work well in corporate social responsibility take performance environmentalism as a mindset, try for no waste and make the lives of their employees and their customers healthier. That field of corporate social responsibility often leaves the companies [that] practice it more profitable.

The argument could be made that maybe they’re just profitable for other reasons, therefore they have extra money to give away for corporate social responsibility, but I think it’s subtler than that. Companies that have a broader

mindset, a mindset of trying to develop a good world, not just a good product, are my favorite examples. There are leaders who respect that companies can do more good than making money.

Q A

What’s one piece of advice you have for marketers?

People practicing marketing have to go back to the original ideas of creating, communicating and delivering value to their target market. New people coming into marketing have to decide where their interests and capabilities lie. Is it in the field of research, where we always need information about every group we want to serve? We need the tools of focus groups and questionnaires. That’s one opportunity, but others may want to be in the role of sales, getting close to buyers and serving their needs. Others may want to be more digitally oriented, where they believe in the value of data and have the mathematical tools to unearth insights about how marketing is working and what drives results.

I see marketing as a mansion of many rooms. We really need product managers, growth managers, pricing specialists and advertising specialists. It’s important for someone interested in marketing to see the latest that’s happening in their room of the mansion. m

I see marketing as a mansion of many rooms. We really need product managers, we need growth managers, we need pricing specialists and we need advertising specialists. It’s important for someone interested in marketing to see the latest that’s happening in their room of the mansion.

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career advancement

PERSONAL BRANDING

5 Keys to Surviving a Personal Brand Attack Turn an exercise in self-defense into an opportunity for brand building

BY DAVID HAGENBUCH

 dhagenbu@messiah.edu

‘H

agenbuch gets it wrong again.”

Those words hit me hard as I read a harsh response to one of my weekly blog posts. Unfortunately, the criticism wasn’t aimed at just a specific statement I made or conclusion I offered.

The reader levied a wholesale indictment of my advice, questioning my competence

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and challenging my expertise. It was a direct attack on my personal brand.

The same social media that make it simple for organizations and individuals to share updates also make it easy for anyone to interject an opinion, be it good, bad or ugly. Unfortunately, public discourse increasingly degenerates

into personal attacks, which makes it important for each of us to know how to effectively and respectfully defend our brands.

How did I answer my aggressor? I’ll continue the story: As my emotions battled reason for control of my actions, I desperately wanted to fire back a quick retort. I’m pretty good at impromptu response, so I was confident I could stand toe-totoe with this guy in an exchange of unpleasantries.

I also worried what others might think if I didn’t respond right away. Would they assume I was cowering from the confrontation, unable to defend myself or articulate an effective reply? I felt time working against me.

Fortunately, I overcame the urge to react quickly. Throughout the day, I

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career advancement

PERSONAL BRANDING

occasionally contemplated the reader’s comments, which were in response to a blog I had written about the ethics of ticket scalping. I then began to draft a reply. The next morning, I reread and revised what I had written. Finally, a full day after the attack, I posted this reply: “Thank you for your feedback, Bob. I appreciate the point about necessities versus luxuries. The tickets are certainly the latter. For that reason, we can’t call what happened price gouging like we might if a retailer quadrupled the price of bottled water for hurricane victims just because it knows consumers have no other choice.

Still, we shouldn’t think that any price that’s not gouging is a fair price, or that whatever is legal is ethical.

Granted it’s hard to determine, but I believe there is a fair/reasonable price for every product, somewhere above cost and below ‘whatever-the-marketwill-bear.’ Other-oriented, long-termleaning individuals can identify those price levels in their industries for their products.

I do truly appreciate your feedback.

If more people would have these kinds of conversations, we might be able to avoid the next ‘Wells Fargo, Mylan Pharmaceuticals, and Volkswagen.’ In the meantime, I will keep ‘moralizing.’

Eventually I’ll get it right!”

The attacker fell silent while others appreciated my response. Although I didn’t have a strategy in mind at the outset, I’ve deduced from this experience the following five principles, which individuals might use to defend their brands when under attack:

1

Don’t Be Baited Into a Fight Generally, those who attack have little to lose. The aggressors win if they can get us to fly off the handle and suck us into a war of words. Don’t stoop to their level. By staying

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above the fray, you avoid tarnishing your brand’s image.

2

Take Your Time Responding In an age of texting and instant messaging, people are used to shooting off short, quick replies. Those kinds of responses are often disastrous in these explosive situations where first reactions are seldom ideal. Use time to your advantage, to ease your irritation and process your thoughts. Don’t rush to respond.

3

Avoid Self-doubt No one has cornered the market on insight; everyone makes mistakes. While we need to be realistic about our abilities, we also shouldn’t allow personal attacks to shatter our confidence. Everyone has ideas and suggestions that are worth sharing and that deserve respect from others. Believe in your brand.

4

Diffuse the Aggressor’s Anger It’s hard for people to sustain an attack when you thank or even compliment them.

If they continue to disparage you, they’re arguing against themselves. However, positive comments need to be genuine. You can always appreciate, as I did, the fact that the exchange gains exposure for the issue.

5

Don’t Back Down Notwithstanding the prior points aimed at restoration, your brand shouldn’t be a doormat. If you’re right, stand your ground and let your well-planned response showcase your insight. You can also use your attacker’s own words to gain empathy, as I did in the last sentence: “In the meantime, I will keep ‘moralizing.’ Eventually I’ll get it right!”

Attacks on our personal brands are usually intended to make us look bad, but well-executed, respectful responses can turn that aggression into brand-building opportunities.

Attacks on our personal brands are usually intended to make us look bad, but wellexecuted, respectful responses can turn that aggression into brand-building opportunities. m DAVID HAGENBUCH is a professor of marketing at Messiah College, the author of Honorable Influence and the founder of MindfulMarketing.org, which aims to encourage ethical marketing.

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advertisers’index

ADVERTISERS’ INDEX Quick source for contacting the suppliers in the January 2018 issue of Marketing News.

2017-2018 AMA Training Series Events ................................... inside front cover ttp://ama.marketing/ts URL: h

AMA’s Marketing Resource Directory .................................................................. p. 55 URL: http://marketingresourcedirectory.ama.org

2018 AMA Winter Academic Conference . ................................................. back cover URL: h ttp://ama.marketing/winter2018

AMA White Papers ......................... inside back cover Email: anelmes@ama.org URL: http://www.ama.org/whitepaper

AMA Foundation Higher Education Marketer of the Year Awards and the AMA 2016-2017 Chapter Excellence Awards . ....................................... p. 22 – 23

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Virtual Conferences presented by the AMA ............................................................... p. 17 Email: anelmes@ama.org

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#OfficeGoals A peek inside the marketers’ offices that make us drool

BGB GROUP, a medical communications

haves for any millennialcentric office.

An adjacent lounge riffs on living room motifs with a flat-screen TV, fireplace, plaster-cast animal heads mounted on the wall, mid-century furniture and a kitschy, life-size ceramic zebra. TPG created a personality in each conference room.

Accordingly, Spring Street’s walls are covered in an oversized photo print of a vibrant spring landscape, Orchard Street’s walls are decorated in Flavorpaper bright-yellow banana wallpaper, and Greene Street’s feature wall is a mosaic of wooden squares cut from skateboards.

Two surprising historic features of the sixth floor were discovered during demolition: an old steel fire door stamped with “Underwriters Laboratories” and graffiti on one of the original brick walls, dating to 1942. m PHOTOS: ERIC LAIGNEL

agency, worked with TPG Architecture to bring its New York City office to life with bright colors, themed conference rooms and amenities that its youthful workforce would appreciate. The designers were asked to create an environment that was vibrant, bright and unusual to delight the staff and pique the interest of potential new hires and clients.

Spread across two floors are two kitchens, three phone rooms, a flex conference room, three medium-size conference rooms that double as billiards rooms and seven small conference rooms, each named after and designed with a local street in mind—Prince, Greene, Grand, Spring, Broome, Orchard and Bond. The reception area welcomes guests with a deep red divider and seating area that intersects a long wooden reception desk, which becomes a DJ’s turntable and bar with beer taps on the far side of the divider—must-

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