Consumer values to look for

In my last post "Cracking the consumer code", we discussed how crucial it was to look for companies that, through their products, are meeting the needs and values of today’s consumers. There are some key values that characterize this generation of consumers. These values are embraced with passion and drive people in their selection of the brands that they trust, buy and endorse. In continuing with the discussion on what to look for when evaluating investment opportunities, in this posting we will review some of the most relevant ones.

Inwardly Driven: Today’s world is exciting for the consumers. In a society of abundance, high living standards and instant connections, consumers can go beyond the satisfaction of immediate needs. The basic problems are taken care of, and consumers increasingly focus their attention and energy in satisfying what Maslow defined as higher-level needs, or, in their terms, higher pleasures. A high pleasure is one that transcends the mere functional and/or sensorial satisfaction, and involves emotional, intellectual or spiritual fulfillment. This pursuit of transcendental satisfaction means that the consumers nowadays are inwardly driven, that is, they are focused on fulfilling their inner motivations and aspirations, and are comfortable with putting their needs first rather than meeting others’ expectations. By contrast -and as a way to complete the illustration of the concept-, a consumer in a situation where the main focus is addressing primary needs –i.e. the post-war era mentioned in my previous posting- would be outwardly driven, because their satisfaction is heavily reliant on external factors –i.e. peers, economy and environment-.

Experiential Enablers: The world is full of possibilities –more than never before- and consumers want to experience them all. In a comfortable and predictable society, their quest is for new experiential opportunities that allow them to enrich their lives, make them fun, exciting and energizing. This is another critical value then: beyond products, consumers are looking for the new experiences they enable.

Authenticity: The third value to review is authenticity, also referred to as being real. Authenticity is a tricky value to grasp, and even trickier to activate. Many marketers hear “authenticity” from the mouths of their consumers, and immediately think of heritage, the original, the first. In reality, all what consumers are asking for is to just being told the truth. To just forget the hype, stop trying too hard, and tell them what a product is, what it stands for and what they can truly expect from consuming it. Consumers are just disappointed with products and companies that promise the stars, when in reality they can only deliver a flashlight. The glamour and glitz I mentioned in my previous posting do just not impress them anymore: they just do not need it. In principle, consumers are just sick and tired of being marketed to with hyped offers and false promises, as if they were fools that can’t see through the smoke and mirrors and make their own choice. It makes sense, doesn’t it?

In my next posting, I will be bringing to your attention a company that is very successfully leveraging these three values to define and support their flagship brand.

Cracking the consumer code

In "Investing by Advertising", it is my purpose to share with the reader my analysis on companies that, in my view, have been able to not only garner the right consumer insights, but have the skills and talent to translate them into great products with tremendous business potential; products that respond to the key fundamental values and needs defining the consumer today. I don’t pretend to be a financial analyst: there are plenty of sites and blogs that deal with balance sheets and revenue forecasts. I am a Marketing professional, and my evaluation is solely based on what I see companies doing in the marketplace and how those initiatives fit with the aspirations, lifestyles, emotions and trends that I know, through research and direct exposure, shape the behavior of this generation of consumers. That’s what I think makes this blog different. There are lots of great resources on Marketing. There are hundreds of sites and thousands of authors writing everyday about stocks and the financial markets. But so far, I have not been able to find a resource that links the two together. It is filling this gap what I intent this blog to be an initial stimulus for. To think of this blog as anything else but a starting point in merging these two fascinating fields would be very pretentious, and I certainly encourage the readers to participate in expanding this effort through comments and other contributions.

There are more brilliant examples of great companies and ingenious marketing initiatives than the time available to write about them. Nevertheless, I truly believe that anyone can spot a great investment opportunity by just keeping the eyes wide open and paying attention to his/her surroundings. We are all constantly exposed to extraordinary marketing initiatives with huge potential pay-off; most of us, though, are just too preoccupied with our own activities and everyday pressures to stop for a moment and just observe. However, even if we stopped for a minute to watch what’s around the corner, it would be good to count with some guidelines, some tools to help us better define what to look for, where to focus our attention. This blog could play a role in generating that guidance, so I thought it would be a good fit to also use it to share with the readers some of the criteria I use to identify products –in the most ample sense of the term- that show great potential.

To start this process, let’s talk a little bit about Marketing itself. Much is talked nowadays about how conventional marketing is not effective anymore. Consumers have changed, media is fragmented, and the promises of glitz and glamour that used to work so well in the old days fall in deaf ears with today’s consumers. All this is partially true: consumers have indeed changed, media is certainly very fragmented, and therefore, new approaches need to be devised in order to better serve your prospects and communicate with them. This, however, does not mean that marketing, in its essence, has changed. Whoever talks about conventional marketing, I would argue, never really understood what marketing is all about in the first place. Marketing has always been about satisfying consumers’ unmet needs. It starts with designing the right product, in both its functional and emotional dimensions, and ends with establishing a long-term relationship with your customers. Therefore, when someone talks about conventional marketing and its ineffectiveness, they are really talking about companies that took a formulaic approach to develop and market their products, and lost track of the needs that they were supposed to meet in the first place. As the consumer needs evolve, a company needs to evolve its products and the way they communicate them. If as a marketer you don’t do that, is not that you are applying conventional marketing: it’s that you are not applying marketing at all. Sure, you may be investing in R&D, advertising on TV and spending in promotions. But if you lost touch with your consumers, those efforts will be in vain.

Does it mean that advertising does not work anymore? Not at all! It works, and very well… if you have the right message for the right audience. TV still works; just not the same way it used to work in, let’s say, the 60’s. What about the glitz and glamour? Well, some consumers might still need it (emotional need), but is not a main trend anymore, as it might have been in, let’s say again, the 60’s, when the consumers were fundamentally outwardly motivated (more about this in a future posting). There is not such thing as conventional marketing: there are outdated values, formulaic messages and out of touch companies. No amount of money will solve for that.

This defines then one of the first criteria in evaluating a company by its marketing efforts: not everything that shines is gold. It is not the amount of advertising and promotion a company deploys what defines its potential. As indicated in the introductory statement to this blog, a company or product is not good just because it advertises. The product, and by definition the messaging supporting it, need to be uniquely relevant to the way consumers want to live their lives and represent the values they embrace as their own. Use your own experience to start separating the grain from the straw. Think of a recent TV commercial or promotion that really caught your attention. What did you think of it? What did they say in the commercial (or print ad or web banner) that you felt was speaking to you? How different did you feel the offer to be? Did you think something like “why didn’t someone think of it before”? You start getting the picture. Does this feel too simple or even mundane as a way to profile potential investments? That’s the beauty of it: it is simple! Beyond simple: it is intuitive. The point, though, is that, as mentioned before, most of the time we are not on the lookout for an investment opportunity. When we watch a TV commercial that speak to us, we think of the product that triggers our interest as exactly what we needed to wash the car, or to listen to music, or to feel cool and energetic; we might even act on it and go and buy it. But we rarely think of it as something other people might be interested in the same way we are, or even question (if not outright obvious) which company is launching it. That is the first shift in our mindset that is required to spot interesting investment opportunities: whenever you see a marketing activity that catches your attention, think of it as a potential opportunity first. Follow the thread from there to see where it can lead you.

I will continue discussing these criteria in other postings, interspersed with the specific product and company evaluations that are the main purpose of this blog. I hope you find these views useful; as indicated before, your contributions and comments can only increase their value.

For an interesting analysis on the topic, read Sergio Zyman's The End of Marketing as We Know It. Check the "Books to Invest By" section of this blog.