Marketers To Confront A Brave New Marketing World
by Alf Nucifora
Recently, I sat down for a wide-ranging discussion with consummate marketer, author, academic and futurist, Peter Sealey. An alumnus of marketing giant Procter & Gamble, as well as ex-marketing chief at The Coca-Cola Company and Columbia Pictures, Sealey delivered an unvarnished take on what's coming down the marketing pike, and who will survive, what he maintains, is an approaching seismic shift in the worlds of marketing and communications.
NUCIFORA: From the time you entered the marketing business, to today, what have been the seismic shifts?
SEALEY: We are in the midst of a societal transformation that occurs in western societies every 200-300 years and that transformation is the leaving of an industrial/agricultural economy and the moving into a knowledge economy. This doesn't happen very often. It happened when Europe came out of the Dark Ages in the 11th Century. It happened in the high Renaissance in the 1500s. It happened in the Industrial Revolution in the late 18th Century. It's happening now, and part of that transformation is impacting marketing.
NUCIFORA: If you were advising somebody coming into the marketing profession today, what would you say?
SEALEY: Brands are going to become even more important. Brands are incredibly powerful. They create enormous shareholder wealth. They are indigenous. They are created spontaneously. People need brands. In the old Soviet Union, where there were no brands, people would identify factories that made better appliances and you would see Soviet consumers on their knees at the back of a refrigerator or a stove looking for the manufacturing plate to identify a factory that had a better reputation for quality than others.
NUCIFORA: You see no diminution in the value of brands?
SEALEY: I see an increase because of the pace of society and the need for people to have comfortable and reliable choices. I watch my younger friends as they have their first child and out of their DNA comes this desire to buy a Volvo station wagon. It's not quality, performance or anything but safety.
Let me give you another example. There is a manufacturing facility in the East Bay owned by GM and Toyota jointly. Two of the cars that come out of that plant are the Pontiac Vibe and the Toyota Matrix. They are absolutely identical…made by the same workers, same power train, same body. However, they put different names on them…and the Toyota sells for $1500 more at retail because of the power of the brand.
NUCIFORA: Let's discuss some of the trends that will change our personal and professional lives. The growth of broadband in the home?
SEALEY: Changes the world. I'm talking pipeline with 30-40-50 maybe 100 megabits per second. When we get that big pipe, then something else will happen…the IP addressable television set… Internet Protocol TV. The device will have an internet protocol address just like you have an IP address for your web site and your email. Imagine when we have the really fat pipe and an addressable 50 inch, plasma, high-def screen with 1080i interlaced video resolution. When that happens, there will be an enormous disenfranchisement of the distribution system. Comcast, Direct TV and the like will be in deep trouble because the guys with the power will be the guys producing and creating the movies. And the average Joe sitting in Middletown U.S.A., with the beautiful 50 inch plasma set isn't going to go to the movies on a given Friday night. That's going to change the entertainment business.
And let's talk about Eric Schmidt of Google, who can afford to give away high speed internet access in San Francisco. Why? Because everybody who goes on the web is going to do a search, and for the searches he sells ads, and the more he sells ads and the more people search, revenue increases. Schmidt can afford to Wi-Fi San Francisco with high speed of 20 megabits per second. What are AT&T and Comcast going to do? They're screwed. The pipe is going to be so ubiquitous and so cheap. Who will pay $49 per month for broadband-wired access when Google will do it for free?
NUCIFORA: What about iPods…14 million sold in the 4th quarter last year?
SEALEY: Media is becoming digital, personal and controllable. We'll no longer settle for receiving one-to-many. We now configure our media the way we want it…customized. And we take it with us. Marketers and advertisers have to adapt to that reality.
NUCIFORA: Satellite Radio? Up to 9 million subscribers as of January, 2006 before Howard Stern.
SEALEY: Clear Channel is in deep trouble. And Westwood One. Here's the problem with terrestrial radio. The satellite guys have an enormous footprint and great variety between ad support and in-premium services. That stuff is going to be available everywhere. The 41 million iPods owned by the people walking around with earplugs in their ears are not listening to a radio station. Music? I've got it in an iPod, in my portable device. Traffic? I'm going to have it integrated into my navigation system in the car. Tell me again why I'm listening to the radio? What am I going to get? Weather? I don't think so. I do think that terrestrial radio is in big trouble.
NUCIFORA: Targeted coupons?
SEALEY: The most inefficient spending of money in the world is on coupons. In the U.S. we distribute three hundred billion coupons a year, 1000 coupons for each household in the U.S. The redemption rate on those 1000 coupons runs something under 3%, and of that, a third are mis-redeemed…you've got a Diet Coke coupon and they give you a Diet Pepsi. So now you've got a 2% redemption rate. The cost of the economic incentive is astronomical inefficiency. I'm on the Board of Directors of a regional pizza chain and it costs us almost $5 per redeemed coupon…not for the price reduction…just for the ineffective delivery. I'm on another Board of an electronic coupon company and we're averaging 15%-20% redemption rates. Why? If you go to www.coupons.com and say you want Huggies coupons and you print those out on your color printer, it means you've got a kid under 12 months at home. You're not going to print out the coupon if you don't. So, here's the case where the digital media permits a self-selection process.
NUCIFORA: Brands you admire. Who's doing it right?
SEALEY: Apple…fabulous. I'm on my eighth or ninth generation iPod now. They just keep coming out with new stuff. Mini Cooper... BMW introduces a new car in the U.S. without television advertising. It's a cult. Harley-Davidson, Starbucks and In-N-Out Burger are other fabulous successes. I want brands which are love marks, brands that people have a passion for.
NUCIFORA: On the other side, the brands that are killing themselves?
SEALEY: Sony, a great company is in the process of destroying itself. The latest one is putting spyware on their CDs. Sony rightfully should have had the iPod. They failed to understand flat panel television. Literally at every juncture in the last decade, they have made the wrong decision starting with Betamax in 1976. It almost makes me cry to see them disintegrate into mush.
NUCIFORA: What do you regret that you may not be around to see from a marketing perspective?
SEALEY: The democratization of marketing…the power of the consumer. I regret I will not see the full scope of that change. Ultimately the consumer will have full control. My regret is that I haven't had my career in the marvelous sunshine where consumers are really in control. We are going to worship at their alter in the future.