McKinsey

What are the short- and long-term implications of self-driving automobiles?

Phillip Nones Business, Economics, Social Commentary , , , , , , , , , , ,

McKinsey’s take:  In a world where people don’t take charge of the wheel themselves … we’ll all be better off.

The Google Driverless Car
The Google Driverless Car

From Google’s fleet of driverless cars to the Mercedes-Benz Robo-Car concept, self-driving automobiles are stepping off the pages of science fiction and into real life.

But how many of us have really stopped to think about how the adoption of self-driving vehicles will change everyday life as we know it?

Consulting firm McKinsey & Co. has done so, and a recently released report predicts some pretty major changes – most of them very fine, indeed.  Here’s a sampling:

  • The number of car crashes will plummet.
  • “Drivers” will become “riders,” with more time for working, leisure and interaction with others.
  • “Dead time” in commuting will decrease, and productivity will increase as a result.
  • The ubiquity of the multi-car household will change.

And it’s not just McKinsey that is looking at self-driving cars with such optimism.

Even the normally dour and scolding National Highway Traffic Safety Administration predicts that consumer adoption of self-driving vehicles will usher in “completely new possibilities for improving highway safety, increasing environmental benefits, expanding mobility, and creating new economic opportunities for jobs and investment.”

But self-driving cars won’t overtake conventional automobiles in one fell swoop.  The McKinsey report outlines a timeline for adoption of self-driving features — and it’s pretty drawn-out.

Within the next three to five years, McKinsey anticipates that cars will self-handle highway cruising and traffic jams.

The more difficult challenges of driving in urban areas and dealing with variables like pedestrians, cyclists and so forth will be tackled over the coming 25 years.

Thus, the impact of “autonomous” technology will be limited until about 2020.  McKinsey figures that the technology will experience growing pains in the years 2020-2035 as driverless cars go more mainstream.

During this period, there will be numerous issues that will need to be resolved, with clear hub-and-spoke implications:

  • The development of comprehensive rules regarding how self-driving cars are developed, tested, approved and licensed (on an international basis)
  •  Changes in insurance practices – migrating from individual coverage to automaker policies that cover technical failures
  •  The growth of remote diagnostics and over-the-air updates
  •  The decline in importance of independent automotive repair shops
  •  The reduced need for taxi drivers and long-haul carrier jobs

The McKinsey report takes us beyond the year 2040, too, which is the point when McKinsey predicts that autonomous cars will become the primary means of transport in the United States.

The implications of this are guesstimates more than anything else, but McKinsey speculates on the following long-term effects:

Mercedes-Benz "car of the future": Seats facing every which-way.
Mercedes-Benz “car of the future”: Seats facing every which-way.
  • Car designs will change dramatically – no more need for mirrors and pedals … and car seats will face any direction.
  • Space savings on streets, roadways and parking lots from more efficient vehicle use.
  •  Fewer cars will be needed compared to today, with one autonomous car doing the job of two conventional vehicles in the typical household. The vehicles will be more expensive but fewer of them will be needed, for net savings for consumers.

As for the economic impact, the figures are difficult to quantify as some sectors of the economy will be up and others down.  But with a projected 90% drop in car crashes, the savings in auto repair and healthcare bills alone are project to be around $180 billion.

If we accept the McKinsey report’s bottom-line findings, it seems the “brave new world” of self-driving cars can’t come soon enough.  But what are your thoughts?  Are there negative implications  or “unintended consequences” that will be part of the revolution?  Please share your perspectives here.

World brands: Who’s up … Who’s down?

Phillip Nones Advertising, Branding, Business, Marketing Communications, Marketing Research, Social Commentary , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

brand finance logoEach year, the brand valuation consulting firm Brand Finance produces a report on the strength of the world’s Top 500 brands.

It’s an interesting study in that Brand Finance calculates the values of brands using the so-called “royalty relief” approach – calculating a royalty rate that would be charged for the use of the brand name if it weren’t already owned by the company.

In the 2015 report, just issued, Apple remains the world’s most valuable brand based on this criterion.  The Top 10 listing of world brands is as follows:

brand finance global 500 2015#1  Apple

#2  Samsung

#3  Google

#4  Microsoft

#5  Verizon

#6  AT&T

#7  Amazon

#8  GE

#9  China Mobile

#10 Walmart

Of these, all but China Mobile were in the Top 10 listing in Brand Finance’s 2014 rankings.  Of the others, all maintained their rank except for AT&T and Amazon, which rose, and GE and Walmart, which fell.

The most valuable brands differ by region, however.  In fact, Apple is tops only in North America:

Most valuable brand in North America:  Apple

… in Europe:  BMW

… in Asia/Pacific:  Samsung

… in the Middle East:  Emirates Air

… in Africa:  MTN (M-Cell)

… in South America:  Banco Bradesco

As for which brand’s value is growing the fastest, top honors goes to … Twitter?

That is correct:  According to Brand Finance, Twitter’s value has mushroomed from $1.5 billion in early 2014 to nearly $4.5 billion now.

Other social platform firms that have experienced big growth are Facebook (up nearly 150%) and the Chinese-based Baidu (up over 160%).

What about in non-tech or social media sectors?  There, Chipotle racked up the biggest growth in brand value:  nearly 125%.  At the other end of the scale, the McDonald’s brand has lost about $4 billion in value over the past year.

Most Powerful Brands 

In addition to its brand value analysis, Brand Finance also publishes a ranking of most powerful brands based on its “brand strength index” (BSI).  This index focuses on factors more easily influenced by marketing and brand management activities — namely, marketing investment and brand equity/goodwill.

In this analysis, Brand Finance comes up with a very different set of “top brands” – led by Lego:

Lego logo#1  Lego:  BSI = 93.4

#2  PWC (PricewaterhouseCoopers):  91.8

#3  Red Bull:  91.1

#4 (tie)  McKinsey:  90.1

#4 (tie)  Unilever:  90.1

#6 (tie)  Burberry:  89.7

#6 (tie)  L’Oréal:  89.7

#6 (tie)  Rolex:  89.7

#9 (tie)  Coca-Cola:  89.6

#9 (tie)  Ferrari:  89.6

#9 (tie)  Nike:  89.6

#12 (tie) Walt Disney:  89.5

According to Brand Finance, Lego’s brand power stems from it being a “creative, hands-on toy that encourages creativity in kids and nostalgia in their parents, resulting in a strong cross-generational appeal.”  Lego also has a big consumer marketing presence, thanks to its brand activities in film, TV and comics.

Last year’s top brand was Ferrari, which has now slipped in the rankings.  Brand Finance cited the brand’s 1990s-era “sheen of glory” as wearing a bit thin 20 years on.

For more details on these brands and other aspects of the 2015 evaluation, you can review Brand Finance’s 2015 report here.

Do any of the results come as a surprise to you?  Please share your observations with other readers as to why certain specific brands are coming on strong while others may be fading.

Managing email communications: Winning the battle … losing the war?

Phillip Nones Business, Employment , , , , , , , , , , ,

many emailsHere’s a statistic that won’t come as a big surprise to many office workers … but it still looks pretty stark when you see it on the page:  According to research by McKinsey Global Institute, knowledge workers, including managers and professionals, spend nearly 30% of their work time managing e-mail communications.

This means that for a typical 50-hour work week, a total of 15 hours are sucked up in the e-mail vortex.

It’s nothing new, of course.  And for years, companies and individuals have been making efforts in big and small ways to manage their e-mail.

One method has been through the use of IM social collaboration platforms, but that solves only some of the problem.

Other methods include aggressive pruning of spam mail … sending unsubscribe notices … and tightening incoming mail filters.

e-mail inboxBeing more aggressive with e-mail unsubscribe requests can lighten the inbox, but other pruning efforts can sometimes be counterproductive, with “good” e-mails getting sent to junk e-mail folders, thereby requiring workers to scan those inboxes every day as well.

Another popular e-mail management technique can work at cross-purposes, too.  Research by Carnegie Mellon Institute has found that about a third of office workers file their e-mail messages into folders right after they’ve been read.

But according to Alex Moore, who heads up e-mail management service Baydin, Inc. creating files associated with different clients, projects or people turns out to have its own inefficiencies when searching for e-mail messages later.

It seems counterintuitive, but searching for older e-mail correspondence is often easier to do when using a single chronological file coupled with a search function, because it’s just one search instead of potentially many.

inbox managementSpeaking as someone who receives around 200 e-mail messages each business day, give or take, I find that the following strategies work best for me:

  • Unsubscribing – as best as possible (even with the shortcomings of attempting to do so)
  • Keeping my settings so that e-mail messages download every 20 minutes instead of right away
  • Aside from important client messages, “batch-processing” e-mails just four times each business day: early morning, late morning, mid-afternoon, and end-of-day

Adopting these practices makes it easier for me to concentrate on my other work tasks, keeping those Job 1 and relegating e-mail management to being “ornaments on the tree” rather than the tree itself.

If other readers use particular e-mail management techniques and tactics that are effective for them, let’s hear about them.  Please share your thoughts below.

Americans and the economy as 2015 begins: Caution continues.

Phillip Nones Business, Economics, Employment, Social Commentary , , , , , , , ,

As we’ve closed out the year 2014, more than a few people – from politicians to business leaders and business journalists – have sought to reassure us that the American economy is not only on the right track, it’s back in a big way.

Bronx CheerBut evidently, word hasn’t trickled down to “John Q. Public.”  Or if it has, it’s been greeted by a gigantic Bronx Cheer.

We have the latest evidence of this in management consulting firm McKinsey & Company’s most recent annual Consumer Sentiment Survey, which was conducted in September 2014 with results released last month.

The bottom-line on consumer sentiment is that despite the recent spate of decent economic news and higher employment figures, people are still reluctant to increase spending, and thriftiness remains the order of the day.

While people don’t think things are deteriorating … they don’t think they’re becoming much better, either.

So … treading water is about all.

It’s not too difficult to figure out why sentiment continues to be so skittish.  After all, median household income for Americans, adjusted for inflation, actually declined in recent years and hasn’t rebounded.

With people still feeling the earnings squeeze, it’s only natural that McKinsey’s findings show consumer sentiment still in the doldrums, with only ~23% feeling optimistic about America’s economy.

Consider these further findings from the research:

  • About 40% of respondents report that they are living “paycheck to paycheck”
  • Around 39% are at least somewhat worried about losing their job
  • Approximately 34% feel they have decreased ability to make ends meet financially

Not surprisingly, respondents with lower family incomes (under $75,000 per year) have higher concerns, and roughly 40% of those households report cutting back or delaying purchases as a result.

[Even among people living in households earning $150,000+ per year, one in five say that they’ve cut back or delayed purchases because of financial uncertainty.]

Activities we commonly associate with recessionary eras continue to be practiced by consumers.  According to McKinsey’s research, those practices include:

  • Looking for ways to save money (comparison shopping, coupon use, etc.): ~55 of respondents report doing so
  • Purchasing more products online to save money: ~48%
  • Cutting spending over the past year: ~40%
  • Doing more shopping at “dollar stores”: ~34%
  • No longer preferring/buying more expensive product brands over private-label substitutes: ~33%

Where things really look different “on the ground” than in the economists’ forecasts is what the public is saying about their future behaviors:  McKinsey logoMcKinsey believes that consumers and their attitudes have been permanently changed by the years of austerity.

The strongest indication of this?  Nearly 40% of the survey respondents say that they’ll likely never go back to their pre-recession approaches to buying and spending.

As McKinsey concludes in its report:  Cautious is the new normal … and it’s unlikely to change anytime soon.

More details on McKinsey’s survey findings can be viewed here.

If the Purchase Funnel is Dead, it’s been Replaced by … What?

Phillip Nones Advertising, Branding, Business, Marketing Communications, Uncategorized , , , , , , , , , , ,

For most marketing professionals over the age of 30, the purchase funnel was one of the fundamental staples of their business training.

AIDA purchase funnelIn fact, the famous “AIDA” model – which stands for awareness, interest, desire and action – was first posited as far back as 1898 by Elias St. Elmo Lewis, an American sales and advertising professional and business writer.

“AIDA” was also the inspiration behind the classic purchase funnel – an orderly, simple path consumers take on the way to selecting and purchasing a product or service.

AIDA has had a good run, because for more than a century, the AIDA purchase funnel has meshed neatly with the various advertising and MarComm tactics that have come along the pike – print advertising, direct mail marketing, radio, television – and even the Internet.

While some people might contend that the advent of the Internet disrupted traditional buying processes, the greater reality is that it brought certain aspects of the buying process into sharper relief. Search engine optimization and search engine marketing stepped in to play nicely within the “interest, desire and action” steps.

Even better, Internet marketing made ineffective “soft” attitudinal metrics less important; all of a sudden, it became much easier to make educated decisions about sales and marketing programs based on hard evidence.

But with social media taking center stage, everything is now scrambled. The tidy “linear” purchase process just doesn’t reflect what’s happening now that “interactivity all over the place” is the thing.

But what exactly is the new “thing” when it comes to the purchase process? There’s a lot of discussion … lots of thinking … but not much in the way of conclusions.

Perhaps the most well-known attempt at replacing AIDA with a new model has been made by consulting firm McKinsey. In 2009, it came up with the “modern” version of the purchase funnel which it dubbed “the consumer decision journey.”

McKinsey purchase funnel
McKinsey’s new model has been described as a “purchase cycle,” a “customer journey,” and various other alternative explanations — you can take your pick.

But what exactly is that? When you look at how McKinsey attempts to graph it … it may be the proverbial “big ol’ mess.”  I’ve pictured it here so you can try and have some fun with it.

The “McKinsey Whatever” may be hard to grasp pictorially, but there’s one thing’s about it: it’s surely not linear.

There are two circles (kind of). Consumers can go around within the circles forwards or backwards. They can also go sideways between the two (sort of).

Truth be told, the “McKinsey Thingamabob” is fairly difficult to untangle. At least that’s the claim of some business observers such as Jon Bond, a marketing specialist and cofounder of branding agency Kirschenbaum Bond Senecal. He writes this:

“I’ve been in 20 meetings where the ‘McKinsey Frankenfunnel’ has come up , and not once has anyone had the courage to admit that they didn’t have a clue what to do with it.”

Bond goes on to posit that introducing this new model was a masterstroke on the part of McKinsey (wittingly or unwittingly) because it’s become a boon to its consulting business: Companies have to hire McKinsey so the consulting firm can explain it, he notes wryly.

Whether it’s the McKinsey diagram or any other one that’s been proffered recently in an attempt to illustrate the new purchasing paradigm (one being a Google model with the eyebrow-raising acronym “ACID”) – what’s clear is that the purchase process is more complex then ever before. And in that process, the number of touchpoints has also grown dramatically.

Perhaps the best thing to do is to jump out of the funnel (or box, or circles, or whatever the purchase cycle is today). Instead of focusing on impressions or touchpoints, let’s remember the big thing that interactivity has placed in the hands of purchasers: far more opportunity to see and hear what trusted influencers are saying about products, services and brands.

It’s like going back to traditional, pre-1900 word-of-mouth advertising — and putting it on steriods.

Jon Bond contends that this new riff on WOM may be the smarter way of looking at the purchase journey a customer takes today. Instead of the “old AIDA” or the “new interactivity,” he suggests focusing more on three degrees of “trust“:

  • Before trust: Even if the brand is known, it’s not yet trusted because no credible third party has validated the brand in the eyes of the buyer.
  • Trust exists: An interaction happens with a trusted influencer who recommends the brand or has positive things to say about it.
  • Advocacy: Nirvana for companies, wherein a highly satisfied customer also becomes a brand advocate, providing third-party validation and attracting additional new customers because of the resulting brand credibility.

Incidentally, the above scenario is particularly effective in the B-to-B world, where credibility and the “CYA” impulse have always played big roles in guiding business buyers to make purchase decisions they won’t regret later.

Consider it the IBM principle, writ large:  You’ve probably heard the adage that “nobody ever got fired for recommending IBM.”  Now, in the “Age of Interactivity,” that principle can apply across the board.

Condé-Nast Gets Real – and Reality Bites

Phillip Nones Uncategorized , , , , , , , , , , , , , , , , , , , , , ,

Conde-Nast logoThis week, magazine publisher Condé-Nast announced the closure of four magazines, including two bridal publications plus the prestigious and well-known Gourmet Magazine title.

It’s an indignity for a publishing firm that has fallen pretty far pretty fast. For years, the company seemed by-and-large unaffected by the winds of change in the publishing industry. Even as other firms were belt-tightening and divesting themselves of low-performing magazine titles, the storied “in-your-face” Condé-Nast business style – replete with jet-setting executives and seemingly endless clothing and expense accounts – appeared to remain intact.

It didn’t hurt that parent company, Advance Publications, also owns cable TV properties that could help prop up the print publication segment of the business – at least for a time.

But with plunging ad page revenues from its luxury goods advertisers on the order of 30%+ throughout 2009, it was only a matter of time before the day of reckoning would arrive. And the sense of impending doom was only heightened when McKinsey & Co. consultants started roaming the halls, poking around the company’s headquarters like a nosy relative, asking all sorts of questions and taking notes.

And now, a few short months later, we have this announcement.

Accompanying the news of magazine closures and personnel layoffs, Condé-Nast reported that it is shifting its priorities to digital properties even while focusing on a fewer number of “core” magazine titles.

Will it be enough? One unnamed company executive was quoted in The Wall Street Journal as saying, “We’re going to make a go of everything else.” But I think that’s doubtful. McKinsey has recommended that nearly all of the remaining publications cut their budgets by upwards of 25%. Whether or not that happens – or whether it will be enough to save the remaining titles – is something we’ll be able to judge pretty quickly.

UPDATE (11/7/09) — The New York Post is reporting that Condé-Nast has now hired Michael Sheehan, the famous crisis manager and media coach, to help the company with PR. Sheehan has coached presidential candidates from Clinton to Obama, as well as handling AIG Insurance’s PR during its financial meltdown in late 2008. Reportedly, Gina Sanders, publisher of Lucky magazine, prodded top brass to bring Sheehan in, citing deep morale problems at the company. Considering the dramatic events at the publishing house over the past year, this news is not at all surprising.

The “age-old, old-age” disconnect in advertising.

Phillip Nones Uncategorized , , , , , , , , , , , , , , , , , ,

Here’s an interesting statistic: Consulting firm McKinsey & Co. projects that by 2010, half of all consumer spending in the United States will be generated by people age 50 or older.

It’s a reminder of just how important the Baby Boom generation has been to the U.S. economy over the past three or four decades. And now, just when you might think that power has shifted to younger generations, the McKinsey statistic helps us realize that Baby Boomers aren’t ready to leave the stage just yet.

In fact, they’re not even ready to leave center stage yet.

Here’s another interesting stat: The average age of creative personnel at ad agencies and related communications firms is … 28 years old. And the number of personnel over the age of 50? Fewer than 5%.

And therein lies the age-old, old-age disconnect.

Perhaps it isn’t surprising that ad agencies are stuffed with creative types who are mostly between the ages of 20 and 35. After all, that’s traditionally the demographic group most likely to buy and spend … and so the vast bulk of marketing dollars – traditional and emerging – are devoted to this segment (as true in the 1970s as it is today).

And of course, having a bunch of twenty-somethings spending time developing marketing pitches to other twenty-somethings makes perfect sense. It’s just that the 18-34 target is no longer where the bulk of the buying power is happening. That’s still happening with the Boomer group, whose average age as of 2009 happens to be 53.

Just how significant are “the oldsters” today? McKinsey’s statistics are telling. They include the finding that the over-50 population in the United States brings home nearly 2.5 times what the 18-34 group earns. Which makes it no surprise that the over-50 group represents more than 40% of all disposable income in the U.S.

And when you look at spending, the over-50 segment — which makes up only about 30% of total U.S. population — accounts for well over half of all packaged goods sales and three-fourths of all vacation dollar expenditures. These spendthrifts buy more than 50% of all the automobiles. They even spend significantly more than the average online shopper during the holidays – 3.5 times more, to be precise.

These are strong financial figures.

Now, consider for a moment to what degree ad creative personnel who are 20 years younger are going to really understand older consumers. Sure, they’re well-versed on the ever-growing interactive and social marketing tactics that are available today. But how likely is it that they’re actually able to craft compelling advertising and marketing messages to older consumers?

Undoubtedly, many will scoff at the very question. For one thing, these creatives grew up with Boomer parents.

But when you consider how many common, worn-out clichés one sees in the advertising that’s aimed at the over-50 set — online as well as off — it does make you wonder if the communications firms are putting their creative emphasis in the right hands!