Sir Martin’s 9 trends impacting the marketing world

by Marketing ON 19 October 2012

Speaking at The Growth Faculty’s Global Leadership Series in Sydney, Sir Martin Sorrell elaborated on the opportunities of ‘fast-growing’ markets as the corporate gaze shifts from West to East. In his first ever official presentation on Australian soil he spoke trends, digital, the economy and WPP’s strategy, and also sat down for a one on one with Marketing.

Sir Martin’s nine trends impacting the marketing world:

1. The shift in the balance of power from the West to the East

We are basically betting the ranch, and I shouldn’t say that as the CEO of a listed company with a market cap of $17 billion, but we are betting the ranch on that strategy of new markets, new media, consumer insight data, application of technology and horizontality. Everything comes down to technology and geography at the end of the day – everything that you think about, every problem you have, every opportunity you have, comes down to those two issues. But geography is probably the most critical. It’s the geo-manual shift in the balance of power from West to East, that you know about far better in Australia, I would argue, than we in the West. There is still a failure to understand that shift in America, the UK, in France, in Germany, in Italy and Spain.

I urge you to go back and look… China’s and India’s GNP (gross national product) as a proportion of worldwide GNP in the early 19th century was 50%. In 1819 or 1820, when Myson and Wedgwood were trying to attack the Chinese porcelain industry, they were producing porcelain of the same quality… at a lower price. Precisely the reverse of what we see going on now. China and India were 40 or 50% of the worldwide GNP. That is where they will be again, according to Goldman Sachs and others, probably by 2025, 2030. This is back to the future; we’ve been here before 200 years ago.

2. Significant overcapacity in every industry

Everybody thinks that the automobile industry has shrunk since Lehman in 2008 – the big three in Detroit have cut capacity in the US, for example – think again. What’s happened is that the Chinese, the Indians, the South Koreans… Hyundai (the Samsung of the car industry in my view) has started to build capacity to match the decline in the US. In most industries, we see similar situations. Overcapacity is still the issue. So what we do in our industry is of critical importance.

3. The web disintermediates traditional businesses

It disintermediates them with a lower-cost business model, and institutional investors and venture capitalists and private equity companies tend to look at them differently to legacy companies. They always look at volume and hits, or the equivalent of circulation, not of profit margins. People like to work in smaller companies, less bureaucratic companies, technologically-advanced companies. So looping back to that talent question or point, technology companies, web-based companies, are much more attractive in terms of attracting people, particularly out of universities and design schools and art schools and film schools.

4. The power of retail

I don’t have to tell you in Australia the power of retail. Tesco, Carrefour, Walmart are all putting pressure on manufacturers around the world because of their strength at the retail level, and also because of some of the challenges that each of those companies is going through at the moment. That’s putting tremendous pressure on the manufacturers. And when you look at the last 20 years, you go back to 1990, there’s been very little price inflation at the consumer level. So our manufacturing clients have very little pricing power with consumers, and you’ve had an increase in commodity prices, at least until recently, which has put internal pressures on their margins.

5. Global and local

We’re trying to organise ourselves globally, as I mentioned, but also locally. It’s no good multinationals believing that they can sit in London or Paris or New York or Washington and run relatively complex organisations from the centre: there has to be this balance between global and local. The squeeze inside corporate organisations I think will come at the regional level, and you will have global and local organisations much more.

6. Internal communications

The biggest challenge facing chairmen and CEOs is explaining internally what they’re doing, strategically and structural.

7. We’re not as important an industry as we were several years ago

Finance and procurement has become, inside corporations, much more powerful than marketing, and that’s a mistake. Obviously I’m biased, but go back to that differentiation point – the need in an overcapacity world to differentiate themselves. You can’t cut your way to success, or, put another way, there is a finite period that you can cut costs, but you can’t go on cutting forever. We have to get our clients thinking about expanding the top line and understanding the importance of strategic thinking, the importance of big ideas and creativity, particularly in an environment that is changing from a media point of view so much.

8. Government is here to stay

Those of you who think the government is going to recede, think again. Despite what may happen after the US election in terms of dealing with the US deficit, government is going to be with us as a client, as a regulator, as an intervener for a substantial period of time. The only historical precedent that you could find I think for what we’re going through post-Lehman is the 1930s, and it took World War II really to change the balance of government intervention.

9. Corporate social responsibility

Five, 10 years ago, if I was trying to make this speech, certainly there would be a lot of ‘greenwashing’ going on. [But today], if I look at our biggest clients, corporate social responsibility is front and centre of their strategy. And if I quote what John Brown, the former CEO of BP, said in 1999 at Stanford Business School, ‘doing good is good business’.

Social State of Origin: Interstate social media rivalries

by Marketing ON 19 June 2012

Marketers have been warned to tailor their social media strategies to the location they’re targeting, with new data revealing social networking behaviour varies from State to State.

While Facebook is used almost universally by all social network users, Twitter is barely used at all in some States, while LinkedIn and Google+ proved surprisingly popular in certain parts of the country, according to the Yellow Social Media Report published by Sensis and AIMIA.

Commenting on the results, CEO of AIMIA, John Butterworth, counsels brands against adopting a one-size-fits-all approach for the different markets they operate in, advocating a more localised approach.

“It sounds like a lot of work, but you could argue that if you really want to crack this, that’s what you’ve got to do,” Butterworth says. “I’m hoping we will start to see more and more getting away from a centralised one-size fits all approach and start to make use of behaviours at the local level.”

The study, conducted with a nationally representative sample of 1016 Australians, found that 62% of the national population are social network users, a statistic that swells to 70% in Victoria and 71% in the Northern Territory.

Usage patterns and the sites used were found to differ across the country. Twitter is most popular in the ACT, where its reach is one-quarter of the population. The micro-blogging network also experiences strong usage in NSW and Victoria, but has very few members in Western Australia and Tasmania.

LinkedIn use is most prevalent in the New South Wales and Victoria, where around one in four and one in five respectively are members of the service. Elsewhere in the country, membership to the business networking site does not exceed 8% of the population.

Google+ has achieved a reach of 8% of the national population, since its launch last year, and is most popular in Tasmania and the ACT. Facebook is the only social network to achieve universal uptake, with near 100% usage in each State.

The study also found that 68% of social media users read online reviews before purchasing and that they read an average number of five reviews before making a purchasing decision. Butterworth says the influence of online reviews works for both online and offline retailers, making social commerce equally important to both groups. “The results go a long way to demonstrate the power of social media in terms of influencing behaviour… whether you’ve got an online capability or not, social media is very important.”

Offline retail slumps, online localisation hailed as its potential saviour

by Marketing ON 30 May 2012

The next wave of retailing is localisation and tighter tailoring of range to individual communities, according to CEO of digital agency Salmat, Grant Harrod.

Harrod’s comments come as figures for April’s retail trade emerge, showing a decline among traditional retailers of 0.2% month on month and a slowdown in the growth of online trade, albeit to a still considerable level of growth.

While the figures point to a continuing reticence to spend and the impact of the structural shift on offline retail, Harrod told members of the press at an event in Sydney that the ability of digital communication and ecommerce to provide localised offers could be the saviour of bricks-and-mortar operations.

“The next wave of retailing will be around this notion of localisation and re-establishment back with community that can be achieved using an omnichannel approach,” Harrod said.

Using digital methods to maintain a relationship with customers, target deals based on interests, buying behaviour and location, offer dynamic pricing to reward loyalty and select ranging to suit individual communities of shoppers could be a ‘fight back strategy’ for bricks-and-mortar, Harrod explained.

Women’s fitness and leisurewear brand Lorna Jane has embarked on the beginning of a localised strategy, by maintaining Facebook pages for each of its 131 retail stores. The intent is to build a community around each local store in order to offer customers as close to what they want as possible.

Sharing the brand’s experience with social media, its digital strategist Sam Zivot said online sales were now equivalent to the sales of 20 of its bricks-and-mortar stores, with 10% of conversions coming from Facebook. The brand has experienced a 300% increase in web traffic and 400% lift in online sales over the past 18 months, and intends to expand into the US with a localised website and distribution centre in the coming months.

While today’s ABS figures show a 0.2% decline on March, April’s spend represents a 2.4% year-on-year increase. However, this increase is being driven by food retailing, up 3.6% year on year, cafes, restaurants and takeaway, up 8% and other retailing, up 2.8%. Discretionary spend sectors of clothing and footwear, department stores and household goods dropped by 1.5%, 3.1% and 0.8% year on year respectively.

NAB’s Online Retail Sales Index shows that online sales grew by 16% year on year in April, compounding the pressure placed on traditional retailers not executing an omni-channel strategy.