Teaser: D-Marketing is coming

I have finished the first draft of my latest book. It needs more work but here is a teaser.

In every corner of the globe concerns over climate change, pollution, resource depletion and environmental degradation are now taken very seriously especially, but not exclusively, among the younger generation. Governments and the business world have had to respond to this and for the most part they have. We have green energy policies, more responsible and sustainable sourcing, production and distribution, recycling infrastructure, to highlight just a few aspects of sustainability. Maybe not as much as we need to meet the climate change targets but a lot more than we had and moving in the right direction. Sustainability is mainstream in almost everyone’s thinking almost all of the time. But we are missing something, quite a big thing – excessive demand. We are buying and consuming too much, not everywhere, not among the ‘other 3 billion’ who live in abject poverty, but in the developed world we buy too much stuff. We are, as part of the drive towards sustainability, aware of waste as an issue but we have not tackled the root cause of this – marketing.

$1 trillion a year gets spent on persuading us not just to buy but to buy more than we need and this causes enormous waste both physical and obvious and hidden, ignored. We have not tackled the demand-side wastage and marketing’s role in that, so we are fighting the climate change and environmental battle with one arm tied behind our back. This book tries to lift the lid on that and offer an alternative, Deliberate Marketing – a more responsible approach that addresses marketing generated wastage but not necessarily by reducing profits and enterprise value. Because we also waste a lot of money on unnecessary marketing so we can cut that out too.

My argument in a nutshell are as follows:-

  • Rooted in free-market economics, the purpose of marketing is to sell more, more, more. This produces vast amounts of excess consumption and waste. Some waste can be recycled but that takes 50% of the resources it took to produce in the first place. Less unnecessary purchases = less recycling.
  • Sustainability does not focus enough on the demand side.
  • It is possible to reduce excess, irresponsible demand and the waste it produces without necessarily reducing profits or enterprise value.
  • We are not looking to impose austerity and fight human nature or progress. Just 5-10% reduction would be game-changing and reducing wasted marketing can more than offset the commercial risk of doing so.
  • We need a better more deliberate and connected way of doing marketing and a better way to measure and account for all costs.
  • There are strategies to reduce waste and safeguard commercial success. There is a simple process a business could follow but it needs to be holistic, looking at the whole business model.

Deliberate Marketing – think of it as marketing that makes you proud, socially and professionally.

The book offers a point of view on how to reduce wasted marketing and reduce marketing generated waste. It highlights areas to focus on to achieve this and suggest a process for D-Marketing. The objective is to generate interest, to start the conversation and pose some challenging questions. It is not offering ‘an answer’ or ‘a blue-print’, that’s impossible without looking at a specific business in a specific category. But here’s an interesting thing about waste, once aware of it, a well-intentioned person or leadership team finds it hard to ignore. There is no study to back this up, merely a lot of circumstantial evidence, but the majority of waste is probably down to thoughtlessness, a feeling of powerlessness and/or an assumption that it’s someone else’s responsibility. As a species we are sentient and most of us have a conscience. If we are aware of waste, if we think we can do something about it and it is our responsibility to do so, we will. At the very least we will try.

The audience for this book is business in general, and marketers in particular. Its purpose is to make people think about waste and believe there is perhaps something they can do if they try.

Case Study: The challenge of Demarketing

I’ve taken my idea of Demarketing from my eBook “So What’s wrong with Marketing” and turned it into a case study for Business Students. Even if people reject the premise that we need Demarketing I think the exercise of thinking it through will enrich one’s view of marketing in a sustainable world. Anyone interested in using it let me know.

The Demarketing Challenge

Background

In my eBook “So what’s wrong with Marketing” I put forward the idea of ‘Demarketing’, the re-purposing of marketing to reduce consumption.

“Marketing was developed for a world of economic growth. Its purpose, however you dress it up, was (still is) to make people ‘consume’ more. That’s why marketers refer to people as ‘consumers’. The problem, it would appear, is that we can’t just keep on consuming, wasting and depleting resources at the expense of our planet. There is no ‘Planet B’. So that presents something of a difficulty for marketing in the future – can it, should it, survive in a world where we need to persuade people not to buy what they don’t need or can’t recycle? Instead of marketing, should we not think about ‘demarketing’?”

Summarised like this demarketing makes absolute sense. We cannot just continue to invest $ trillions to persuade people to buy more stuff than they need and more than we can cost-effectively recycle or, in whatever way, re-engineer to be sustainable. And yet governments around the world (of varying political persuasion) for what they would say are sound economic models continue to strive for GDP growth to lift people out of poverty and improve the quality of life. Can the idea of buying less co-exist with the imperative to increase economic output? At a micro level can a company’s board of directors persuade their shareholders to support them if they wish to invest in suppressing demand? Investors move their money to wherever gives them the highest returns. Perhaps it might work if all companies faced legislation that required them to fully cost their products to take account of all their environmental and societal impact (no business currently directly bears the cost of the full life-cycle and total impact of their products or services on e.g. waste disposal, health, infrastructure, they just pay tax in a largely one-size-fits-all fiscal system and many avoid even doing that if they can). But it would be hard for a government to be re-elected on a manifesto that includes proposed legislation limiting what people can buy and raising prices. Demarketing might sound like the right thing to do, but how to do it is the challenge.

Nonetheless there are signs of positive movement albeit more in the name of CSR and sustainability rather than specifically this idea of actively demarketing. Blackrock, the behemoth of private equity, now insist all its investment portfolio have coherent CSR and sustainability programmes. There are a growing number of ethical funds like FirstPlanet, dedicated to investing in businesses that can deliver financial returns and build a better world. More and more big businesses like Ikea, Unilever, even Amazon have moved CSR and sustainability from something they should do ‘as well’ to being central to their core purpose. All for the good, but there aren’t many like Patagonia who spend money on ads asking people not buy their products unless they really need them and who offer free repairs to make previous purchases last longer (they will even repair competitive brands if you ask nicely).

Demarketing is a tough idea to get your mind around and some would argue is not needed. Oxford were early champions of the Circular Economy and this has now taken root in many top academic institutions. The industrial revolution (and the later technology revolutions) were based on a linear economic model – find/process materials, turn them into products or services, get people to buy them, use them and then throw them away to buy something new using the money you earn to help find/process materials, turn them into products or services, get people to buy them, use them and then throw them away to buy something new. While it was mostly Europe and America doing this we could cope with the energy demands and the waste. But with America and Europe, bar the odd recession, relentlessly consuming more and China, India, the rest of Asia catching up and set to overtake them, plus South America (maybe even Africa one day) following suit this linear economic model has become unsustainable, an existential threat.  It’s obvious, we need to make a linear model circular through recycling and repurposing. If we focus on this perhaps we can go on just consuming more and more and more. On the other hand, maybe events will overtake us……..

There’s a linearity to the environmental debate too – more people, more consumption, more carbon, more climate change. A great deal of the spotlight is focused on climate change and greenhouse gases. Let’s not argue the science, let’s just go with the consensus, the wisdom of a wise crowd, and accept that we need to limit global warming to no more than 1.5 c-degrees in the next two decades and thereafter reverse it. There are 3 ways to do that – reduce, replace and remove CO2. In this linearity there is no argument against reducing the consumption of carbon fuels, many argue it is the priority. Renewable energy sources may not come on stream (cost-effectively) fast enough, electric cars just push the issue further up the supply chain. There is investment into technology to remove CO2 but nowhere near as much as has gone into alternative energy perhaps because it’s hard to design anything better at removing C02 than trees. But no-one seems to be confident that we can plant enough trees fast enough to compensate for the rise in CO2 emissions, or indeed enough to replace the ones we are cutting down in places like the Amazon. A lot of businesses like Ikea have tree planting initiatives to offset their environmental impact but in the wider context it’s really just a sticking plaster. No, we have to reduce consumption, no argument. Well there is an alternative to this, or at least a different point of attack. We could reduce population growth, like China tried to do (for different reasons), but outside a totalitarian state that would be hard. Or we could reduce consumption of things we don’t need to consume and/or replace consumption with better alternatives, like reducing meat and dairy for plant based foods. Or we could try a combination of all of this?

My argument is – and I hope I’m wrong – reducing wasteful, unnecessary consumption of everything, not just carbon fuels, needs to be in the mix because the alternatives won’t kick in fast enough. There needs to be more Patagonia thinking, we need to stop spending money making the environmental challenge worse, and embrace the challenging idea of demarketing, perhaps not everywhere and not to the same degree for every category, but we need to think about using some new form of marketing to do the opposite of what we have been trained to do, to make people buy less not more.

To take just one example, and apologies to Gillette for singling them out, they forced people to throw away a razor they were perfectly happy with to buy a new razor with more blades (and some little ‘easy-glide’ strip). There are many other things people have been persuaded to throw away in order to buy things they did not really need but that is a choice people can make. Gillette gave us no choice, they took the replacement blades for our razor off the market and their marketing team invested millions of dollars to force us to buy a new razor needing a new type of blade not all of us wanted or needed. Surely that kind of marketing is just plain irresponsible? We are being told to avoid travel where we can for the sake of the environment. With just a little demarketing to reduce unnecessary consumption and wastage we could happily enjoy more guilt-free travel.

Can it be done? Can we square the circle between demarketing and government-led economic growth, between responsible consumption and shareholder returns? Honestly, no-one knows but it might be possible, if only to an extent sufficient to make an impact. It deserves the effort to try, if only as an insurance policy in the event of the other planet-saving initiatives failing to deliver in time. And it can be as creatively and intellectually satisfying as conventional marketing, perhaps more so. Selling more Gillette razors, or beer, or cosmetics, or fashion clothing or washing powder or burgers or biscuits or electronics etc etc is not actually that hard once you know the rules and tactics. Demarketing will be very hard and demanding of the best ‘marketing’ minds.

Exercise

Select a B2C company you are familiar with, preferably one with a reputation for high marketing investment.

You are to prepare a presentation for the board to persuade them to embrace and commit resources to a demarketing strategy. You don’t have to develop the strategy, you just have to persuade them of 3 things:-

  • There is a case for demarketing (building on the macro rationale make it specific to this business and category)
  • It can enhance enterprise value and shareholder returns in the long term
  • You have some feasible ideas for options to explore

Success would mean they would agree to set up a task force to explore your ideas.

Some starter thoughts

  • There is evidence that businesses that have really committed to sustainability have out-performed their peer group. Demarketing takes sustainability to the next level.
  • Enterprise value and shareholder returns are derived from a sustainable profit stream. The same or lower sales does not have to mean lower profits – you can grow share, or raise margins
  • Strong brands can have a much higher valuation even if they have lower sales cf Tesla versus Ford
  • Demarketing could result in far more efficient marketing spend “Advertising is the tax you pay for having an unremarkable product”
  • “What gets measured gets done” – a business committed to demarketing would choose to create better KPI’s that show the link to future returns. Engagement, loyalty, affinity are all believed to correlate to brand strength and from that to enterprise value and shareholder returns
  • Case studies can help your case – Patagonia is the one everyone cites, is this relevant to your business, what others can you find?
  • It is hard to imagine what demarketing looks like, some examples of what it could be in terms of customer communications, engagement, events, service etc might help. In what way does ‘good demarketing’ differ from “good marketing” in terms of skills, people, partners, spend?
  • It would also help to show how this links to, and builds on, other sustainability/CSR initiatives
  • Are there business model changes that could help make demarketing attractive e.g. direct to customer?
  • Break the challenge down ito market segmentation. Who/when/where is the opportunity? Reducing consumption can relate to purchase frequency, penetration, usage.

Mark Sherrington

mark.sherrington@marksherrington.com

Solving the Social Dilemma

I’ve just finished my article on my response to the Netflix documentary, ‘The Social Dilemma’. I ran a small survey to help me in the writing of this and results are still coming in so there may be some further additions and editing to be done but I wanted to get this first version out there and see what people think. Please let me know.

Solving the Social Dilemma

The recent release of Jeff Orlowski’s documentary ‘The Social Dilemma’ on Netflix may prove to be an even bigger deal than their 2016 film ‘The Great Hack’. The latter left you feeling that the villains of the piece were the businesses like Cambridge Analytica who malevolently manipulated social media data to change the political narrative, influence elections and threaten democracy. TSD points the finger squarely at big tech who purposefully design social media to feed their commercial model and in the process fuck up society and the whole of mankind.

 “If you don’t pay for the product, you are the product”.

Social media is not just abusing their tech to sell us stuff, they are selling us – our attention and our behaviour – without us knowing and to our detriment. TSD paints a scary future with overtones of the human batteries in The Matrix and Skynet from Terminator – AI may have started as a technology tool we used but it might become us that are the tools serving the needs of higher artificial intelligence. You think this is fantasy? Watch the documentary.

“Only two industries call their customers ‘users’: illegal drugs and IT” said Yale’s Edward Tufte.

Marketers (who pay for all this with their ad budgets) are trying to wean themselves off calling customers ‘consumers’. (If you drop the ‘m’ consumer is an anagram for ‘con user’). I think ‘people’ would be the best word because it simultaneously captures diversity and common humanity – the ‘we’. But I don’t think the lexicon is the issue and in fact I don’t think marketers or even the titans of big tech are the villains. They are people. A lot of the contributors to TSD, people like Tristan Harris or Justin Rosenstein, are from big tech. They have a conscience and know that many of their former colleagues do too. Marketers are not evil svengalis. They are paid to promote their products but most recognize that this increasingly means doing so in a sustainable and socially responsible way because that is what society wants. It is what will make their customers happy and they like happy customers. So what makes good people in marketing and tech do bad stuff? Two things:-

  1. Not recognizing the unintended consequences
  2. Not having a commercially attractive alternative

On the heels of ‘The Great Hack’, TSD can address the former. As ‘Inconvenient Truth’ was for climate change, this is a tipping point in the debate about social media and the issues around the misuse of the data it generates for the ‘attention extraction’ industry. We all know that something is wrong, we all know this is seriously fucked up and heading in a bad direction – but what is the alternative? What is the antidote? TSD is incredibly powerful and disturbing, very disturbing especially as it leaves you in no doubt things need to change but not much hope they will and no real solutions other than regulation (of some sort not defined) to disrupt the business model on which big tech has thrived.

Just as I concluded in my paper ‘Naked Economics; the new laws of the jungle’ the easy conclusion is that governments need to fix this – ‘they’ need to regulate. Easy but wrong because even if ‘they’ wanted to, ‘they’ can’t. It’s too complex, there is too much vested interest and there is no ‘they’. The legislation would need to be intricately drafted to cover every issue and avoid every unintended consequence. There are $ trillions at stake so expect some resistance and every government would need to act in lock step which they won’t/can’t.

So, as with the new economics, let’s focus on ‘we’ –  what we the people can do about the social dilemma that is social media data harvesting, processing and commercial application. For the wider economic context the macro levers to pull were the attribution of cost and ascribing of value to enable us to make better choices. In the specific area of data the micro levers are platforms that allow us as individuals to own, control and transact our own data.

The solution lies not so much in regulating the current business model, although that might have a role to play, but rather in creating a new business model that empowers people.

At the heart of the current model is data about 3 things:-

  • What you think
  • What you do
  • The connection between these

The tech, the algorithms, the UI and the AI that are all designed to do this can of course then be applied to change what you think and do, to get your attention and to persuade you. The business model is then to monetize this by selling it to people who wish to promote their business. It can also be sold to people wishing to change your politics but that will only ever be a small fraction of the billions social media earns. The big bucks come from big business.

The global industry for advertising and research is roughly $1 Trillion. That is how much business will pay to find out what you think and present the best version of themselves to you at the most opportune time.

What if we just told them? What if we offered the information they want to know and stuck our hand up when they had the best chance to sell something to us? Because if we did, en masse, then the revenues for facebook et al would start to evaporate.

Who would be prepared to do that? We all would. We do it all the time for purchases that are important to us and about which we are unsure. Say we want a haircut, a new car, expensive cosmetics, a new home, a piece of home electronics, a suit for our wedding. We pitch up, tell someone we are interested and then proceed to tell them everything they need to know about our lives, quite often more than they need to know. Yes we may do some research on-line and then purchase on-line but there are still many things where we meet people face to face, people that we know are there to sell us stuff, we tell them we are interested and we answer pretty much any question they care to ask. Why? Because it is in our interest to do so and we get something in return – help in making our best choice.

As long as we feel in control of the exchange of our information, our attention, our data, and this has material benefit to us we are happy to give business what they want.

I have been thinking about this for the last 5 years and I have ideas for two potential tech based platforms that would allow people at scale to exchange their ideas and their data – on their terms – with businesses and brands. These could divert a big chunk of the revenue Social Media generates directly into the hands of us, we the people, and offer what business wants quicker, cheaper and more effectively.

It would not stop the potential of big tech to produce addictive, manipulative social  platforms with the power to affect peoples’ physical and mental health, to undermine truth with fake news, to divide society and swing elections but it would take away their incentive to do so. They would eventually be left with only one option which is to make you pay for their service – and if we pay for it then we control it. It becomes the product, not us.

Let me know if anyone is interested to know more……..

Solving the facebook problem

Facebook are in the firing line yet again. Several large advertisers are boycotting them for publishing hate speech – these are big names like Unilever, Diageo, Pepsi, Starbucks. It will concern facebook, they will probably dial up their investment still further in an effort to stamp this out and their spokespeople will double down on on their well crafted defence based on that. “We are making every effort we can, it’s a tiny minority but while there is hate in the world there will be hate on facebook” I heard one say today. After all ‘we’re just a platform not a publisher per se’. There is one obvious solution which is to declare them to be a platform that publishes and impose the same kind of legal restrictions that apply to other media platforms/publishers/broadcasters. Admittedly these restrictions are not perfect. They differ from country to country, some are exercised through government watchdogs and others through a licensing system. If we go down this route the licensing option is the most effective – break the rules and you lose your license to trade, it is awarded to someone else. Can this be operated for the web – of course it can. Not every country or territory would sign up but if enough did it would flush out very quickly whether facebook were “doing everything we can”. But I think there is a better solution which takes the advertiser boycott to its logical conclusion. Reduce facebook ad revenue to zero by making it redundant as an advertising platform and forcing it to charge for its service. Facebook generates $70 billion in revenues from advertising and its costs are roughly $46 billion. But of course a great deal of its costs are incurred to generate the ad revenue. How much would they be if they focused purely on running a really good social media platform? Let’s take a stab – half? So how much would they have to generate from user subscriptions? About $7.50 per user per year. At $10 p.a. they’d be making a very decent $7 billion operating profit. It’s not quite as simple as that but the point is valid – there is a different business model available to facebook or other competing social media platforms. The challenge is how to force them to look for it. Well that is simple – take away their data advantage by creating platforms that allow people to transact their own data.

It has been estimated that your personal data – what you like, where you go, what you buy, what you watch/read/listen to etc – just as much as you want to share is worth $7,600 p.a. on average to you. Much more for high nett worth people, less for the less well-off but arguably more important. If you only earn $25,000 a year then an extra $2,500 for your data is very attractive (this has been proved – people in emerging markets and students are far more willing to sell their data or attention or opinions). Facebook’s model is based on them taking the commercial advantage for having thousands upon thousands of data points on you. The technology exists to allow you to cut them out the loop and transact your own data with whosoever you choose for your own gain.

With no – or at least much lower – ad revenue facebook and their ilk would have to find a better business model, one where people only hand over their money if they appreciate both the service and the ethics of the business. Would you renew your subscription for a business that allows hate speech or pushes content to you in irresponsible ways? No need for government intervention or business boycott’s – problem solved by giving people the rights to their own data and the means to transact it however they choose.