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Managing Marketing: Marketing, Investors And The Economy, Stupid

Brian Wieser

Managing Marketing is a podcast hosted by TrinityP3 Founder and Global CEO, Darren Woolley. Each podcast is a conversation with a thought-leader, professional or practitioner of marketing and communications on the issues, insights and opportunities in the marketing management category. Ideal for marketers, advertisers, media and commercial communications professionals.

Brian Wieser is the Global President of Business Intelligence at GroupM and he discusses the state of the fragile global economy and the impact of an economic deceleration on the advertising and marketing category. He also looks at where the growth in media spend is currently coming from and the changing face of global media.  

You can listen to the podcast here:

Follow Managing Marketing on Soundcloud or iTunes

Transcription:

Darren:

Welcome to Managing Marketing, a weekly podcast where we sit down and talk with marketing thought leaders and experts on the issues and topics of interest to marketers and business leaders everywhere.

Today I’m sitting down with global president of Business Intelligence at Group M, Brian Wieser. Welcome, Brian.

Brian:

Thanks for having me, Darren.

Darren:

Welcome to Sydney. What brings you to Sydney on this trip and why did you bring the weather from the north west of the USA?

Brian:

That’s why I’m here; I thought you would appreciate a bit of wet weather that we experience and allows us to be so creative and make wonderful coffees and beers and wines and all that stuff.

Not that you have that here in Australia. I’m kidding; it’s lovely here.

Darren:

But what does bring you to Sydney because it is a long way across the pond called the Pacific Ocean.

Brian:

It is a little bit of a trip. The AANA had their conference and that was the occasion for me coming here. And it’s really important to actually get out and see some of the local regions and markets and understand what the key issues are. It makes the work I do deeper when I can.

I don’t travel that much so we’re selective about which events I come to. This seemed like an important one to come and visit and therefore I did.

Darren:

It must be interesting, from the point of view of seeing the numbers that are coming from around the world on the measures of our economy because there are definitely mixed messages even in Australia.

Consumer confidence index is down, retail, construction is down, mining is up, unemployment is sort of static, the dollar has been falling. These are all different economic measures. It’s very hard to get a sense of what’s happening except that everyone seems to be saying the R word is pending.

What’s your read, not just from an Australian point of view but the broader point of view?

Brian:

At a global level, the best characterisation of the economy around the world is ‘fragile’. It’s really, really fragile. By most standards, as you say, most things are actually pretty good but all the attention is going on trade wars, what Brexit means for the UK, Europe and the rest of the world, trade wars with other countries that don’t involve the US and the fact that the economic cycle is so long into a growth cycle that there is an inevitability of a downturn.

There are always factors that are going to weigh on the economy at some point and there is, naturally, a reset that will occur. That’s just a normal part of an economic cycle.

Darren:

It’s just part of the boom and bust that happens naturally in economies?

Brian:

So far that’s probably true. It can be healthy to have a slight downturn, a correction. But that’s why they call it a correction; there is an eraser—let’s do it over. Which is very different to say the global financial crisis, which Australia might not be aware of but it happened everywhere else.

Darren:

Australia avoided recession. That’s why it’s called a global financial crisis whereas in the rest of the world it’s called a recession because economies actually went into recession.

Brian:

It was desperate times in many countries. You don’t want that. That obviously is really destructive. The global economy is fragile and it’s safe to say, one should assume that deceleration at minimum is occurring. And we can call that a recession if it meets certain technical criteria.

Darren:

Two quarters of negative growth.

Brian:

I think when we’re talking about economic factors and trying to compare them to the data points most marketers should care about, we should really look at nominal year to year growth rates, not sequential real growth trends. That’s inflation adjusted and it captures some seasonality in those numbers.

You want to be able to compare apples to apples numbers: what’s your growth as a business relative to the economy whether nominal GDP or some other metric. And when I look at it that way we usually see deceleration rather than decline when we go into a downturn.

Most downturns you could say have negative sequential real growth or decline but that’s not really what’s happening (on a nominal basis): It’s deceleration.

Darren:

So the pace of the economy is slowing.

Brian:

Yes, but still growing.

Darren:

That’s interesting because we have seen over the last 6 months, decision making is becoming longer. There’s still a decision at the end of it, it just takes people a lot longer to make decisions around spending money, which is part of deceleration.

Brian:

That’s true and that’s bad for the companies who are slow in making decisions and good for companies that can make decisions faster.

Darren:

In many ways all of these economic measures, indices are actually capturing behaviour which is underpinned by attitude. When we see things like consumer and business confidence –these are actually the leading edge of what we often see as the hard numbers of behaviour.

Brian:

It’s true. We can talk ourselves into a recession and we can talk ourselves into growth. These are absolutely true things. That said, sometimes economies become over-extended.

Darren:

A bubble.

Brian:

Yeah, a bubble. So forget about talking ourselves into a recession; these things are actually necessary to bring the economy back to a foundation from which future growth can occur.

Understanding the global media market

Darren:

Brian, you presented at the AANA quite interesting numbers around advertising spend. Back at the global financial crisis we saw cuts of 12% in the US, on average 9% of media expenditure. But you’re seeing in the numbers that a small group of companies are significantly contributing to growth.

Brian:

Yeah and this is the thing that few appreciate. There are 8 companies that we can identify who spent last year 26 billion US dollars. So, take Facebook, Amazon, Netflix, Google, eBay, ISC, Uber, Booking.com—26 billion dollars of paid advertising last year.

If we added Tencent, Alibaba, and JD in China—that’s another 10 billion dollars. This is them buying advertising not selling; buying.

Darren:

That’s right.

Brian:

And it’s not difficult to find others who are spending 100s of millions of dollars each. Very quickly you get a few dozen companies who account for 10% of all advertising, and importantly, probably 40 to 50% of the growth.

So, these companies have, firstly, displaced companies that came before them in many instances so, Expedia replaces a Thomas Cook or a travel agent. There’s an element of displacement that occurs but as these companies mature their growth rates will eventually mirror the economy’s growth rather than the 25 or 30% growth rates we’ve been seeing in terms of their expenditures.

So, the fact that they must necessarily decelerate their own spending will contribute to global deceleration.

Darren:

It’s so interesting the number of CEOs for instance who will often challenge their CMO with stories about start-ups and technology companies not relying on advertising. They get growth from having great products and people wanting the technology.

Brian:

They’re all spending on advertising.

Darren:

Isn’t it interesting how all of them get to a point, usually post IPO, where suddenly they’re responsible for delivering real revenue and head towards (god forbid) profit and suddenly the advertising strategy becomes an essential part of their marketing strategy.

Brian:

It is possible to build a business with very limited advertising. There are examples of this occurring. A fantastic, unique product paired with word of mouth can absolutely get you there. It’s just pretty rare.

The vast majority of direct-to consumer businesses that have emerged over time—when we say they have growth hacked, what we mean is they’ve found audience segments to target narrowly on Facebook, Google, and various related properties, and they’re spending huge shares of their revenue on advertising.

There’s nothing wrong with that but to be clear that’s been a core part of the strategy. Just because that’s how other (small) businesses have grown it doesn’t mean it’s not possible (for large businesses to do the same). You could choose to be a marketer who spends nothing on advertising and say, ‘tie your hands behind your back; now win this race’.

Darren:

I absolutely agree except that it does explode the myth that these companies have actually grown exclusively without advertising.

Brian:

I don’t think it’s true. They’ve all relied on advertising to some degree.

Darren:

In some ways it is part of the mythology that we’ve seen grow up around start-ups right up to the IPO stage because they don’t usually invest a lot of their investor’s money. Once they get to IPO and they’re on a stock market and there’s a share price that can be monitored, we get the quarterly reporting.

Brian:

The great thing about this recent boom in IPOs, from my vantage point, is that a lot of these companies have had to disclose financial statements. And there are some who spent very little on advertising. Pinterest, I think, spends very little. They’re now starting to spend.

Square, Peloton, Chewy; these are large advertisers and most of them, once they get past the first couple of years, they’ve absolutely invested in advertising.

The role of advertising in short and long term growth

Darren:

One of the issues for marketers, and we’ve heard it quite a bit, around the change in the CMO in a few big companies to the chief growth officer and then flowing onto agencies is this focus on ‘is it brand building or short-term sales and revenue or both?’

What are you seeing from an investor point of view the measures that we have around success? What is that conundrum that seems to appear for marketers? Do I do short-term sales? Do I build long-term growth?

Brian:

It’s all possible. I think different marketers are making different choices. It’s certainly been written about widely enough. The consequences of 3G dominating the trends in the packaged goods industry have concentrated minds around more short-term oriented metrics until very recently.

Darren:

That’s 3G Capital?

Brian:

Exactly: they control Kraft-Heinz among other companies. They also control Burger King which is doing stellar advertising. So it’s not to say they weren’t investing in creativity and brand. But the spirit behind what they were doing was causing fear in the hearts and minds of packaged goods companies around the world; fearing a takeover from someone else if not 3G.

And that in turn led to more short-term thinking, budgeting and short-term everything. We’re kind of past that. It’s not to say it’s not short-term thinking but whether the top of a company is taking a long-term horizon in the choices they’re making; that influences these questions you’re calling out.

For all the knocking investors take for being very short-term oriented; they only have a very short time horizon when they don’t trust management (of a company). And if the management team – and by management I mean CEO, CFO -can’t persuade investors they should be trusted they’re not going to get a very long leash. And then that’s going to play itself out in shorter term goals (that investors set).

Darren:

We saw that with Jeff Bezos who would sit there and say to his investors, ‘you are not getting any returns because I am going to invest everything back into growing this business’. So this is a long-term capital growth gain, market domination game rather than a short-term return on investment.

Brian:

I think they built a brand unintentionally from that. Read The Everything Store by Brad Stone or any of the histories of Amazon; there was almost a disparaging view towards marketing and advertising. I think over time he could appreciate its importance and role for Amazon and multiple brands.

But the fact that they just kept building their business and focusing on what they were focusing on and kept a long-term orientation in all of their business, all of the product as a consumer experienced it produced a brand that means something and we know it when we see it now.

Darren:

To go from what’s seen as a technology brand like Amazon to more traditional brands. Unilever is an interesting entity because it had a long-term CEO, leadership that had long-term vision and largely protected the business from the short-term. They obviously met the requirements but took a much longer-term view of building brands and building their market share in different markets.

Then compare that to a P&G where we’ve read a lot about cost-cutting, moving away from traditional advertising expenditure and putting more into driving revenue. I think they famously said, ‘we’ve cut 300 million dollars in the US and driven sales at the same time’.

It’s an interesting juxtaposition because they’re two companies that are long established and yet quite similar in the category.

Brian:

From my observation, looking at them mostly externally, I think you have to look at the brand level. They both have made similar choices in terms of reducing spending on services certainly (public statements to that effect) but I think they both have long-term orientation around the brands.

But they and every large company with multiple brands has to make the choice about how much do you leave to the brands to build their own brand and own categories. From my vantage point they both have very similar strategies. Good or bad, they have basically said get creative about how we use our money and let’s not assume that anything we did last year is what we need to do this year. So again, I see more similarities. But that’s very much from trying to look at them from the outside.

The changing role of (news) media globally

Darren:

Of course, we’re both observers from external. I wanted to also talk about how media has changed. From my perspective, media was traditionally (until this century) something that was controlled on a market by market basis and some of that was driven by politics.

Things like being a newspaper publisher was a benefit that came with responsibilities. And television licences were things that governments bestowed on individuals. It would be given within a particular geography. So, in the US, Australia, Singapore, government has a much bigger influence over media.

We’re now living in an era when companies are calling themselves technology that don’t really acknowledge those boundaries anymore and they’re not really held accountable as media companies because they say they’re not media companies. I’m talking about Facebook, Google and the like.

Brian:

May I interrupt this thread a little bit? I’m indirectly going to push back on this a bit. If you can channel back to when you were a kid or a teenager, can you name a few television programmes that stand out top of your mind?

Darren:

Oh, Adam’s Family, Get Smart, Gilligan’s Island.

Brian:

Oh, where did those come from?

Darren:

All from the US.

Brian:

Interesting—that’s my point. As a Canadian, I would have rattled off a very similar list of American programmes. It’s interesting because there’s a different way that you have global presence.

Darren:

That’s the content though. The content is global, except the news, politicians, and sports. Politicians are particularly nervous about individuals controlling the news. And then television started creating 24 hour news channels and this has become incredibly influential in the politics of a country.

So, if you’re a politician you want to control or at least have some influence over the messaging that’s being sent out about your leadership, policies and style. That’s what I’m talking about. Yes, entertainment is entertainment; that’s the bit where the advertising gets spent.

Brian:

But the foreign cultural influence in any one country.

Darren:

But when it comes to actually influencing things like politics. And Facebook and Google have been seen and implicated in influencing those things, or at least facilitating the influence. But they’re not accountable as media companies because they’re not media companies; they’re technology companies.

Brian:

True. Although wasn’t this a concern that the Americans and the British had about the Murdochs?

Darren:

Absolutely.

Brian:

Obviously, there are differences. Globalisation has impacted media in different ways over time. I’m just trying to make the point that it’s influenced markets for decades. You can see it going in two different directions. The fact that Facebook and Google are global entities and that the policies they set in Silicon Valley can influence the rest of the world.

At the same time look at what Netflix is doing with respect to investing in local content in countries around the world. It’s probably safe to say that as Amazon continues to invest in what it is doing it will also have more content.

It is an interesting distinction to say that the (for want of a better word) thoughtlessness that goes into automatically generated news curation platforms. And when I say thoughtlessness I mean there just is no human. It can produce meaningful and often negative effects and that’s a consequence of thoughtlessness.

At the same time, globalisation means there are more resources to plough into productions that might end up having more local flavour. It goes both ways.

Darren:

I think it’s particularly on the political agenda from news media because in a democracy the media is considered the 4th pillar of democracy. It is in Canada, Australia, and the US.

Brian:

Used to be.

Darren:

Has it changed?

Brian:

It still is obviously critical to a functioning democracy but one of the big issues and this is where Facebook, Google and others have just had this consequence on societies because budgets have almost entirely shifted into digital because digital media, functionally, serves the same goal for the most part.

If you’re a large brand it satisfies the goal of engagement with a narrowly defined audience. And from a small advertiser perspective, it’s a way to spend $1,000 at a time and micro-target because you have to conserve your resources. So, digital satisfies those goals better than print ever did.

Owners of print did not initially invest heavily enough into it. Naspers aside, you could argue South Africa so their revenue base evaporated from advertising. And print never operated as a charity so subscription fees were not enough to continue making the business what it was so it’s had a negative impact on the willingness of publishers to produce the kind of news they used to.

So, we have this term ‘news deserts’—I don’t know if it’s such an issue here.

Darren:

So not sweet and fulfilling?

Brian:

No, the opposite. In a robust large market like the US—it’s not like Australia—a small number of cities that are the vast majority of the country. The US is a much more rural country than a lot of people appreciate. It would take 100s of newspapers to get to the majority of the market and the problem is that for most of them, any city that used to have 2 newspapers has or will end up with at most, one.

Darren:

Or none.

Brian:

And any city that has one will have either a couple of days of the week or none. Unfortunately, that’s just the reality. It’s hard to say what the right answer to that is. It coincides with the fact that Facebook and Google have basically absorbed the demand for advertising. And let’s not forget Craig’s List.

Darren:

It ate up what was called the classifieds, the rivers of gold for these publications.

Brian:

Absolutely. Craig’s List, with whatever intentions—largely good, I think, has really crushed the newspaper industry in many countries. It’s not exactly a great situation. If there is any good news at least you can see that there are consumers who are willing to pay for printed content.

When you look at some of the top tier national newspapers, like the New York Times, Washington Post, Wall Street Journal; they’re doing well in terms of getting people to pay. But even a Los Angeles Times (they’ve had their ownership issues), which is a large market; apparently they’re really struggling to get subscriptions.

If you’re less important than a national level, it’s really hard to continue the journalism. Now, this could speak to where brands could maybe play a role. If brands think it important they could be helping make sure the news keeps coming.

Darren:

And in some ways going back to the future; the soap operas and things like that to actually play a role of providing the content that people want.

Brian:

It is tricky. There almost needs to be a film-thropic approach because there could be audiences who will consume the content but it’s always a delicate balance there needs to be some sort of separation between church and state.

Darren:

One of the things we’re seeing increasingly is this talk about brand purpose and a lot of organisations have started to co-opt either a brand purpose or found a brand purpose. How important do you think that type of thing is from an investor’s point of view or a perception of the value of brands and businesses?

Brian:

I think it can be very important. It’s not necessarily the only way to be important. Certainly, we’ve seen a lot of illustrations of brands tying themselves deeply to a cause or a purpose where that has worked really well. But it’s not necessarily a given that every brand will have a purpose.

Every brand doesn’t need to have a purpose to have a successful business. It’s like not every product needs to have a brand necessarily but there are opportunities for brands to have those purposes.

As politics in many countries have become more polarised it’s hard to imagine this reversing anytime soon.

The role and importance of brand purpose

Darren:

The reason I brought it up was when you were talking about the opportunity for brands in, for instance, news, I’ve never actually heard of a brand embracing the idea of becoming or supporting a source of news apart from their category.

Brian:

If there was a brand where the purpose was fostering a healthy democracy, sponsoring news products would probably be a good way to do it. Tying that to the point I was making about a polarised society—because of that so many different aspects of life have become polarised where you’re either for something or against something.

If you’re not against it you’re for it. This is what can push a brand down a path towards purpose. Take Nike.

Darren:

I was going to say Nike because it was willing to polarise the market.

Brian:

The market was already polarised you could argue.

Darren:

Okay, their position in that—they were willing to take a stand.

Brian:

They needed to make a choice. They were either for Colin Kaepernick or against him. If they didn’t support him there was no middle ground on that one. They had to make a choice.

If you read what Phil Knight has said about what he was thinking and why he ultimately agreed to make the campaign. This conversation about LeBron having to worry about his kids getting pulled over and Phil Knight realised he would never have to worry about that for his kids.

It’s well documented what they had to go through to be O.K with it but if they cut off Kaepernick at that point, in the context of where the United States is as a society, they would have necessarily been against it.

You don’t have a choice in many instances and I think brand are going to find themselves in situations where if they’re not for it they’re against it.

Darren:

It was interesting around Nike with the share price. When the story of the campaign broke and the negative press drove the share price down. And then when the celebrity endorsement got behind it the share price went back up, in fact to record values.

Brian:

Unfortunately, investors were wrong in how they responded to the concerns immediately. That was a no-brainer, slam dunk amazing consistent brand choice that they made.

That doesn’t need to be the reason why the brand makes the choice, that their sales will go up necessarily in the short-term. If the purpose the brand is identifying with is truly organic to what they believe then it’s part of long-term brand building.

The extreme counter example is if you go to a trade show, and remember it used to be very common that there were drawings for iPads—you’d enter a raffle and you could win an iPad. Why does everyone do that? An iPad wasn’t necessarily consistent with what that trade brand represented.

Darren:

Exactly.

Brian:

That’s not a good purpose to identify with. A brand shouldn’t just choose a purpose for its own sake.

Darren:

No, it should come from the core of what the business is about, which is why I think founders particularly, like Phil Knight, can call that purpose. Often the company they’ve built is infused with their values whether they like it or not. That’s one of the things about founders.

Brian:

I’m going to push back on that a little bit. It’s not necessarily what the company’s culture is.

Darren:

No, the focus.

Brian:

Not even that because it could be that your product can resonate with consumers independent of what your values are. Just look at what’s been going on in luxury with some of the issues around race.

Darren:

Well Dolce and Gabbana certainly screwed up their Chinese market.

Brian:

I know but the point is that the marketers have to recognise their consumers who embrace them independent of what the company’s values might be.

Darren:

O.K but there are a lot of companies out there that want to be everything to everyone.

Brian:

They can be but I’m saying that every brand can recognise that they have a consumer base who believe something and then you as a brand choose to embrace it or not.

Darren:

I think you’re getting cause and effect. Have you got those customers because they’ve already picked up on the values that have been delivered from the founders’ start and the ones they’ve expressed themselves.

Brian:

I believe they’re often independent of each other.

Darren:

So many brands like Disney and short-term brands like Aesop, which is a local brand—it just reeks with the values of the founder because the founder is the one who defined it.

Brian:

I’m saying it’s often coincidental.

Questioning the focus on shareholder value

Darren:

Just on this whole issue. There was a group of 200 CEOs who collected together recently and made the announcement that shareholder value is no longer the number one driver for the performance of a company. Cynically, a fund manager I know said and they left after that announcement and phoned all their fund managers saying, ‘we didn’t mean it’.

Obviously, that’s cynical but what does it take for a company to be able to make a stand where they’re not beholden to the investors?

Brian:

It doesn’t necessarily take a lot. A company just has to decide that there are certain things they believe in that ultimately benefit the company in the long run. And they can include being conscious of a wider range of stakeholders.

There’s a consequence of a triple bottom lined company. I don’t know if many in Australia have brought into this idea but Salesforce.com was one of the first companies to actually do this. It’s done pretty well as a triple bottom lined company, not just from a stock and valuation perspective but as a business.

Darren:

And attracting talent.

Brian:

Absolutely, that’s the thing. Not every product needs a strong brand. It can be helpful to have a strong brand to build business but it needn’t be an order qualifier. Similarly, being conscious of your stakeholders, a wider range than just your investors is a practical choice for the vast majority of companies to make.

Because if employees think that the company they work for is only focused on…

Darren:

Making a profit.

Brian:

Yeah, then O.K some people will sign up for that—it’s this job or the job in the coal mine that I didn’t really want to take. And that’s fine but it can be a talent differentiator. It can be a differentiator for a consumer and a means of placating regulators ahead of time.

There are all these benefits that come from it so I don’t think you need to be cynical about it; it’s just business.

Darren:

Brian, we’ve run out of time. Thank you for calling by in your busy schedule. Just one last question. We started off talking about the economy. I just want some personal advice. Should I be getting out of equities and putting it into gold?

Ideal for marketers, advertisers, media and commercial communications professionals, Managing Marketing is a podcast hosted by Darren Woolley. Find all the episodes here

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Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com

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