South Africa: The Retail & Brand Landscape

As some of you may already know, I’ll be traveling to Cape Town this week for the 2016 Global Summit of the Consumer Goods Forum. This year’s theme is “Seizing Opportunities in the Face of Disruption,” and I think that South Africa provides a perfect setting for the topic at hand. The South African market is both young and ever-evolving, and I’m excited at the prospects for innovative disruption in Africa’s second largest economy.

South Africa has a tremendous kinetic potential both within its borders and spreading out to Africa as a whole. With its high urbanization rate, both current and projected, and a quickly growing middle class, South Africa is primed for continued expansion. In fact, some of the strongest evidence of this is SA’s 2011 admittance into what is now the BRICS coalition alongside Brazil, Russia, India, and China.

Framing this potential is South Africa’s unique patchwork of traditional and modern outlets, which are ripe for disruption and innovation; especially in the ways we can apply eCommerce and other methods to shift the status quo away from traditional commerce. Through various sources I tried to educate myself on what is happening with retail in South Africa. 

The traditional market is underpinned by the ‘Spaza,’ a uniquely South African concept that originated from the necessity of providing goods to residents dealing with the sprawl of the townships in the country. A small, informal convenience store, generally run from the owner’s home, these shops are spearheading huge growth in SA’s traditional trade sector, leaping from 31,000 outlets to 134,000 in the past two decades. They offer a built-in location convenience that few other outlets can match, and the numbers are clearly bearing this out.

Table Top

Besides the growth evidence, studies show that consumers shop at spazas, on average, four times a week. While they’re still using supermarkets for total shops, they generally only do those large buys once a week, showing the huge frequency advantage traditional markets maintain. Also, studies show that the average Spaza consumer, faced with the stores’ often limited selections, tend to decide very quickly on purchases. They are far more likely then, to purchase established brands, which creates a difficult situation for new brands attempting to gain a foothold.

Modern trade outlets are showing steady growth however, with over 4,500 outlets nationally; and 70% of SA consumers using them for larger shopping trips. But close to 50% of shoppers are still using the spazas for small, frequent trips and top-up shopping.

What can modern trade stores and brands do to disrupt this market paradigm and reposition themselves to compete?

We know that modern outlets offer both wide varieties of goods, and the ability to purchase those goods in bulk to deliver better prices to the end consumer. This will always be the case, but it has much more novelty in an emerging market. And while modern outlets will always struggle to compete with the proximity convenience of traditional stores, it’s important to note that SA internet accessibility has increased nearly 4% from last year, making it much easier for consumers to make online purchases and pre-decisions.

It also allows brands a way to create awareness that will translate to sales both in traditional and modern markets, while giving consumers a new way to interact with both the brand and the markets. While only about 52% of South Africans have internet access, this will only increase. These first-time web consumers will be able to take advantage of eCommerce at an ever-increasing rate, while being highly sensitive to novel promotions and concepts that web access can bring.

If modern outlets want to compete with traditional markets, they will have to appeal to this rapidly growing group of shoppers. By leveraging emergent internet capabilities, they can create convenience that rivals the spazas while offering options that can’t be matched by a corner store.

Likewise, the smart play for brands is to utilize the web to get out ahead of established brands that have no presence outside of traditional markets, creating a brand recognition that will literally have consumers asking for them by name, in both spazas and modern outlets.

With such a large potential for growth, there’s going to be plenty of room for both traditional and modern outlets moving forward. However, only non-traditional outlets have the capability or wherewithal to utilize disruption to create a jumping-off point for competitive convenience and focused brand appeal. To miss this opportunity could be devastating.

I look forward to experiencing this ever-evolving market place for myself, and can't wait to hear about South Africa from Zelda La Grange who served in Nelson Mandela's government & the legendary South Africa team's Rugby captain François Pienaarat at the conference.

Era of Chief Marketing Technologist

I recently had the pleasure of reading an interesting article from SapientNitro covering the emergence, evolution and paradigms of Chief Marketing Technologists. I think it’s great to see people diving into this exciting new role, and this article certainly validates the need for the industry to move toward CMT leadership.

As I’ve advocated before, companies who crack the code on merging the roles of CMOs and CIOs into a new super-ordinate CMT role fare far better in our ever-changing marketplace. I think there is lot of synergy in thinking through make-move-sell-market through the lens of this combined office. Having a distinct CIO and CMO role in the future especially in consumer’s goods and retail industry will inhibit success in this digital world.  I would espouse combining both into a CMT role. Also quantifying the qualities that a successful CMT must embody is anything but simple. I love the seven archetypes they’ve created in this article, and as I’m sure you will see, the breakdowns are extremely helpful when evaluating CMT candidates.

These archetypes truly showcase the diversity of backgrounds companies are turning to when looking to fill the CMT role today, and they demonstrate that, currently, there is very little synergy in the backgrounds of CMTs. Honestly, I don’t find this to be very surprising, given that we are merging two areas of expertise that currently have very different degree and career paths. It’s this lack of integration that makes SapientNitro’s new CMT university-level curriculum exciting because it is something sorely needed in today’s education landscape.

I continue to believe that if scoped properly, the CMT has the power to drive disruption in the marketplace by nimbly reacting to the ever-expanding variety of mediums we must operate in, while creating new sources of revenue around brands beyond their own products, such as subscription and content services, all while dramatically reducing the amount of assets required to do so. Most important, CMTs are perfectly poised to harness the true power of consumer behavioral data that we all have at our fingertips and bring it to bear, ultimately liberating us from the flaws of antiquated data-gathering methodologies.

We live in exciting times, and I hope you are as eager as I am to see this evolution of marketing function. Let the of era marketing technologist begin! 

Recognizing potential is not enough

Everywhere I go, I find myself reflexively analyzing the marketing strategies and tactics around me. Much like a filmmaker at the movies, it’s hard not to notice the details under the surface and dive into a quick game of 20 Questions with the first person I see.

On a recent trip to Mexico, I couldn’t help but notice a lack of technology necessary to fully tap the next big thing for that region: e-commerce. With the increasing penetration of social media in Mexico, Amazon is recognizing the potential for tens of millions of new customers and is initiating marketplaces targeting Mexico City. However, aside from the major roadblock of scarce Internet access, the Mexican market is also facing the hurdle of roughly only 16% of the nation’s 120 million population owning credit/debit cards.

I also noticed a striking similarity in marketing content compared to that of the United States. It’s almost as if ads were merely direct Spanish translations of ads from the U.S., which in my mind is unacceptable. Culture, target markets and purchase triggers are drastically different in Mexico, and marketing should be tailored accordingly. A recent Path to Purchase study took us through the journey of the average shopper in Mexico and showed a deep-rooted existence of impulse purchases. While list-based shopping still has a traditional presence, there is a sense of collectivism infused into it, making the shopper experience more of an event than a chore to check off the day’s to-do list. The most striking example of this is the fact that when buying kid-friendly products, Mexican consumers tend to only purchase items that can expose their children to their heritage.

This was an eye-opening trip that could be summed up in one word: potential. There is a tremendous amount of growth potential in Mexico, not only with technology and online retail but also with the marketing we can and should be doing right now. I challenge my fellow marketers to listen to all the research we have available to us, and to use it to innovate beyond the mediocre, so that we’re truly unlocking potential based on culture, and not just going through the motions.  

Industrial Revolution 4.0: This revolution will be streamed

(Observations from the 45th World Economic Forum)

"The only thing constant in the universe is change."  

While this is a phrase most notably used in physics, I would argue that it just as accurately describes the reality of our business and marketing landscape. 

As we embark on what’s being considered the fourth industrial revolution, the prescription is clear: don’t just brace for change, embrace it. This shift is expected to bring so much change that even Professor Klaus Schwab (WEF Founder and Executive Chairman) stated in an article he wrote explaining the Fourth Industrial revolution, “business leaders and senior executives need to understand their changing environment, challenge the assumptions of their operating teams, and relentlessly and continuously innovate.”

Perhaps before we go into the Fourth Industrial Revolution and its implications on business and humanity as a whole, we should take a step back to look at the changes the previous industrial revolutions brought:

• The first industrial revolution occurred around 1784 and used steam, water and mechanical production equipment to drastically improve and increase the use of machines for productivity and manufacturing.  
• The second industrial revolution occurred around 1870 and used electricity to further increase mass production, resulting in the shift to a division of labor.
• The third industrial revolution occurred around 1969 and integrated electronics and information technology (IT) to automate production.
• The fourth industrial revolution is a further evolution of the third, which began at the transition of the new millennium and is characterized by the increasing fusion of our physical, digital and biological worlds.

And while some are scared of technology itself, especially the idea of fusing it directly into our daily lives and possibly even our biology, many people are more terrified of the change it represents.  

Humans vs Machines?

Erik Brynjolfsson (Director of the MIT Initiative for the Digital Economy) commented on this fear at the WEF, stating that “the biggest misconception I’ve heard here at Davos, and recently, is this idea that technology is going to come for all of our jobs and there’s nothing we can do about it.”

This fear is most evident in those whose industries have been affected by the disruptive nature of technology within their established business models. “Black Tuesday” earlier this week in Paris is a prime example. Taxi drivers blocked roads and set fires to protest the disruption to their industry by new entrants enabled by technology.

Of course, nobody likes to have their livelihood threatened, but the reality is that evolution is inevitable, and more importantly the advent of the fourth industrial revolution and digital technology will greatly enhance our lives overall at a societal level.  Sure, there will be growing pains, but ultimately the consumer will win in virtually every aspect, from saving money, thanks to more efficient supply chain management and production schedules, to enjoying highly-customized and more relevant user experiences across more products, services and devices.

Lean management taught us to remove the waste (muda) from our processes and organizations, and the digital synchronization of virtually every piece of machinery, from warehouse equipment to the refrigerator in your home, is allowing us to track, remove, and efficiently refine those aspects of waste that have been occurring in both our industries and personal lives.

The Human Touch

In addition to the technological and innovative side of the fourth industrial revolution and exponential technological advances, the WEF also focused on the human factor, most notably its impact on jobs, society and culture.

Canadian Prime Minister Justin Trudeau delivered a speech in which he stated “we don’t want technology simply because it’s dazzling.  We want it, create it, and support it because it improves people’s lives.”

And to that effect, will the fourth industrial revolution be a net gain or loss to society and humanity in general?  That all lies in the eye of the beholder.  A forum report released at the meeting predicted that by 2020, 5 million jobs will be lost as a result of technological changes.

The driverless car seems to be an emerging technology that many of the biggest brains and brands have their attention focused on, but what will be the unintended consequences?

For we business leaders it seems to be an astounding leap forward, increased efficiency in our shipping times, reduced costs and less need for risk mitigation.  But what about the truck driver who is replaced by a driverless vehicle? Or do we look at the increased efficiency and growth potential as an opportunity to create different jobs, or more jobs in different arenas?

Again, evolution is inevitable. It’s what we do with it that really matters. 

A Marketer’s Dream

For marketers, the digital and informational impact of the fourth industrial revolution is limitless.  

Rather than the old world tactic of putting faith in small focus groups to accurately represent the sentiments of the larger population (which they never truly do based on the law of large numbers), technology is emerging that enables us to gather information directly from the consumers themselves. Want to know what each individual consumer truly wants, likes and, most importantly, purchases? That crystal ball is at our fingertips. 

But the other side of that same coin will be the ability for nearly every consumer to have a customized experience with their goods and services catered specifically to their needs and desires. This luxury once reserved for an elite few will be accessible to increasingly more individuals on the socioeconomic spectrum, and will likely be one day be available to all.

(R)evolution

In the end, we know that it’s poor business practice to stand in the way of progress.  There are countless business school case studies depicting the fall of once mighty blue-chip corporations who thought themselves too essential in their customers’ lives to need to innovate or evolve.  

Maybe they thought the “poorly-positioned” new entrant to their industry was nothing to worry about, or were simply too set in their ways to invest in innovative technologies or to rethink corporate culture philosophies. Whatever their motivation, they are the focus of case studies for this reason: refusing to adapt to evolving technologies and cultural shifts never ends well for a company.

If the 45th World Economic Forum taught me anything, it’s this: the fourth industrial revolution is here, and it’s our job as the business leaders now to increase our output of innovation and thought leadership for the betterment of our future.

What we choose to do with these newfound technological advances is up to us, but we all share the same responsibility: to use them wisely and make the best choices, not only for our bottom lines but also for the good of our fellow global citizens. After all, no revolution happens without the people.

Snapchat. Not just an app, a tipping point

Once regarded as simply a platform for teens to share content they would rather not have linger, Snapchat looks to have finally broken out of its adolescent confines to move from niche social network to mainstream platform. Older generations are now snapping away their day, too, making a real impact on Snapchat's growth. “While the service has grown 59 percent in the last year to 40.3 million US adult users (as of November), it has grown 69 percent among people age 25 to 34 according to ComScore. Nearly 27 percent of US adult web surfers this age are on it" (Wired).

Why did teens take to it so quickly while adults took baby steps? Personally, I think that this is due to the fleeting nature of the platform. Our generation is the archive generation. Pictures were something that required an investment of time, effort and money. Remember the ritual of dropping film rolls off at the drug store, and then waiting a few days to pick them up? And paying for them on top of that? I think that commitment to our content has translated to the digital world. We want to save everything, backup everything. But today’s generation? Pictures, videos and other content are created and consumed on demand. Like life moments, they are simply building blocks that make up their day. When my daughter makes brilliantly funny snaps, I ask her if she's OK with them disappearing after 24 hours from her Snapchat Stories. She just shrugs and says “I’ll make more.” 
 
While the thought of losing great content admittedly makes me twitch a little, this is the reality of the next generation of consumers. Content is dynamic; it is on-demand, real-time and completely integrated into their lives. It’s not “online” or “offline” anymore. The divisions are not that distinct. I think it’s time we call it “inline." Technology cannot be separated from the moments that constitute our lives. It is our lives. As marketers, this is the new reality we need to face. We can tap into our customers’ lives as a useful, albeit fleeting experience, or rest on the sidelines trying to divert their attention and archiving our decline.
 

Be the game

In light of all of the innovations in communications and marketing technology, the idea of a sports sponsorship may feel passé. The reality, however, is that no one can deny their effectiveness. So why is this? Why after so many years and so many changes in the marketing landscape does this marketing staple still hold such sway?

The answer is simply that sports are inextricably intertwined into the DNA of American culture. 

America is a nation of sports fans. Even in this technology-driven world where entertainment, news and other vital information is given to us instantaneously, sports remains the last bastion of appointment television and the purest, most authentic form of reality TV. In fact, a recent article in Ad Age points out that sports account for 37% of TV ad spending.

While some fans’ basis of enjoyment of sports is purely financial, often in the form of wagering or fantasy league participation, for most it’s more than that. Sports provide an escape from our daily routines and stresses. When our favorite team wins, we win. This tribal aspect of sports is what I believe makes the biggest impact on our lives. It provides a reason for us to gather with family, friends and even strangers. Celebrating the fruits of our team’s victory (or commiserating after a loss) is always better with our tribes. 

The feverish loyalty of sports fans can be attributed in large part to their direct connection with the team. Teams represent our hometowns, states and schools, so for many fans, when their team takes the field, it feels like they are walking out onto the gridiron alongside them.

When we think about these experiences, or any other social gathering, food and drink provide a social anchor or central hub for the group, but game day spreads take it to another level, perhaps due to the infectious sense of competition surrounding sporting events. 

These gatherings have always provided Frito-Lay with an authentic reason to join in on the game day fun. To truly integrate into the pack, we’ve had to bring something to that spread – something that would have meaningful impact for the fans as well as enhance their game day experience. 

This year, we’ve introduced the Party Like a Pro promotion. Fans who bring Tostitos to their game-watching experience can collect points, bid and win football tickets and trips every 15 minutes during Thursday night games all season long!

For this promotion, we created a unique marketplace, giving fans even more chances to win when they Party Like a Pro. From gaming prizes like Xbox One and EA Madden NFL16 bundles, to autographed items from NFL players and legends, every prize was carefully selected to fuel fandom and encourage camaraderie throughout the NFL season. 

The mechanics are simple: Collect codes from Tostitos products, enter them at Tostitos.com to bank points, and use those points to bid on over 250 auctions throughout the NFL season to win tickets to regular season games and exclusive NFL experiences. Points also double as currency for the online marketplace, and every code redeemed for points gave fans an automatic entry to win the grand prize: a pair of tickets to the Super Bowl! Complete details are available at Tostitos.com

While this promotion is still in market, initial results show that sports fans love it! In the first month of the program over 9.6 million points have been banked, with participation continuing to build momentum. At the risk of sounding overly confident, my belief is that the early success of this program has been due to its seamless integration with the activities that make watching sports so electrifying. Party Like a Pro combines the excitement of uncertainty with the comfort of security, as fans never know if they’ll be one of the lucky ticket winners, but the points they accumulate have guaranteed value in our marketplace. Membership in the marketplace provides a new channel for fans to connect and compete with one another, adding to the sense of camaraderie, while the chance to win big prizes ups the stakes of every Thursday night game.

Only time will tell if this program is one for the record books, but if I had to place a bet, I’d put my money on Tostitos pulling out another great win.  

The Super Bowl livestream ad bundle. All in or wait-and-see?

I tweeted earlier in the week about the decision by CBS to livestream Super Bowl ads and how this represents the first time a network has required advertisers to purchase an online spot along with their broadcast spot since livestreaming of games became available in 2012. 

I believe that this is a step toward finally recognizing that TV time has evolved to becoming a shared experience with the smartphone and tablet, and that all networks and advertisers need to adapt to the multi-screen world that consumers live in. It is also clear that this bundling is a smart revenue tactic by CBS. As an advertiser who has been part of the last nine Super Bowls, I have mixed feelings about the bundling move and the fact that the advertiser can’t opt out. According to Variety, NBC’s online stream of this year’s game attracted 2.5 million unique viewers. While this number is large, when put into the context of the 112.2 million who tuned into the broadcast, this audience size was miniscule.

My question for CBS and other networks is if you believe in the multi-screen world the consumers have migrated to, then why not mandate and sell all your TV content bundled with online spots? As an advertiser I want to pay to reach the total audience across multiple devices on which the content is consumed. I realize that the Super Bowl bundle represents a symbolic leap toward this new paradigm for content, consumption and reach, but unless the networks can apply this consistently across everyday programming, I’m afraid it will remain simply that. In other words, you’ve got the ball - are you going to run with it?

Seek innovation, not perfection

Later this week, I will not be sitting here: 

Instead, I will at the Cannes Advertising Festival observing, learning, and bringing lessons back from the most innovative work in the world to inspire my marketing department.

This will be my first time attending Cannes, so naturally I’m very excited about it. 

Beyond the rosé and the beaches (I hear that’s what they do in France, but I don’t drink) what I’m most excited about are Frito-Lay’s submissions to this year’s festival -- especially because they are all ideas borne out of a personal philosophy of mine:

“Imperfect action trumps thoughtful inaction.”

It’s a maxim that isn’t often followed in the marketing industry, but should be. Don’t wait around to make something perfect when you’ve got something great that you can run with today. 

Think about it. You usually know whether an idea is going to be great or not the minute you hear about it. So why spend countless hours iterating, perfecting, tweaking and over-thinking when you can perfect it as you go? The marketing landscape is littered with great ideas that never saw the light of day because perfection was the team’s goal, rather than success. 

You can’t have success if you don’t put something out there. 

I’ve talked about the 70/20/10 principle on this blog before. Originally covered in the Harvard Business Review, the principle refers to a balanced approach to innovation where 70 percent of a company’s efforts should be focused on core activities, 20 percent to adjacent ones (validated risk), and 10 percent towards transformational ideas. 

At Frito-Lay, we have applied this principle to marketing, and we have empowered our agencies and the marketing department to bring more 10 percent ideas. These are ideas that aren’t fully formed nor perfected, but they are different, game-changing, and great the moment you encounter them. 

I charged myself and our leadership team to approve more of those ideas and charged my teams with getting them quickly out into the world once approved. Modern marketing departments need to be full of idea makers, not idea iterators. 

This is how you are going to win in the digital world. Everyone is a creator. There are no boundaries. 

We are fortunate to have agency partners like Goodby Silverstein & Partners, OMD, TMA and Ketchum who also fully embrace this new world – they did it with Crash the Super Bowl early on – and they continue to do it as we explore new marketing territory. 

The most validating aspect of all this is the fact that all of our submissions to Cannes were 10 percent ideas. 

Enjoy a few of them below, and look out for more missives as I post from Cannes in the coming days.

Tostitos Chip Kelly 

Every Chip Gets a Dip Tostitos Campaign. Watch the ad here.

Doritos Boldest Radio

Cheeteau, the wonderfully cheesy fragrance that Chester Cheetah graced the world with on April Fool’s Day. See the ad below; see the Cannes Lions video entry summary here.

Building brands in a digital data world...welcome to era of the marketing technologist

Everyday as a marketer I wake up to a hyper-fragmented audience -- multiple social platforms, the ability to skip past our 30 sec ads, a more savvy and de-sensitized consumer. It's arguably getting harder and harder to reach consumers through traditional channels, and our appetite for technology in all forms, from digital TV to social media to smartphones is taking the blame. However, it's this same technology that has created data that has led to more unique ways to connect with consumers, and enabled the creation of immersive experiences that cross over from the digital to the physical world. These are the experiences that transcend simple awareness and win a share of heart and soul, which is what we really need to impact their consideration.

My blog aspires to explore and navigate this changing world. I will post my random thoughts on consumer, creative, strategy, data & analytics, business & life ...contextually timed. I am as anxious to share as I am to learn, so open door on feedback to my posts.