Data protection appears to be many companies’ Achilles’ heel.
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Why 2018 will be the year consultancies poach high-value marketing strategy budgets from agencies
Consultancies aren’t just parking their yachts off the French Riviera at Cannes. They’re setting their sights on major marketing budgets, and 2018 will be the year they start their conquest to remake the industry.
The CMO budget is the last line item on the balance sheet that companies like Accenture, IBM, and Deloitte haven’t touched. In the agency world, many are shrugging off consultancies’ maneuvering as irrelevant to their business and clients. While market inertia may slow down consultancies in the near term, they are playing a much different game than agencies — and the largest agencies should be particularly worried. Consultancies are integrating the entire digital marketing environment, of which paid media is just one facet, to tell a broader story about ROI — and they have the data to prove it. They aren’t simply selling ads, they’re helping the brand sell products and services with holistic solutions that cover the entire value chain.
Traditionally, Accenture, IBM and other consultancies have been system integrators and technical infrastructure companies. They implement large scale IT solutions and operate data centers for corporations — about as far from advertising creativity as a company can get. But as their core services expanded — and there was a clear need from the market — they bridged into marketing-related activities, such as building interactive and e-commerce websites. Now, they’re consolidating their role in marketing and design, with the CMO budget being the last untapped pot of money. This shift is predominantly driven at the CEO or CFO level, while ad agencies typically connect with CMOs at brands.
These companies have adopted a standard playbook as they remake advertising in their own image: acquire new capabilities, or enter client accounts through audits. Accenture recently purchased the French digital commerce agency Altima, the company’s 17th acquisition since 2013 as it expands its move into marketing and advertising. Altima joined Accenture’s roster of previous acquisitions, including US-based marketing and design agencies Wire Stone and Matter. They’re also acquiring people: Accenture recently hired OMD‘s EMEA president Nikki Mendonça to be the global president of intelligent marketing operations. Rigorous audits will also win consultancies the CMO budget: they’ll look for a pain point within a brand’s marketing strategy, provide a deep analysis of why that’s a problem, and offer a technical solution that integrates a number of third party solutions. The consultancies’ deep experience in building complex solutions out of many building blocks provided by independent vendors is the key enabler for these complex, transformational projects.
Market forces are pushing businesses to become more digitally-integrated. Brands must go all in to digitize themselves if they want to survive this tidal shift — they’ll be called on to better connect with consumers online, tell a broader story about the digital buying journey, and measure the impact of their marketing efforts. For example, lightweight direct-to-consumer CPG brands are upending the beauty industry with influencer-led marketing and slashed prices due to a lack of overhead. As major advertisers go digital, they’ll also face significant challenges in bringing all facets of their business into compliance with data privacy regulations around the globe. Consultancies are demonstrably better positioned here — for example, IBM recently showcased its capabilities to help brands weather the General Data Protection Regulation (GDPR) in the EU.
Traditional ad agencies don’t currently have the staff, expertise, or infrastructure to build out and support this deep digital integration — and they face a considerable amount of resistance from their brand clients as they wage a cold war over marketing data. As a result, they’ll continue to lose market share to consultancies that can build systems and integrations for advertisers, and offer both efficiency and tighter control over their data.
In 2018, consultancies will test the waters in the advertising space by auditing major brand marketing budgets — and it will likely be a bloodbath. Consultancies will come for high-value targets like brand and creative strategy first, and if agencies can’t prove their value, they’ll be left out in the cold. Major agencies are right to be worried — consultancies will likely move fully into the space in 2019 and 2020, once they’ve hammered out the details of adapting their business model to the marketing industry.
There is a silver lining for agencies, though — for the moment, these consultancies will likely steer clear of the execution layer, and leave media buying to agencies. Instead, they’ll continue to expand their creative efforts: building interactive experiences, setting up e-commerce sites, and optimizing and integrating technical solutions. Media buying requires a heavy investment in working capital with a comparably low rate of return to what consultancies are used to. In fact, this will likely prove to be a major boon to small shops and medium-sized agencies — following an audit of a major brand’s marketing budget, independent agencies will be on an even playing field with major agencies. If they can integrate with the consultancies’ technical solutions, and make the right pitch, they could win unprecedented budgets. But is there a motivation for consultancies to move into media buying? Yes — and they will move into media buying aggressively once they’ve isolated a vastly different media buying model than the traditional paradigm.
For the CMOs of major brands, the future of their marketing spend will depend on the outcome of a mandated consultancy audit. Long-time agencies of record could fall by the wayside — unless agencies and brands agree to a mutually beneficial, more transparent deal. Barring this, consultancies will help CMOs manage their budgets, soliciting bids from creative shops, media agencies, tech vendors, and platforms on the CMO’s behalf — and building the technical solution that integrates all the pieces.
To defend against consultancies, agencies must provide greater value, get leaner, and become more transparent. Smarter agencies — such as WPP — are already building out or buying IT infrastructure to integrate their digital marketing capabilities. But as these holding companies move from a verticalized to a horizontal approach, there’s still a challenge in connecting the disparate pieces for clients at scale — when each client wants a bespoke solution — while receiving fair compensation for their work.
Moving into 2018, agencies should lean on their bona fides: relationships, creative expertise, and organizational DNA that consultancies can’t easily access. The competition from consultancies should also be seen as an opportunity for agencies: to tell a holistic marketing story, built on deep ROI, across the nonlinear consumer journey.
Stitch Fix’s TV advertising push attracted new customers. One problem: They want cheaper stuff.
So Stitch Fix is giving it to them.
Online personal styling service Stitch Fix stepped up its advertising spending by 84 percent in the first quarter of its 2018 fiscal year, with TV campaigns playing a big role in trying to attract new customers.
But the new customers attracted by the mass-market commercials had one common piece of feedback: Stitch Fix needs to offer a bigger selection of less-expensive clothing. CEO Katrina Lake told Recode in an interview following today’s release of Q1 results — its first earnings report as a public company — that these consumers want more options in the $20 to $50 price range.
So Stitch Fix plans to give these new customers more of what they want.
“In the last year, lower price point product has grown to represent a double-digit percentage of our total unit sales,” the company said in a letter to shareholders announcing the financial results. “Given the success of this offering, we plan to increase lower price point sales as a percentage of overall sales over the course of this fiscal year.”
In its first few years of existence, Stitch Fix’s selection of clothing items skewed mid-tier — higher than the range mentioned above, but lower than those of premium brands. But in the past year, the company has started to sell name-brands at premium price points, in addition to beefing up the selection in the $20 to $50 range.
On the company’s earnings call with analysts, Lake was asked what the lower-price push would mean for profit margins. She did not offer specifics on the profitability makeup of the different price points, but said Stitch Fix “can serve very profitably” these value shoppers.
Average order values, on the other hand, would be lower for these customers, but would be largely offset by new sales of high-price premium brands, she said.
For the quarter, Stitch Fix reported revenue earnings and profits that were generally in line with analyst estimates. First-quarter revenue grew 25 percent to $296 million year over year, while the company netted $13.5 million in net income.
But Stitch Fix’s stock was trading down as much as 12 percent in the after-hours market, perhaps over concerns that the company did not provide a forecast for net income.
CMOs Eye Big Data, Digital Spend For 2018 Budgets
Marketing leaders allocate more to analytics as demand for data-driven insights increases
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Data Can Be a Marketer’s Dream—or a Persistent Nightmare [Infographic]
Too many B2B marketers are sleeping on the job when it comes to maintaining the consistency and quality of their data.
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Will Brands Be Ready For Monetization In 2018?
AdExchanger |
“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media. Today’s column is written by Trey Stephens, director of audience monetization at Acxiom. As 2017 comes to a close, it’s a great time for brands to assess ways to improve marketing strategy and better capitalize… Continue reading »
It’s moving slowly, but Pinterest and other tech companies are becoming less white and less male
Pinterest released its latest diversity report on Tuesday.
Slowly but surely, Pinterest is getting more diverse.
The company released its annual workforce diversity report on Tuesday, and claims that underrepresented minorities now make up 9 percent of its workforce, up from just 7 percent in 2016. Pinterest is also hiring more female employees: Women account for 45 percent of Pinterest’s workforce, up from 44 percent last year, according to this latest report.
The data represents advances compared to 2016 government data published earlier this year. And while the changes from year to year may seem small, the company is chipping away at those diversity proportions.
Here’s how Pinterest’s workforce has changed since 2014:
Women make up a larger percentage of Pinterest’s workforce than they did three years ago, and they also claim more technical jobs inside the company, roles that have traditionally been dominated by men. Women still account for 19 percent of Pinterest’s leadership positions, the same percentage the company had in 2014, but up slightly over the past two years.
Underrepresented minorities — people who are black, LatinX or Native American — also make up a larger percentage of Pinterest’s overall workforce. Minority employees make up a larger percentage of Pinterest’s technical and leadership groups than they did three years ago.
Here’s how Pinterest’s diversity report compares to similar reports from other tech companies. Silicon Valley has been making a push over the past few years to diversify the tech industry for a number of reasons, one of which is to bring in employees with a more diverse range of experiences and ideas. As you can see, Pinterest has a higher percentage of female employees than most other Silicon Valley giants.
Candice Morgan, Pinterest’s head of Inclusion & Diversity, says the company has instituted a number of programs in order to increase diversity, including Pinterest’s own version of the NFL’s Rooney Rule, which requires teams to interview at least one minority candidate for top jobs like head coach. Pinterest’s version of the rule requires the company to interview at least one qualified female and underrepresented minority for each senior-level opening.
Pinterest also has an apprenticeship program to encourage candidates from nontraditional tech backgrounds to apply, and requires employees to complete an unconscious-bias training course in their first week on the job.
The MarTech Minute: Digimind’s Social Wall, Heap’s customer insight platform and more
This week we are seeing some innovative product launches, powerful collaborations and lots of career moves.
MarTech in Motion
Digimind announces its Social Wall
The social listening analytics company adds a data visualization presentation tool. Its first-to-market offering will allow brands and agencies to display simple, up-to-the-minute social listening analytics metrics and more.
CliqStudios.com selects Visual IQ’s marketing intelligence platform
The seller of custom kitchen candid
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Walmart is developing a personal-shopper service for rich moms — and a store with no cashiers
This ain’t your grandpa’s Walmart.
When Walmart paid $3 billion for Jet.com and its founder Marc Lore, the promise was that the entrepreneur would help the retailer appeal to new types of customers.
Here’s the next step in that evolution.
A new Walmart subsidiary, called Code Eight, has recently started testing a personal shopping service for “busy NYC moms,” according to multiple sources, with the goal of letting them get product recommendations and make purchases simply through text messaging.
The target customer of Code Eight is described in an online job listing as a “high net worth urban consumer” — translation: A rich city dweller — certainly not the historical sweet spot for Walmart’s main business.
Household items are delivered for free within 24 hours; other purchases are delivered within two business days. Returns are picked up for free at a customer’s apartment building or house.
Walmart’s startup incubator, Store No. 8, is also working on another under-the-radar project, dubbed Project Kepler. This effort aims to reimagine the in-store shopping experience with the help of technologies like computer vision.
Multiple people familiar with the project tell Recode that one goal of the initiative is the creation of physical stores that would operate without checkout lines or cashiers — in a similar fashion to Amazon’s futuristic Amazon Go store, which was announced a year ago but has yet to open to the public.
A Walmart spokesperson declined to comment.
Taken together, these Walmart initiatives mark a major leap in the vision for the type of businesses Walmart will operate, and customers it will serve, five or 10 years down the line. But since both business strategies are in early stages, there is no guarantee that either will develop into a long-term business or launch widely.
Walmart had previously announced that Rent the Runway co-founder Jennifer Fleiss is heading up Code Eight, but has revealed little to no details about the startup.
Recode has learned that Code Eight plans to eventually charge a membership fee, but current testers are using it for free. The personal-shopping service is currently focused on items in “health & beauty, household essentials and apparel/accessories” categories, according to a job listing. It’s not clear if the startup is sourcing this inventory from Walmart and its subsidiaries, or from outside retailers.
Code Eight has told early users that they can order products simply by texting a photo of it. They can also message with a general request for a type of product they need, and leave it up to the service to pick the specific item for them; customers fill out a survey upon joining that is supposed to help personalize their experience.
One source says that the Code Eight product has the appearance of an automated bot, but seems like a human is actually the one communicating on the other end of the message. That may change over time.
“[W]e set our sights on taking the lead in conversational commerce by leveraging machine learning, NLP, and personalization algorithms,” a Code Eight job listing reads. NLP refers to natural language processing — essentially, how a computer turns a human’s spoken or written request into instructions it can process.
The Project Kepler project focused on the future of in-store shopping is being led by Mike Hanrahan, the co-founder and former chief technology officer for Jet.com, multiple sources tell Recode. It is located in Hoboken, N.J., where Jet is based.
A Project Kepler job listing for a “computer vision engineer” says that the role will involve creating a “best-in-class consumer experience in the physical retail space.”
Amazon’s Go concept uses a combination of sensors and cameras to track what each store shopper takes off of shelves so it can automatically bill them for their purchase without their having to stop to pay on the way out. The store’s launch has been severely delayed, however, with reports that the technology did not work well when the store was crowded.
Walmart is envisioning a similar system that would potentially eliminate the need for cashiers in stores outfitted with the technology. Walmart has more than two million employees worldwide, many of whom work at checkout.
But it’s possible that the Project Kepler technology would be used in new types of store formats, rather than be retrofitted for existing stores. This project is just one of several across Walmart focused on what the retail store of the future should look like, according to a source.
Drug and Alcohol Deaths at U.S. Workplaces Soar
The number of American deaths at work from unintentional drug and alcohol overdoses jumped more than 30% in 2016, new government data shows, showing that the U.S. struggle with a deadly opioid epidemic is migrating to the workplace.
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