• Edward Nevraumont

The future of marketing and Augmented PR


Learning from the past 

Predicting the future is impossible. Most people do not understand what is happening RIGHT NOW, let alone what will occur in the future. But I think marketers can all agree that we are in the midst of industry-wide changes, especially in terms of how people consume media and advertising.

To provide some context for the changes to the marketing landscape, let’s take a quick look at the past. 


If you wanted to build a national brand during the second half of the twentieth century (and into the start of the twenty-first), then you probably relied on a standard formula: 

  1. Create AWARENESS of your product. You would focus on reach and frequency of high-fidelity impressions to target a mass audience of potential buyers. Using commercial television as the anchor for awareness campaigns, you would add other marketing channels (often at premium prices) to broaden the brand’s reach. 

  2. Secure DISTRIBUTION, AVAILABILITY, and CONVENIENCE. With the strength of your product’s awareness (or coming awareness), you could convince retailers to make it easier for consumers to purchase your products. 


These two tactics supported one another. High levels of customer awareness and demand motivated retailers to prominently display the product. In fact, when this strategy was well executed, product manufacturers could sometimes negotiate a reduction or elimination of retailer promotions or slotting fees. 


Awareness campaigns impacted consumers in different ways

  • Some consumers would deliberately seek out the product. 

  • Other people might not have intended to make a purchase, but seeing the product prominently displayed at retail locations would increase their likelihood of buying the product. 

  • Many people would not have seen the ads at all. They would encounter the product when they shopped at a store — especially if the product was prominently displayed. For a subset of customers, therefore, the physical stores were both a source of distribution AND a channel for more awareness building.


As the product became more readily available and distributed, the ROI on the awareness marketing spend improved. In turn, this allowed for more spend (or constant spend as the other levers began to provide diminishing returns).


Companies that could not afford massive advertising budgets had to find a way to hack their way to growth — begging for a Walmart listing, and then using that opportunity to fund regional advertisements, which helped land a Target listing, which captured PR attention, and so on. 


But even these resourceful companies sought to emulate the tried-and-true marketing playbook: use television to create awareness, leverage awareness to negotiate better details with retailers, and then repeat.  

Learning from the present 

Today, companies have more options to consider. In the era of digital marketing, many — but certainly not all — new brands try to build a growth strategy along these lines: 

  1. Create AWARENESS and DISCOVERABILITY, using targeted ads on Facebook.

  2. As online demand grows, ensure AVAILABILITY and DISTRIBUTION on Google search (paid and organic) and Amazon search (paid and organic).


Facebook replaces television, and Google/Amazon replace retail distribution.


This strategy can be very effective. Hundreds (if not thousands) of direct-to-consumer brands have flourished by executing a version of this plan.

 

Unfortunately, many companies have also discovered one big limitation with this method — you can only scale so far, and nowhere near as far as the earlier television/retail synergy. Diminishing returns hit Facebook spending relatively early. A Databox post included an illuminating quote from Colette Nataf, the CEO of Lightning AI (a digital marketing advertising agency): 

We’ve found that at very low volumes, Facebook scales easily, but we see exponential increases in cost per conversions starting at spends approaching $5,000 per week. This means that for advertisers who are starting out, Facebook is a really effective channel in terms of costs. But once advertisers are scaling up to more than $20,000 per month in ad spend, even though the CPMs or CPCs may stay in the same range, the cost per conversions overall increase steadily. We’ve found this is true regardless of the advertiser’s industry and product that they sell.

A Facebook spend of $20, 000 per month is only $240, 000 per year. A pile of money for a new brand, of course, but a simple rounding error for national brands. For context, here are the 2019 marketing budgets for three brands: Gatorade ($100 million), Tide ($233 million), and McDonald’s ($447 million). If Facebook were the primary channel for those brands, they would be facing a LOT of diminishing returns. (Note: Facebook is searching for a new CMO, and the minimum qualifications include, “Experience managing marketing budgets upwards of US$500 million.”)


For an example of the diminishing returns of Facebook spending as you scale, take a look at the direct-to-consumer razor industry. Over the last decade, two DTC brands — Dollar Shave Club and Harry’s — managed to disrupt the long-established razor oligopoly. But despite all of the press about the two companies, they’ve barely dented the giants. Gillette still commands almost 50% of the market. Edgewell’s brands (including Schick) hold about 14%. 


In 2016, Unilever acquired Dollar Shave Club; three years later, the brand’s market share has levelled off around 8.5%. Harry’s entered the industry a bit later, and they’ve stalled at around 2.6% market share. Edgewell attempted to buy Harry’s, but the move was aborted due to Federal Trade Commission concerns about anti-competitiveness. Interestingly, especially for the focus of today’s essay, Edgewell originally planned to acquire Harry’s and then push the edgy brand through the more traditional marketing cycle — more television and more retail distribution.


If you need more evidence that new consumer brands struggle to take over markets, check out Kantar’s list of the “most purchased” CPG (consumer packaged goods) brands. All of the listed brands were built with the old television/retail synergistic system. And all of the brands are OLD. (In terms of opaqueness, brand-value rankings are even worse than college rankings. But still, the Kantar list is instructive.)


Here are the top 25 CPG brands, along with the year they were introduced:

  1. Coca-Cola (1886)

  2. Colgate (1873)

  3. Maggi (1947)

  4. Lifebuoy (1895)

  5. Nescafé (1938)

  6. Pepsi (1898)

  7. Lays (1932)

  8. Knorr (1838)

  9. Dove (1957)

  10. Tide (1946)

  11. Pentene (1945)

  12. Nestle (1905)

  13. LUX (1925)

  14. Downy (1960)

  15. Sunsilk (1954)

  16. Kraft (1935)

  17. Palmolive (1898)

  18. Danone (1929)

  19. Pepsodent (1915)

  20. Sprite (1961)

  21. Oreo (1912)

  22. Ajinomoto (1973)

  23. Bimbo (1945)

  24. Milo (1934)

  25. Heinz (1886)

Among the top 70 brands on the full list, the “newest” one is Activia (by Danone) at number 29. And even then, Activia was launched in 1987. 

Keep in mind, the Kantar list focuses on companies in the CPG industry, which has not welcomed a significant new entrant in a long time. Other sectors, of course, have witnessed the emergence of new brands that achieved great success. BrandZ’s ranking of the most valuable brands in the world now includes Amazon (#1, 1994), Alibaba (#6, 1999), and Facebook (#8, 2004). 


Interestingly, rankings of brands often get the causation reversed. Amazon holds an impressive brand, but they did not grow it through a traditional “brand building” process. Instead, they developed a business that was very successful and they kept their promises — a positive brand was the result. As Jeff Bezos famously said, “Advertising is the price you pay for having an unremarkable product or service.” But since the time of that quote (2009), Amazon’s marketing budget has increased to a now massive $19 billion a year, of which over $1 billion is spent on traditional television. Needless to say, Amazon is not spending that money on the Facebook newsfeed. 


If you look at Kantar’s list of “brand contribution” (i.e., the percent of a company’s market value attributed to the brand), you find another list of hundred-year-old companies, with one notable exception — TikTok. The video-sharing platform offers a great case study on how to build a modern brand. TikTok DID build their initial brand via social media channels like Facebook and Snapchat; the company spent more than $1 billion on those channels in 2018. But even TikTok has hit diminishing returns, and their latest ad campaign is centred around a traditional television spot. 

Rumors of television’s death have been greatly exaggerated 

With apologies to Mark Twain, people have been proclaiming the death of television — and especially television ads — for years. With the rise of VCRs in the mid-1980s, viewers could bypass TV advertising by recording shows and then fast forwarding though the commercials. And yet, people continued to watch television shows AND television ads. 


With each new invention, pundits have predicted that TV advertising was finished — VCRs might have required too much planning to record shows, but surely the easy-to-use DVR (digital video recorder, like TiVo) would be the nail in the coffin for live TV ads. And yet, people kept watching both shows and commercials. We’ve seen the same predictions and similar outcomes for Netflix and ad-free streaming services.


To be clear, all of these claims contained some elements of truth. As VCRs gained traction, people DID sit through fewer television ads. The emergence of DVRs DID reduce the effective viewership of ads (and also increased the relative value of the ad at the start and ends of the blocks). Netflix and other video-streaming services ARE decreasing the amount of time that people spend watching traditional TV. 


But while viewership of traditionally delivered TV shows — along with the accompanying advertisements — has decreased, it never fell off the cliff. 


Case in point: in 2018, the average time spent watching traditional television (i.e., excluding streaming services like Netflix) in America was still 3 hours and 43 minutes per day. A total of almost four hours each day is the AVERAGE! In other words, the typical American spends about a quarter of their waking day in front of the television. 


Television viewership is certainly declining; back in 2014, the time spent per day was four hours and twenty minutes. That said, the 2019 levels of 3:43 are still really, really high — probably much higher than you would have expected. 


Why are there so many think pieces about the death of an entertainment medium that still occupies a dominant place in people’s lives? One possible reason: television viewership correlates to socioeconomic status, and members of the creative and professional classes have moved away from traditional TV much faster than everyone else. 


When I advise companies, I often suggest TV advertising. Invariably, the executives ask, “does anyone even watch commercial television anymore? I know I don’t.” Well, Mister-Young-MBA-High-Income-Executive, the fact that YOU don’t watch network television doesn’t mean that other people have stopped sitting in front of the tube. In fact, due to all of the people who “never watch TV,” the average daily viewing hours for everyone else is even higher than 3:43.


Bottom line: television is not dead yet.


In fact, I believe that TV still has years of life left. Years, though. Not decades. Plus, TV ads are becoming less effective — and more expensive — every year.

Although the word “death” is overstated, I think we can still use the word “decline.” And while the death of television may be overstated, the decline may be understated. The decline comes with a negative spiral in three parts:

  1. There are fewer people watching television every year, and that trend will continue. The COVID pandemic might have accelerated the decline because greater numbers of people have turned to video-streaming platforms. 

  2. As less people watch TV, the price of a television advertisement will increase. The “Upfront” CPMs for television averaged $36 in 2019, $32 the year before, and $29 the year before that. There has been a 125% increase in CPMs since 2009 (which translates to an average annual increase of 8.5%).

  3. Most insidiously, the people leaving television are the advertisers’ best customers: young, educated, and affluent. This reality explains why many ad-supported businesses (think Facebook) don’t offer an ad-free paid subscription tier. The people willing to pay for a “no-ad” version are the best people for advertisers to target; losing those consumers would decrease the value of the remaining ad inventory.

The impact of television’s decline is clear: fewer eyeballs, less quality per eyeball, and more dollars per eyeball.

What’s next?

Even if you never watch television, your company should consider running commercials — TV is still the best way to build a national brand.  


But since we know TV advertising is getting less effective every year, savvy marketers should be looking at what’s next. 


What’s the new roadmap for building a brand?


We can start by considering the elements that make television such a good medium for brand building: 

  • High fidelity (the authenticity of a reproduction): Television ads use both audio and video to capture people’s attention. With a standard length of 15–60 seconds, commercials can (when done well) convey the arc of a story or the emotions of a person. 

  • Scale: Television offers enormous scale. You can spend a lot of money before starting to see significant diminishing returns.

  • Above-the-line, wide reach: Independent of scale, when you reach people on television, there is an understanding that OTHER people are also being reached by that same television spot. So even if one specific individual is not influenced, that person might recognize that OTHER PEOPLE would be influenced by the ad. In a world where there are fewer “shared cultural elements,” advertisements and brands can remain “widely known for being widely known.” Even if you don’t enjoy Corona beer, you probably know that “Corona is the best beer for the beach.” Accordingly, when you are invited to a beach party, there’s a good chance you will decide to bring Corona. 


One reason that television has refused to die: it’s very difficult to find another marketing channel that offers such an effective combination of attributes.

  • Radio: No video. And drying up almost as fast as television.

  • Digital Audio: No video. Below the line. Very limited cultural impact.

  • Facebook: Lower fidelity (mostly images, some video, some audio, and limited storytelling). Below the line. Lack of scale.

  • Google/Amazon: Distribution channel that is not effective for discovery.

  • Billboards and print: Much lower fidelity. Low ROI. Primarily used for incremental reach after TV is exhausted.

  • Digital video: Promising. But really high CPMs for the same reason as billboards and print.


We are back to where we started. How do you build a mass market brand when you can no longer use television?


Time to consider more speculative territory. With all the caveats that you should never trust a prediction about the future, here is my theory of what the “standard marketing playbook” might look like in the next decade or so:

  1. Use Facebook or other digital, targeted advertising to get product-market fit and some degree of scale. This is the current DTC strategy, and it can get a business to $1+ million per year in spend, as well as real traction among their core audience.

  2. Spend as needed to dominate distribution channels and minimize potential customer inconvenience (e.g., top placements on paid and organic search, push through online and physical retailers, simple purchase funnels (CRO), etc.).

  3. When you reach diminishing returns on digital display and paid social, fire up mass television advertisements to build general “cultural” brand awareness. Hitting journalists and media is especially important; consider supplementary ideas like heavy billboard spend in Manhattan.

  4. Leverage “Augmented PR.”

Augmented PR 

With apologies to Mark Twain, people have been proclaiming the death of television — and especially television ads — for years. With the rise of VCRs in the mid-1980s, viewers could bypass TV ad


I want to introduce a new term: “Augmented PR.” You’re among the first people to encounter this term, because I’m coining it in this essay. 

Augmented PR uses traditional PR (“earned media”) to extend the reach of commercial advertisements (“paid media”). For years, marketers have relied on paid media to accelerate earned media. As an example, instead of sending customers to your own webpage, send the traffic to a glowing review in The New York Times. 


Augmented PR uses the same strategy — in reverse.


You begin by running a standard ad strategy, but you intentionally try to generate buzz about the ad campaign, rather than just the product. Use something interesting, controversial, or weird — anything that will “get people talking.”


Next, make sure to get the ad that “everyone is talking about” in front of journalists and try to get them talking about it. Attracting interest from earned media is very hard. You might be excited about your next product release, but unless you’re one of the rare “event announcement” companies like Apple, journalists are not clamoring to cover your latest news. (I have a client working on a rebrand for next year, and they are holding back on doing SEO work. Why? Because they are convinced the announcement will be widely covered and they don’t want anything to leak. For months, I have been trying to tell them that no one is going to care!)


I believe that Augmented PR is an emerging trend. Here are some examples from the previous year. 

  • Controversial: When Nike launched their Colin Kaepernick campaign, the commercials were widely viewed. The majority of the impact, however, resulted from distribution driven by the ensuing controversy. Another example like this: Gillette’s Real Men campaign.

  • Remarkable: Another Nike example. The company recently released a commercial that featured a split-screen video collage with a stunning display of editing skill. In some ways, the ad was a traditional media play, but the artistry was so compelling that the media (and consumers) sought it out to watch.

  • Weird: Olympic gold medallist Katie Ledecky swam the length of a pool with a glass of chocolate milk on her head — without spilling a drop. If this activity had been structured as “an event,” it would not have received media attention. And the piece is definitely not an effective stand-alone television spot. But the combination of these factors resulted in a weird commercial that earned the Got Milk? campaign millions of impressions. 

  • Different: Burger King bought a virtual “paid placement” spot inside the popular Grand Theft Auto video game. BK then ran traditional television and media campaigns that raised awareness of their creative approach — those ads, in turn, led to media coverage of the placement.

  • Unashamed: You can sometimes reach an augmented audience by making ads that you believe authentically reflect your product — even if the ads don’t necessarily fit the zeitgeist. Peloton’s Christmas ad garnered headlines (and backlash) for suggesting that a wife would appreciate a premium exercise bike as a gift. Peloton claims they were surprised by the reaction, but either way, the reaction definitely helped raise awareness for the brand.

  • Rapid: While Peloton’s holiday advertisement did very well with Augmented PR, Aviation Gin did even better with their “response” ad three days later. Although they never directly mentioned Peloton, their ad featured the same actress. Plus, Ryan Reynolds — part-owner of Aviation Gin — tweeted #exercisebikenotincluded


Augmented PR strategies provide a valuable benefit: the people who will encounter the earned media are different people than the people who will encounter the paid media. Traditional paid media skews older, lower income, and less educated. Many of the 6.7 million initial viewers of Aviation Gin’s “Gift that does not give back” commercial were young, high income, and educated professionals who stay on top of the latest Twitter trends (and Ryan Reynolds’ YouTube feed). Combining traditional tactics with augmented PR strategies not only gets you more impressions, but it also increases your reach far beyond what you would get from doubling down in either channel on its own. 


I hope the above examples conveyed the fact that Augmented PR is not an easy strategy to execute. You still need to find a way to break through the noise. But there’s some good news: Augmented PR could provide more ways to get your message across than traditional PR. With a competent Augmented PR strategy, people — at least the people who talk about ads — will talk about your brand. In essence, your ad itself becomes the press release.


As more and more companies discover this technique, I expect the next decade will be spent refining the tactics to optimize the chances for success. We might see a Red Queen effect. Techniques will need to improve to yield the same impact. And there will still be a place for process-optimizers and analytics. 


But Augmented PR also requires a lot more creativity than either the current Facebook Ads/Google cycle or even the more traditional “television brand ads”/“retail distribution” cycle.


I’d love to hear your comments about Augmented PR.


Keep it simple,

Edward


If you enjoyed this article, I invite you to subscribe to Marketing BS — the weekly newsletters feature bonus content, including follow-ups from the previous week, commentary on topical marketing news, and information about unlisted career opportunities.

Edward Nevraumont is a Senior Advisor with Warburg Pincus. The former CMO of General Assembly and A Place for Mom, Edward previously worked at Expedia and McKinsey & Company. For more information, including details about his latest book, check out Marketing BS.

© 2020 EDWARD NEVRAUMONT
  • LinkedIn - White Circle
  • Twitter - White Circle