Innovate or die. It seems like advertising industry has been living in the shadow of this mantra for the last fifteen years. Long gone are days of advertising as usual, and more adept agencies and clients alike have been in constant reinvention mode, trying to adapt their business to the Fear Factor that consumer behavior has become.
It all started with nerds sharing code. It continued with people sharing content ranging from the latest news to the most intimate moments of their lives (just look at Secret. Actually, don’t). Now micro-entrepreneurs, who are just like us, are now sharing property, possessions, skills and knowledge.
It sounds like an amazing thing. Except that, if you are a brand in the business of creating all of those things, it is actually not. It is dangerously close to pure panic of being squeezed out of business by virtually anyone describing their model as “AirBnB for X.” And with good reason.
Total revenues of the collaborative economy sector exceeded $3.5 billion in 2013, with growth going upward of 25 percent, claims Forbes. Rachel Botsman, founder of Collaborative Lab, assures us that P2P rental market alone is worth $16 billion. The Economist got so smitten that it proclaimed 2013 “The Year of Collaborative Consumption.” Mary Meeker, the queen of Internet trends, decided that sharing economy was one of the trends for 2012. Some go as far as to predict that collaborative economy as potentially a $110 billion market. US Investors, always keen on being the first to discover and fund the next big thing, turned their watchful eye to developments in the collaborative economy startup scene. The result is that is more than one third of startups with business models revolving around sharing cars, labor, office space, equipment, and pre-owned products received a total of over $2 billion in VC funding [EDITOR’s NOTE: over what period?]. Lyft raised $60 million. Airbnb raised double that amount. Avis bought Zipcar for $120 million. Google funded uber for $258 million. eBay/Paypal bought Braintree for $800 million.
The numbers are dizzying, and they implicate a very real and powerful economic force. Forget about all that hippie, “join the movement!” talk. We are dealing here with a new business model based on self-interested consumer behavior. This model is viable, sustainable, and above all, aimed at putting your brand out of business.
Something that at first seemed like a social phenomenon is actually firmly an economic one (further demonstrating that separating the two had never been a good idea). Just like the rest of digital disruptions, it is deeply rooted in human behavior that got amplified, translated, fortified and turned into a cyborg, half-human half-technical version of itself. The specific behavior that steadily fuels the collaborative economy is a combination of value-seeking, convenience, instant gratification, quality control, and looking for less-mass, more unique experiences. Using Uber as an example, this means that I, as a consumer, am looking for: a) a transportation option cheaper than Yellow Cab, b) available at the swipe of my application rather than standing at the slushy corner, c) instantly present at the moment I call it (no lingering at the above mentioned slushy corner), d) customer reviews-supported, and e) quite a pleasant, sitting in someone’s roomy car instead of smelly cab, experience.
Brands don’t provide this. They don’t provide this superior experience. They don’t even compete on the basis of customer experience. Their go-to market strategies are not customer experience-driven. Their marketing doesn’t concern itself with experience. Their value chain is devoid of it.
What is the real challenge here, then? The fact that there are a lot of micro-entrepreneurs and startups resolved to make money out of making something better, easier and more fun for consumers, or the fact that our branding playbooks suck because they haven’t been updated for the past 75 years, ever since the industrialization happened?
The real innovation of the collaborative economy is not that people are — brace yourself — sharing, bartering, swapping, renting, lending and collaborating, because they have been doing that since the dawn of time. The real innovation is that the collaborative economy created a market for superior customer experience. Instead of competition based on price, production cost, distribution, and advertising communication, brands — oh the horror — need to compete based on the customer experience they provide. This is when innovation of the collaborative economy became truly disruptive.
It certainly helps that there is a lot of opportunity for disruption. There are 1 billion cars in the world. 740 million of them are occupied by just one person. The average car is used one hour per day. On average, our homes are filled with $3000 worth of unused items. Forty percent of human food goes to waste.
This waste is a direct result of the 75 years of branding being done in a certain way. This mode of branding persuaded, inspired and nudged us into acquiring more, more, and then some more. We became senseless hoarders without conscience. If that sounds harsh, look up the most recent data on global warming, energy sustainability and economic crisis.
The reality of this world, combined with our accumulated, idle assets and skills, and spurred by trust and connectivity coming from digital technology created a context for economic exchange that’s neither based on production nor on knowledge. Instead, it revolves around socio-economic exchange that happens directly between individuals instead of exchange that takes place between businesses and consumers.
This is when the situation gets hairy for brands. Traditionally, they were mediators between producers and consumers, making producers more attractive to consumers and convincing consumers that they will be prettier, stronger, smarter because of products and services that producers create. Today, all we need to make a decision is a review, a photo and a community endorsement. So what happens to brands when the fastest growing form of economic exchange doesn’t need mediation anymore? What is the role of brands in a collaborative economy (assuming there is one)?
This is a valid question. Current global economic landscape is interspersed with “traditional” companies, digital-first businesses, and collaborative economy startups. All of these diverse organizational forms revolve around different value chains. Industrial-era companies have value chains optimized for production and distribution. Digital companies have value chains optimized for service and information. Collaborative economy startups have value chains that optimize a marketplace. For example, in retail market, there are traditional retailers like GAP or Target. They compete with digital-first retailers like Of A Kind, Zady or aggregators like Shopbop and Net-a-Porter. All of them now compete with retail marketplaces like Threadflip, Rent the Runaway or Walk In My Closet.
We, advertising professionals, do not need to answer the question of brand relevancy by predicting which economic model is going to win. The much more pressing question for us is how we can help prevent our clients from falling in the trap of the Innovator’s Dilemma (when new technologies cause firms to fail), help them see that the collaborative economy is not just a “movement,” and make them competitive in this complex landscape. For this, we need a new branding playbook.
The good news is that a roadmap to the new branding playbook is already laid our for us. There is no one we can learn more from than those who disrupt our clients’ businesses. The collaborative economy startups hand us the manual for success. This manual is a tool for brands to identify new branding practices and growth opportunities in collaborative marketplaces.
Grouped together, these new branding practices fall under one of the four categories.
Add an existing marketplace
Brand’s traditional, legacy business is going to be more valuable to consumers if we add an already existing marketplace to it. TaskRabbit is a marketplace for time, skills and knowledge, and, not accidentally, the most popular task there is assembling IKEA furniture. (I can personally attest to this). Loads of people do not want the fear and loathing of IKEA manuals. They would rather pay someone to go through the ordeal. Right therein lies an opportunity for IKEA. IKEA should own the “IKEA-assembling skills” marketplace on TaskRabbit. The option of having a TaskRabbit individual should be part of every online and in-store order, all bidding already done by IKEA. The retailer then delivers to your door both the furniture and the person who will assemble it.
2. Create a new marketplace
Brands are going to be more valuable to consumers if it creates some sort of new value that did not exist before. New value usually comes out of connecting supply, provided by the brand, with customer demand in some new way. A few years ago, Peugeot unveiled “Mu,” a rental service available in 70 European cities. Peugeot rents its customizable vehicles, along with scooters and bikes. This car manufacturer realized that its customers are engaging in car sharing behavior, with this brand or without it. In a savvy move, it adjusted its supply to its customers’ shifting demands.
In a slightly different vein, Patagonia partnered up with eBay to create a redistribution market for its pre-owned jackets, fleeces, gear, shoes, sweaters and other outdoors items. Patagonia customers can sell their ski pants, or buy a ski helmet on eBay, under Patagonia’s brand. By expanding its product offerings into pre-owned goods, Patagonia effectively expanded its market, reached more consumers, and encouraged more economic transactions around its products. Since then, retail brands are starting to embrace the trend: H&M and British retailer ASOS crated their own online marketplaces.
3. Design for exchange
Brands are going to become critically valuable to consumers if consumers invest their own time and resources in it. In this scenario, consumers define their brand experience by adjusting brand product and services to their own needs and likes. Big, upscale US retailer Nordstorm partnered with TOMS shoes to inspire its customers to design new TOMS. Nordstorm attracts affluent customers who are looking for something more than just mass-produced clothes. They seek unique, elevated designs that are going to set them apart from their peers. Intimate knowledge of its customers allowed Nordstorm to come up with the initiative that responds to their needs in the best possible way. Nordstorm inspired its customers both to express their creativity through shoe design (and to own it), and to feel good about being part of a larger, meaningful humanitarian initiative.
Lincoln Motors tapped into customer insight in a similar way. Knowing that people who gravitate toward Lincoln cars like exclusive, highly personalized, unique experiences, it partnered with CustomeMade, a 3D hardware shop, to create matching jewelry for new owners of Lincoln vehicles. In this way, it rewarded its customers via the innovative, next-gen symbolic status recognition.
4. Disrupt the business you are in
Brands create the most value when they reinvent their business by identifying and serving an unmet customer need. The fact that they modified their value chain so it diverges from their industry standard allows them to propel themselves ahead of their competition for long-term. Walmart has been suffering Amazon’s online domination for years now. The biggest US brick-and-mortar retailer finally decided to do something about it. It transformed its value chain into a hybrid online/offline/collaborative economy model, where merchandise ordered on Walmart.com can be drop-shipped for same-day pickup at local stores. Additionally, Walmart incentivized customers shopping in its physical locations to serve as couriers, dropping off merchandise ordered online to those who live nearby. For their effort, they get a shopping discount. Not to be outdone, Google quickly created Google Shopping Express that mobilizes local merchants to deliver goods ordered online via Google Shopping. Rapid delivery has proven to be an unmet customer need that served to spur innovation and turn market competition into customer gain.
All these new branding directions are aimed to one, single-minded goal: amplify customer experience. Make it better. Make it more complete, A to Z. Close the value loop. Provide consistent quality. Put customer convenience first. Be useful. Be interesting and stay clear of one-size-fits all experiences. Allow people to share (people love sharing!) .Add value in every customer interaction. Focus on unmet needs, and be one step ahead.
Brands who implement this kind of thinking have nothing to fear in collaborative economy. They already behave according to its principles of generosity, transparency, sustainability and utility. Marketplace, design and disruption are the new branding playbook, and with it, collaborative economy can only make your brand grow.
*The above text was taken from the new Creative Social book, Hacker, Maker, Teacher, Thief: Advertising’s Next Generation. This book features chapters from 35 leading creative directors and business owners. Some of the topics we cover are: what does the industry need to do today (not tomorrow) to stay valuable and relevant? Is digital collaboration the death of idea ownership? And should we make things people want rather than make people want things? Get your copy on Amazon here!