By ERNEST NORTH, co-founder at Naked, the AI-driven car insurance provider
Over the past 10 years, we have seen digital technology reconfigure the relationships between brands and consumers. The rise of globalised competition has given people more choice than they have ever had before, while social channels mean that consumers have the ability to organise into communities of interest as well as a louder voice in their interactions with brands.
This shift means that big branding campaigns no longer have the power they once had. Though mass media campaigns can be prestigious and impactful, they are also expensive and untargeted. This approach also suffers from diminishing returns as dozens of brands in crowded, commoditised sectors compete to shout the loudest, trying to overwhelm consumers with hundreds of billboards, radio ads, sponsorships and other untargeted advertising.
Breaking through noise and clutter
Typically, in markets that are not very interesting or where the products themselves are not particularly differentiated, the goal is to break through the clutter and noise so that the brand’s name can be top of mind for the average consumer. These big campaigns lead to high customer acquisition costs—costs that traditional brands typically pass on to their clients in the form of higher fees or prices.
Ah, but this is all changing because of the shift to digital advertising, some might say. The reality, however, is that most digital advertising is not as personalised, efficient or non-intrusive as it is meant to be. The approach for most brands is to use crude demographic and behavioural data to target consumers with ads across a range of digital platforms.
For example, a property developer may use a social media platform’s data to target all 30-35-year old females in Johannesburg with a certain estimate of minimum income with an ad showing a residential estate close to a prestigious school. And once someone searches for home loans online or uses a bond repayment calculator, she will see popup pages for home financing wherever she may roam on the Internet for the next two months.
This approach—which essentially is a move from shouting to stalking—is flawed for a number of reasons. For starters, it still depends on intruding in the consumer’s life with dozens of marketing and advertising messages they might or might not want. Targeting people along lines such as age, race, gender, education, and suburb is not bringing a real personalised touch to marketing.
We are not our demographic data
As humans we are not defined along demographic lines, but by our mindsets and beliefs. What matters to most people is their definition of what’s right and wrong, their feelings about certain social trends, and their attitude to embracing new technology and new processes to lead better lives. Targeting people according to age or gender is ultimately as unfocused as putting up a billboard for everyone to see.
The other major problem with this approach is that customer acquisition costs remain high because one is paying to reach large audience segments that are not going to be interested in the brand or product. It does not scale into a way to bringing marketing and advertising costs down over time by talking to the customers that will relate most to the brand.
There is another way.
We are seeing many brands shift towards more personalised, granular and direct ways of reaching their customers. Many new-age brands such as Uber and Airbnb have grown more on the back of social media and word of mouth than through massive campaigns in mainstream media—and they have done so by focusing on connecting to people on the levels of values and lifestyle rather than demographics.
Such brands focus on reaching a ‘tribe’ through more sharply focused micro-campaigns on social channels and even in the real world. A ‘tribe’ refers to a group of people whose interests, values and behaviour align with those of a brand. When people buy from the brand, they are purchasing because they feel aligned with a tribe rather than because of features, functionality or branding power.
Scaling up personal storytelling
The beauty of tribal marketing is that customers tell the brand’s stories through authentic social media and word of mouth testimonials. People in the tribe feel as if they’re investing in the other members of the group (and earning themselves social credibility) by sharing the good news about a brand they love. The customer growth curve becomes exponential, and the marginal cost of acquisition becomes almost zero.
Brands have long tried to cultivate tribes using mechanisms such as loyalty clubs and in-house magazines, but today, the combination of social media and data enables us to take tribal marketing to the next level. Rather than spending lots of budget on big brand campaigns, the brand can use its money to reduce prices or create better customer experiences.
Tribal marketing will only work when the brand embeds the values and philosophies it promotes into everything it does. We can expect to see many companies try to create tribes in much the same way as every brand a few years ago desperately wanted to ‘go viral’ with its social campaign. A tribe needs to be built organically, with a product experience as the first building block.
In many industries, this means leaving behind legacy issues and processes and tricks and systems that have made consumers cynical. For some businesses, consumer unfriendly policies and systems are so deeply ingrained into the way they operate that it can be difficult to change. This has created fertile conditions for startups to challenge incumbents in industries as diverse as banking, insurance, transport, and retail.
These challenger companies will compete in different ways to those that came before them: by building enduring relationships with people who don’t just buy their product or service, but their purpose, values and community. Their customers become true fans of the brand, retelling its story to other people who share their values and interests.
This creates a virtuous circle—it enables the brand to grow without significant spending on traditional advertising and brand building, which allows it to drive down customer acquisition costs and deliver better value for money, which in its turn drives further growth and creates more advocates and fans for the brand.