The marketing industry has become addicted to mass advertising and sales promotions to lure consumers, and Cult Collective CEO Chris Kneeland is calling for an intervention.
Chris Kneeland
Kneeland said this dependence is damaging customers’ relationships with brands as marketers focus too heavily on the symptoms of the problem instead of trying to find a fix.
“We have become masters of bribery, begging people to shop and to give us their attention,” said Kneeland at The Gathering event in Banff on Thursday.
“This proliferation of advertising has now caused many businesses to overdose on [this type of] stimulus.” The result can also be deadly for brands in the long run, he said.
Kneeland pointed to a Deloitte report showing the life expectancy of a Fortune 500 brand has fallen to 15 years today from 75 years in the 1960s.
“Too many good marketers are addicted to bad behaviour,” said Kneeland, who also co-authored Fix: Break The Addiction That’s Killing Brands, along with his company co-founders Ryan Gill and Rob Howard.
“We have this over-reliance on markdowns and all of the accompanying mass media that is required to promote our promotions,” added Kneeland. “If you are continuously discounting your offerings, or screaming to the largest possible audience you can find to try to convince someone to care enough about you to shop, then your business isn’t healthy.”
Kneeland cited data showing spending on mass advertising has increased by $180 billion in 2014 from $136 billion in 2008.
“What wonderful benefits are brands receiving because of this huge, incremental investment in mass advertising? By every metric we could get our hands on, consumer engagement is tanking… and at all time lows,” he said.
What’s more, the traditional loyalty marketing 80/20 rule — where 20% of your customers are considered so loyal that would generate 80% of your business — is “fiction,” he said. Today, it’s the 40/60 rule.
“That means you need twice as many good customers to generate 20% less sales than what that group used to generate even a decade ago,” Kneeland said. “Consumers have become promiscuous because we have failed to give them what they want.”
In his presentation, Kneeland citied online shoe and clothing retailer Zappos.com as a company that’s getting it right by changing the way it handles marketing, and prioritizing customer service.
For example, instead of trying to get customers off the phone quickly to take more calls, Zappos rewards employees for keeping customers on the call longer. It also offers free return shipping, which is still rare in the e-commerce industry today. Zappos also crams its website with interesting content.
“Not enough marketers are good at content marketing. We are spending all of our time and creative juices on our advertising and not having any money or people left to do what really matters,” Kneeland said.
He believes it’s the job of marketers to own the entire customer service experience, citing as an example Hyundai’s popular Assurance Program during the height of the global recession, which promised shoppers the company would buy back their vehicles if they lost their jobs and couldn’t afford to keep it. The program led to a spike in sales at a time when other car manufacturers were suffering.
Kneeland also pointed to statistics from a Harvard showing that 86% of consumers say it’s important to have a positive brand experience after making a purchase. If the experience is negative: 65% will complain to family and friends; 41% write an email or letter; 34% will go online to write a review; and 19% will complain on social media. Only 1% said they would make an additional purchase.
Kneeland summarized his talk at Thursday’s event with what he calls the “Three Truths” in the industry today:
- Many brands are taking the wrong prescription to what truly ails them. They are overdosing on markdowns and mass advertising.
- Improving consumer engagement will improve the overall health of your business faster than just about anything else. It’s as simple as properly identifying what consumers expect from your category, then delivering against those expectations better than everyone else.
- The most enviable brands are showing us the way.
“If you are a promotion junkie or advertising addict, please consider The Gathering as an intervention,” said Kneeland.
