PPPPinching Pennies & Pushing Progress (Four P's #198)
Building, Simplifying & Learning In the Face of Uncertainty
One of the many memorable talking points from a (poorly-informed, if not a poorly-intentioned) member of my extended family during the Thanksgiving weekend was a frequently repeated reference to Jeff Bezos' interview with CNN earlier this month:
“If you're an individual considering purchasing a big-screen TV, you might want to wait, hold onto your money, and see what transpires. With inflation, remove some risk from the equation.”
SOMETHING POLITICAL: The Flip Slide to Inflation
Everyone seems to have an opinion as to what has caused this latest wave of global inflation. Half of Americans currently think President Biden is the biggest source of blame. But most people talking about inflation look at only one side of inflation: the general increase in prices. However, this definition misses a second, equally important aspect of inflation: the fact that it also involves a decline in the purchasing power of money.
This combination of a persistent increase in the prices of goods or services and a decline in the purchasing power of money has contributed to a dangerous spiral of inequality as the wealth of the richest – including the central government – expands at the expense of average citizens.
Inflation tends to follow a wave pattern, with prices rising, stabilizing, and then rising again. Increases in the money supply are typically caused by two different factors: central banks printing new money and private banks making loans to individuals or companies. Changes in the money supply impact inflation in the medium term – but that’s not the case in the short and long term.
Short term, the money supply is less relevant because changes aren’t immediately reflected in the prices of goods and services. Increases in the money supply initially prompt people to save, so they aren’t spending their new money right away. Additionally, most new money is created by banks when they give out loans. That money is usually transferred into assets (real estate, savings accts) rather than directly into goods and services.
In the long term, inflation is impacted mostly by population growth. This effect is easy to understand. An increasing population means more people are competing for limited resources, which means higher prices.
With a combination of factors - from Russia's invasion of Ukraine to a massive stimulus of cash to keep the economy afloat during the COVID-19 pandemic - we are in the down-wave of a wave-like pattern. Inflation gradually rises over about a century. Then, there’s a period of turbulence where prices fluctuate wildly. Finally, there’s a period of equilibrium in which prices remain relatively stable. Eventually, a new wave of inflation is triggered, and the cycle begins again. Each price rise increases exponentially over time, though the length of the waves and the intensity of the inflation all vary.
Inflation isn’t wholly bad. But it’s not wholly good either. The early inflationary wave can help the economy. For one, increasing prices provide an incentive for people to spend money rather than save it since they know that whatever money is sitting in their checking and savings accounts will continue to hold lesser and lesser value. But the real beneficiary of inflation is the government. It makes countries’ GDPs appear higher. This, in turn, shines a positive light on the country on the world stage. But inflation also slowly steals money away from average people and the cash savers' accounts, decreasing the purchasing power of their savings.
According to Deutsche Bank’s forecasts, the total world population will peak and then begin to decline in 2055, yet the current number just surpassed 8 billion. Our aging population, combined with population decline, will likely slow down inflation significantly in the decades after 2050. One solution could lie with the blockchain, as we know that some cryptocurrencies are regulated by a predetermined formula; as a result, they’re not easily abused by individuals or governments and can be accessed all over the world. Yes, even more regulation is required, but the blockchain could be used to facilitate a new global monetary system that eliminates inflation.
SOMETHING PRACTICAL: Build, Borrow, and Buy
"Now is the time to build." I can't tell you how many times I've heard that in the past few months. But build what, exactly? There's an easy answer, and then there's the right answer.
Earlier this month at Web Summit, Sir Martin Sorrell posited that as global conflict and economic tumult pose challenges, CFOs and CEOs will put pressure on CMOs to deliver on performance and activation. “The market is going to become much more performance orientated, much more activation orientated, more about media mix, measurement, ROI —- those are going to be the critical issues.”
That's the easy answer. But as we learned in the last economic downturn, marketers that strive to push up revenues during a recession and lean into performance marketing will struggle to see desired results. Prioritizing short-term conversion objectives over long-term brand-building as consumer confidence drops is penny-wise and pound-foolish." Consumers may not have as much discretionary capital to spend on non-essential items, goods, and services. Marketing budgets can and should shift, but perhaps not to the extent that some may be planning or thinking about.
The right answer: Companies that focus on brand-building, expand their technical infrastructure, bolster the emotional connection, and prepare for the recovery will be better positioned to emerge even stronger than ever when consumer spending returns.
Speaking from personal experience, the early success of our clients at 360i from 2009-2011 came amid the last economic downturn. Instead of guiding brands to put all of their eggs in the conversion basket to hit bottom line numbers, we helped them to test new social media platforms, build communities, and focus on consumer education, entertainment, engagement, and loyalty. When the market bounced back, those brands capitalized. The same should happen now: Technologists are building the next generation of digital engagement tools on the blockchain so that marketers and brands can invest back into the system, put down their Web3 roots, and reclaim ownership of their relationship with their consumer community once again.
Crypto crash isn't to blame for the recession. But investments in blockchain technology might just be how we accelerate our way out of the recession.
Take a look back at what Harvard Business Review had to say back in April 2009: "Allocate for the long term. Bolster Trust. Position For the Recovery."
SOMETHING PERSONAL: Simplification With Specialization
One of the best compliments I've gotten in recent times came after I got off a stage at an event with hundreds of marketers in the crowd. With the opening question about the future of Web3 and brands directed at me, I made it my goal to explain things as simply and clearly as possible. So when a CMO at a leading global brand later told me that I had done the best job of making these topics understandable as they'd seen to date, I felt invigorated.
There are many great benefits to Web3 technology, but we have to stop using big words and complex ideas to sell it. That's not how we forge progress. The key to Web3 success for brands will be simplification without loss of specialization.
First, let's stop using words like "interoperability." Let's, instead, use words like "connected." In simple terms, interoperability is a term used to indicate that systems and programs can communicate with other programs.
For blockchain-based applications, it means that tokens and NFTs from one brand can connect or unlock access to another. Why is this cool? Because every company and brand is using its platforms at the moment. Nothing is connected.
Another term we hear a lot: "composable." Which, I'll admit, sounds a lot like compostable. Or garbage. Trash. What this really means is "adding." We're starting simple, and adding layers, benefits, applications, experiences, value.
Today's brand/consumer experience is isolated from one another. They don't connect. They aren't additive. What's worse? Centralized platforms own that content, data, and relationship with the consumer.
Current loyalty programs suck. Yet no brand is ready to replace its existing solution. No, not even Starbucks or Nike. But by seeding tokens with subsets of consumer audiences, you start small with small rewards. Build affinity. Only later, once behaviors, interests, and accessibility are greater... Then we add. Then we connect.
White-label token platforms are building systems that can be connected and added to over time.
With tokens that connect branded experiences to each other... partnerships via proof of ownership.
With tokens that can be added over time... that unlock access to experiences, events, content, commerce, collaborations.
With blockchain transparency, all of this connecting and adding is going to provide better data (data that the brands own, not the centralized platforms).
Which then will make the connections better, and the additions smarter.
Thus making consumer experiences better, and brand loyalty stronger.
Sounds like a win-win to me.
SOMETHING PERSONAL: Fall & Rise of Metaverse(s)
Most brand metaverse experiences are failing. But that doesn’t mean they are failures.
In this first phase of Web3, we're seeing similar patterns from the early dot.com & social media eras repeat themselves, with companies and agencies prematurely celebrating the launch of a new virtual environment or experience instead of actual engagement or participation. (Most are seeing fewer than 100 active users at a time.)
But it is an opportunity to examine, reflect, and revise strategies for those following their lead. Brands need to take risks if they want people's attention. If not, then the next generation of consumers will grow up unaware of their existence. The more we experiment, participate, and lead with new thoughts/innovative ideas now, the more resonant and meaningful the opportunities will be later.
KEY LEARNING: Launching a branded metaverse experience is fun and exciting, but if marketers want ongoing, active engagement in their virtual metaverse experiences, the required step beforehand is to seed tokens (yes, #NFTs) with their audiences.
This blueprint works with retail/fashion and gaming models, but others are skipping steps, and therefore unable to establish certain behaviors and threshold audience requirements for sustained success.
Total metaverse users continue to grow (1.5B+ worldwide by 2024) & consumers are spending more in these spaces. Web2 social platforms are integrating web3 tools (Meta, Twitter, Reddit, Instagram).
Many of these initial virtual experiences are being fashioned to replicate the banality of physical experiences (shopping, ordering food), but this will not attract new customers or delight those you're trying to keep happy. They are missing opportunities to educate about the technology & terminology.
But it's not JUST about NFTs. It’s about tokenized affinity, passion, loyalty, participation, and experiences. 2023 will see the excitement from the past few years channeled by brands, marketers, and partner organizations develop into a more sophisticated understanding of the power and potential of tokens: to connect with consumers and fans, add value, and unlock experiences.
Tokens don’t disappear and can be activated with additive value over time (especially in metaverse environments!). Imagine an NFT or loyalty program that levels up w/ your fandom as you engage in virtual and IRL locations, not just through ownership of digital assets, but also ticket purchases, digital streams, referrals, social engagement, etc. Participation tokens are early AND they’re just the beginning!
