Advertising agencies get a digital wake-up call from Nike

Just Do It! Nike just did, ditching its running shoe advertising agency of twenty five years not because it was unhappy with creative or because of costs, but because Wieden & Kennedy just didn't have the digital media passion or expertise needed to adequately engage the new consumer.

While Nike moving its running shoe business after so long and successful a partnership is news in itself, what is really making waves in the agency world is the reason for the move. Agencies worldwide are generally still doing a half-hearted job of leveraging the internet and related technologies for brand building, and most of them know it. When a manufacturer as intimately in touch with its consumer as Nike is sees the need to do more and do it better, and is willing to just do it, the agency world looks over its shoulder to see who is next to go.

Wieden & Kennedy are not a minor agency – they have long been a creative powerhouse doing work for companies like Procter & Gamble and Coca-Cola. They must have seen this coming, and probably had plenty of warning from Nike, but were simply unable to change fast enough to keep the account.

In February, Mark Parker, Nike's CEO, told investors

The Nike brand will always be our strongest asset, but consumers are looking for new relevance and connections. We're fundamentally changing the way we're organized as a company. It's really all about going deeper to get deeper connections and deeper insights, to get more innovation and more relevance, and to make us ultimately more competitive in each of the discrete pieces of our business. This allows us to be more informed and more surgical in creating products and optimizing our go-to-market strategies within each category.

Nike gets it. The consumer – particularly in Nike’s demographic – is now calling the shots, and companies who insist on pursuing a 1980’s-style mass-market broadcast approach to communicating risk being marginalized or, worse, becoming irrelevant.

As the New York Times put it,

The message is clear: No matter how talented an agency's creative team or how well the client's management likes the firm's executives, the agency is of limited value unless it embraces digital media.

That means, just as the web has permeated the lives of consumers, agencies must permeate digital culture throughout their organisations, instead of regarding “internet stuff” as an afterthought, add-on, or external business. For many markets, digital thinking needs to be a foundation of advertising strategy. And while it makes sense to start digital operations as a separate entity (thus bypassing all of the legacy resistance), there has to be a plan to reintegrate online operations as soon as the “interactive agency” is up and running.

But advertising agencies the world over are still dragging their heels. Given that the internet attracts more advertising money than radio worldwide, and was second only to TV in the UK last year, it's hard to keep on regarding online as something that is still not important.

Last week at the Online Media Marketing & Advertising (OMMA) conference in Hollywood, a panel of industry insiders agreed that most ad agencies are simply not ready for the digital era. Tim Hanlon, from Publicis, was adamant that the traditional structure of ad agencies is an obstacle, and that de-siloing brand advertising and response advertising is essential to create the flexibility and spontaneity necessary to get to the online consumer.

Bant Breen of Interpublic was of the opinion that acquiring so-called interactive agencies is easy, but integrating them into existing agencies is not, and that’s the thing which is necessary for a more powerful approach to advertising which can do things like build customer relationships and enable transactions.

What’s the problem with traditional ad agencies?

Firstly, the whole structure within agencies (and the communication structures between agencies and clients) makes change a painfully slow process. Not good when rapid and disruptive change is a key characteristic of online consumer environments. How long does it take to brief, pitch, create and roll out a campaign? Given the aversion to risk within agencies and clients, it can take months. Online, you need to be able to do this stuff in days if not hours. The risk of not operating quickly vastly outweighs the risk of moving so slowly you are effectively doing nothing. Agencies need to be given more latitude to act almost spontaneously, but it is unlikely clients would allow that, and even less likely that agencies would want it.

Secondly, agencies and their clients are way too precious about protecting brand identity. Remember when the primary role of a brand manager was to police the “brand bible” and ensure the eternal purity of the proposition? In a web 2.0 world, consumers want to talk about products. And, in the words of the Cluetrain Manifesto, whether the news is good or bad, they tell everybody.

Trying to protect a brand from consumer comment, being afraid that customer opinion may pollute or hijack your carefully crafted identity, is no longer a valid marketing activity. But encouraging discussion and being ready to respond to it, and making sure you are structurally able to maximize net advocacy, are alien concepts to many marketers and their ad agencies.

Thirdly, the traditional approach to broadcasting generic messages to largely mass markets is inappropriate for digital media, which is all about sharply focused messages for niche audiences who are discerning, informed and impatient. When your medium is newspapers or television, you have to communicate across the broad mix of audiences that they reach, and being too focused in your message risks completely missing important components of those audiences. True, satellite TV and niche publications do allow for a more narrowcast approach, but it is nothing compared with the laser-focused nanocasting and individual consumer conversations that the web allows – and requires. But the broadcast mentality of traditional agencies results in nothing more imaginative online than generic corporate banners on mass traffic sites like directories and online newspapers.

Fourthly, the online business model does not work well for agencies. If a major part of your income originates in placement commissions paid by traditional media, it is very hard to look at online opportunities as anything but financially retrograde. So the only real financial incentives to pursue digital strategies are macro incentives: you’ll pull in big accounts if you are seen to be on top of this web thing, or you’ll lose big accounts if you are not. Ad agencies need to reinvent their business models for the 21st century, because their old models are a significant handicap to progress.

Social networks for KLM passengers and business travellers

Loyalty programmes are invariably about a company trying to create a relationship with a customer, with the primary motivations being to secure repeat business and cross-sell services. That’s so web 1.0. These days, the objective is not so much to form a company-customer relationship as to facilitate customer-customer networking relationships with the company providing the context.

There is probably no industry in which loyalty programmes are so widespread as travel, so when a major airline starts trying to get social networks working for its frequent flyers, it may be the first sign of a significant evolution. Not surprisingly it is the Dutch, who gave us the compact cassette and the CD, who were the first to move in this innovative direction.

KLM is the first airline in the world to build online social networking communities for its customers. Aimed primarily at frequent business travelers, and currently centered on specific destinations and activities, KLM’s communities connect people with common travel interests. Its first two destination communities, KLM Club Africa and KLM Club China, and its first activity community, Flying Blue Golf Club, are at the moment available only by invitation.





The benefit of belonging is that members of the networks can get to meet and share experiences with people working in similar markets, facilitating connections that might otherwise never happen. Members also get access to services such as translation, travel advice, or legal assistance provided by KLM business partners. And the networks are not exclusively online: face-to-face networking events take place regularly in he destination zones, as well as back home in the Netherlands.

Members of the golfing network (ever meet anyone from the Netherlands who doesn’t love golf?) can use the community to create profiles of their playing ability, arrange to play with other members who are going to be in the same place, and even use frequent flyer miles to pay for games or buy golf equipment.

It is a fairly bold move by KLM to try to unite its customers. Most airlines prefer to keep customers at bay with a divide-and-conquer mentality. But KLM has a good product and an already very loyal customer base. What KLM has done is leverage and lock in that loyalty not by offering “me-too” benefits like more comfortable seats or better in-flight entertainment, but by offering a unique service of potentially great personal value which other airlines might find harder to mimic.

In a similar vein, a new company called PairUp is offering to help travelers (on any airline) to connect face-to-face with fellow travelers with whom they may already have an online connection. PairUp members uploading their contacts list (from Outlook, or whatever their e-mail or contact management tool is). When they schedule a flight or participation in a conference, they put their flight and accommodation information in the system.

The system shows them people in their list whose uploaded travel details coincide with theirs, and lets them pick the contacts that they are interested in getting together with. The system is not exclusively for use by vaguely connected people – it can be used as a coordination tool by colleagues who need to share travel plans.



PairUp also provides a version of its tool to event managers, allowing convention organizers to offer a pairing-up service directly to people who register for their event. Anyone who has participated in major conferences where you struggle to find out who is attending, then battle to track down the people you want to talk with, can see the benefits of such a tool.

How Alasoop Uses MailChimp to Help Local Restaurants

MailChimp is an e-mail marketing service provider that makes managing e-mail campaigns very simple. Where services like Constant Contact charge a flat monthly fee that increases with the size of your mailing list, MailChimp charges a very low fee per e-mail sent.

On MailChimp’s site there is a great case study about how Webstellung (a small communications business) in Paris is using MailChimp’s e-mail marketing tools to help local restaurants market themselves.

They created a service whereby they get lunchtime restaurant patrons to sign up to receive via e-mail the daily menus of local restaurants who provide a high-quality but reasonably priced lunch. The service (branded " Alasoop", a tongue-in- cheek phonetic rendition of French for "Dinner's on the table") helps office workers find out about restaurants they may not have tried and let’s them know what’s on special today. It also helps restaurants – none of which have anything like an advertising budget -- find new customers, and to fill their restaurants every lunchtime.

Apparently the restaurants currently piloting the service are receiving increased business and increased repeat business. There is a coupon program built in to the e-mails to provide a little incentive, and it seems there is very little unsubscribing in the mailing lists.

You can read the full case study here on
MailChimp’s site.

Online Businesses Beat Offline Businesses in Customer Satisfaction

One of the prerequisites of successful online business is a commitment to customer satisfaction. The online customer simply doesn’t take the kind of abuse, disregard, or obfuscation that the offline customer is often resigned to. Online customers can go elsewhere at the click of a button; off-line businesses often perceive their customers to be captive because of the difficulty of going elsewhere, which can lead to habitually poor service by offline businesses.

The University of Michigan and ForeSee Results have just released the American Customer Satisfaction Index, which shows that customer satisfaction with e-commerce now surpasses that of offline business by 11.6 percent.

The Customer Satisfaction Index is a 100-point scale, and on that scale e-commerce scored an average of 80 against off-line businesses average of 68.4. Online retail scored 83 as opposed to offline retail’s score of 74.

Pepsi Goes Beyond 2.0

The Pepsi Generation is very much the web 2.0 generation, so it is appropriate that for 2007, Pepsi (through their agency Tribal DDB) is taking consumer online engagement and brand dynamism to a level not often seen.

Pepsi will be launching a new can/bottle design every three weeks, with each can design being themed to a consumer passion, and linked to a different online microsite that engages consumers in generating content around that theme. The dozen or so themes will include cars, music, fashion, entertainment and sports.



Pepsi’s first site was thisisthebeginning, which encouraged visitors to use a series of templated tools to collectively design a Pepsi billboard. The winning design will become a real billboard that will appear in Times Square.



The next site, pepsifreeride.com, focuses on cars, where visitors can play an online driving game and enter a lottery to win a specially customised Subaru Impreza.



Future microsites will let visitors design their own Pepsi can, with the possibility of the winner’s can actually making it onto the market. Another site will let visitors use their computer keyboard to create music.

You can see all of the Pepsi can designs at pepsigallery.com.

Personalization Desire Outweighs Security Concerns

It is hard to imagine that people who are neurotic about data loss and identity theft would willingly relinquish security for convenience. But time and time again we see consumers acting in a way that might make life harder tomorrow in order to make life easier today. In German supermarkets, people who would refuse to allow their government to capture their fingerprints willingly pay for groceries by pressing their finger on a fingerprint scanner at the till.

The recently publiched "2006 ChoiceStream Personalization Survey" found that over half of the respondents will provide demographic and other personal information in exchange for a personalized online experience.

Part of this is familiarity. Ten years ago when online sites like Amazon.com first started using cookies and subscriber data to customise the shopping experience, people were wary. Suspicions abounded about who might get hold of the information and how it might be abused. But if you don't provide the necessary information, and if you crush your cookies regularly, the online experience can be dry, tedious, and often irrelevant to your interests. Over time, people get accustomed to the personal service and become more willing to give away information. At the same time, they get more sophisticated and discerning, and they actually read privacy policies and make conscious judgement calls about who to trust and who to avoid. The more information consumers are exposed to online and the more decisions they are making online, the more dependent they become on personalisation as a data filter.

According to the report, in the past year, consumer interest in a more personalized experience has increased by 24 percent to 57 percent of respondents. Consumers willing to let a site track clicks, purchases, and other behavior increased by 34 percent in the same period. Concerns over personal data security remained high, with six out of ten people expressing concern.

Not surprisingly, younger age groups have less concern about privacy and more interest in personalisation. Comfort with the norms of social networking sites play a role, with younger people expecting sites to provide personalised recommendations.

original ClickZ article