Richard Edelman delivered this speech on October 5, 2015 to the Food and Consumer Products Association of Canada.
It should be clear to all of us that we are in a period of change that is unprecedented in its impact on consumers and brands, that is to say, we have gone beyond disruptive change to discontinuous change. It is non-incremental and drastically alters the way things are currently done or have been done for years. Consumers are responding to new business models and their preferences are being shared in a powerful peer review ecosystem. Examples: We all know the story of Greek yogurt, which went from four percent of the U.S. yogurt market in 2008 to 52 percent today. Uber and Airbnb are challenging the auto and hotel industries. Sector darling Whole Foods, just this week cut 1,500 jobs, hurt by mislabeling of weight of products and by high prices. Meanwhile, margins in the consumer products sector are tightening and mergers are commonplace as the common answer to the pursuit of cost synergies.
The food and consumer products industry continues to attract widespread consumer attention, some of it good, some of it bad:
Changing tastes and distrust are clearly disrupting the food and consumer products sectors. Consumers are changing their behaviors on everything from artificial colors and flavorings to GMO-free foods, pesticides, organic produce, fair trade coffee and gluten. Big brands, which were once a symbol of trust and credibility, are now subject to criticism and, in some cases, declining trust.
The solution used to be: Run more ads. Not any more, for two reasons.
First, because, as we will see later, trust is declining in traditional institutions and their leaders and moving towards “a person like me.”
Second, time-shifting viewing and streaming video have resulted in declining network television audiences, except for live sports and major news events. TV is reaching fewer 15-to-35-year-olds, who now spend time interacting with social media on smartphones. But one third are using ad blockers. Hence the growth of Buzzfeed and Vox. Major publishers like The New York Times are aligning themselves with digital content hubs like Google and Facebook. Millennials are cutting out cable and moving to platforms like Hulu and Netflix with no ads. The shifts are consistent in Canada where TV is declining and mobile media consumption has risen from 13 minutes per day in 2011 to over 2 hours today, a 46 perecent CAGR.
People’s expectations of how companies and brands should behave also continues to evolve. They expect both to lead with purpose, transparency and shared values. In short, companies and brands can no longer demand or command attention, they must earn it. And in our fast-moving marketplace, companies can’t just promote themselves as they are, they must evolve with the changing times and protect themselves as well.
Importantly, 81 percent of respondents believe that business can pursue its self-interest while doing good work for society. For example, Paul Polman’s vision at Unilever is to double the size of the business while reducing its environmental footprint and increasing its positive social impact. Recently, Unilever announced that their most sustainable brands accounted for half the company’s growth in 2014 and grew twice as fast as the rest of the business.
Two research studies this year, the Edelman Trust Barometer and our Innovation and the Earned Brand study highlight three trends we need to address to win consumer loyalty:
Let’s begin with Trust. The annual Trust Barometer measures trust in 27 countries across government, business, NGOs and media. Look at this slide, which shows that 63 percent of respondents refused to buy products or services from distrusted companies compared to 80 percent buying from companies they trust. And for today’s businesses, creating and maintaining trust with key stakeholders is more important — and more complex — than ever before. Trust has become not just about what an organization does, but about how and why it does it. Authentic engagement, real-time response, alignment of interests, integrity, transparency and shared value are required. For companies, a license to operate is no longer sufficient. They now need to move towards a license to lead.
There is a widening gap between trust in institutions and their leaders, exacerbated by the negative perception of CEOs and top government officials. Even as trust in business has recovered, trust in CEOs has declined 10 points since 2011 to a mere 31 percent in developed markets, while business is at 50 percent. To recover consumer trust, I would advise the CEO’s in this room to take a broader view of your mandate to improve society beyond financial returns, important as they are.
I want to focus on Trust in Canada. At the very top is Tech, at the bottom are Chemicals and Pharma. Consumer packaged goods and the food and beverage sector saw a decline in trust along with most other industries.
By contrast, trust in the entire business sector in Canada dropped 15 points last year – the largest decline we saw across 27 markets. In comparison, in the U.S., trust in business increased by two points. It’s not entirely surprising, given some of the press the business has been getting. The other noteworthy point for Canada is the 11-point slide in media, probably exacerbated by the celebrity news scandal.
This is the first year in our Trust Barometer that Canada the country has fallen outside of the Trusters category (into neutral territory). That’s a clear indication that the four core institutions have some ground to make up and it’s consistent with the general skepticism we’re seeing globally. Part of that was likely fueled by stories, including those on the glum predictions for Canada’s economy.
Now I want to look at our Earned Brand Study. What is quite surprising is that, yes, consumers want innovation in their consumer goods and foods but, they are also scared by the pace of innovation. Acceptance of innovation is not automatic.
There is such fear that eighty-seven percent told us that they would stop purchasing innovative products if we do not address their concerns regarding privacy, the environment and the pressure to be always on.
We also found marketing is making it worse. Two in three want to be reassured versus one in three who want to be inspired. Note, reassurance first, inspiration second. But we are failing them as marketers because we are not responding to these needs. Two-in-three consumers feel that how marketers are communicating with them is moving in the wrong direction. They are frustrated that so much marketing makes them feel obsolete, and 60 percent say that because of photo manipulations in ads and online, they don’t know what to believe anymore.
Is it any surprise, then, that they are increasingly relying on their peers, through online and offline conversations, to help them address their concerns and make product buying decisions? The classic pyramid of influence has been flipped!
With media outlets declining, companies and governments are becoming their own storytellers, creating interesting content for consumers via short, shareable and visual pieces of content. This all means that there is a revolution in content creation, distribution and consumption. That means we have to fundamentally change the way we engage with consumers and go where the people are, having a presence on social media like Facebook and Twitter. There are approximately 50K channels that have generated 10M views or more.
We at Edelman have looked at all the changes and reimagined the category by creating the concept “communications marketing” to acknowledge that the present environment which is top-down, image-driven marketing is complemented by a model which is horizontal, led by the earned and engagement qualities of communications/PR and delivered with the research rigor and creative magic of marketing.
There are three governing principles of "communications marketing”: Evolve, Promote and Protect. Evolve allows us to see around the corner to predict what will happen, listen to community feedback and adapt the strategy for brands. You must have action before communication. Promote is grounded in our storytelling heritage, with ideas designed to start movements, with an emphasis on experiences that are true to life and add value to relationships. Protect goes beyond crisis management. We need to hold the organization to its promises where it matters most, on issues as diverse as human rights, tax and product safety. Globalization and transparency are the game changers.
One example of integrated communications marketing in new media is the work Edelman did for Adobe, the computer software company.
Since announcing a new cloud-based subscription business model in 2013, Adobe has seen some negative backlash on social media. Our strategy was to give fans a unique and fun way to use the product, so that they would be more likely to see the value in a monthly fee. This campaign encouraged fans to use the cloud’s file-sharing capabilities to download the murder mystery file. Edelman helped Adobe turn one of its most iconic products, Photoshop, into a kind of video game, “Who Done It,” that immersed fans in a deeply engaging, competitive quest that tested the limits of their Photoshop skills. The approach was so unique that press outlets picked up the story immediately, challenging their own readers to test their skills. “This campaign blew the doors off anything we have ever done before. The engagement from our fans was of such high quality,” noted Lex van den Berghe, principal product manager for Photoshop.
In 2007, the Hellmann’s brand in Canada tapped into the emerging consumer trend away from processed meals towards more healthy and nutritious ones. Since that time, the Hellmann’s Real Food Movement has introduced urban gardens through Real Food Grants and Real Food Trips. This initiative has clearly resonated with Canadian consumers, contributing to an annual sales increase and a market share of 53 percent by 2014, 20 points ahead of its top competitor.
Kraft Hockeyville is a wonderful example of how a corporate brand operates with purpose and embraces local values. Through Kraft Hockeyville, communities across the country are able to nominate themselves for funding provided by Kraft for much needed hockey arena improvements.
The MiO Squirtcar was a great example of a brand living its character, and that of its audience – millennial males. A Toronto Transit Commission (TTC) streetcar was reimagined as the most original concert venue the North by Northeast festival had ever seen – the MiO Squirtcar – moving concerts along the city’s hippest stretch: Queen Street West. The MiO Squirtcar hosted an incredible lineup of acts, and truly became THE most original and hottest venue of the entire festival.
Then there is the work we did for Dove with #speakbeautiful. Dove research, in partnership with Twitter, discovered a disturbing trend: negative beauty conversations were dominating women's social media activity and damaging their self-esteem. Dove knew it was time to encourage positive online behavior change. Dove developed an ad with real tweets to expose the issue. We used a Twitter algorithm to uncover negative Tweets and engage women in real time, and inspire them to send positive messages about body confidence instead (during the Oscars and beyond). #SpeakBeautiful trended during the Oscars and was embraced by women. Twitter saw 69 percent more positive Tweets about women's own beauty during 2015 vs. 2014.
Before I close, I have an idea for you; become the global innovation country for your companies, particularly the multinationals. Before you say this is not possible because we are small subsidiaries in a mature market with high profit expectations from the parent, let me give you four reasons why this can succeed. First, Canada is a digital and technology savvy market. Second, Canada has the makings of a sustainable supply chain, from farm to fork. This country has an enviable record in producing food in a competitive and sustainable way. Third, the country has had success in building brands, from Blackberry to Roots to Lululemon, although some of these have had issues as they matured. Fourth, Canada is a melting pot, from Montreal to Toronto to Vancouver, each with its own recent immigrants who make it a microcosm of the globe.
What will it take for this to happen? The R&D function must be open for new kinds of business relationships which look to crowd source ideas and offer partnerships, with research start-ups and universities, not full ownership of innovative concepts. The supply chain must take into consideration the preference for organic, local and small suppliers. The time horizon for return on investment should be extended, taking into consideration the extended period required by KIND and Kashi to achieve significant market penetration. And find a way to keep the entrepreneur in the business, whether through allowing a separate entity in the home town or unique sales force.
In summary, I believe there are three keys to success and faster growth in your businesses:
In today’s skeptical and disintermediated world, consumer loyalty has to be earned by engaging your consumers in a thoughtful dialogue about your product or service and by fascinating content and storytelling about your product distributed across digital platforms. The earned brand will be successful because it will be the product of consumer dialogue, deserving their loyalty and support.