“Ok, Google. Order my favorite pizza.” Twenty minutes later, a large pepperoni pie with extra green peppers is lowered from a small drone into your hands.
After dinner, you open Kik and chat your favorite designer brand, asking for gift recommendations for your friend’s birthday. An artificially intelligent style expert gives you the perfect idea, and even shows you how it would look on your friend when you upload a photo of her.
You miss your hometown, so you snap your phone into a virtual reality headset and take a ride through the familiar streets. It’s good to be back.
Your watch buzzes. You’ve been sitting still for two hours—that’s not healthy. You chat your gym, “What classes are available tomorrow morning?” Sure, you’ll give kickboxing a try.
Before bed, you ask your virtual assistant for kickboxing glove recommendations. They’ll be on your front porch by sunrise.
The year of this scenario? 2017. For marketers, things have never been more exciting—or more terrifying. Following are six trends that demand attention now.
1. Ongoing channel disruption.
People still go to stores, right? Yes, but not the way they used to. Eight in 10 Americans now shop online and 15 percent do so on a weekly basis. U.S. e-commerce sales will reach nearly $500 billion by 2018 and continue to grow roughly 15 percent year over year.
The rapid growth in online shopping is largely driven by—you guessed it—Amazon. The e-tail giant could be a topic of its own article, but lest we forget Amazon’s dominance, here are some proof points:
- As of November 2016, nearly half (46 percent) of all U.S. Internet users live in a household with an Amazon Prime subscription—up from 29 percent in December of 2014.
- In the 2016 holiday season, Amazon accounted for 38 percent of online sales, more than 4x the share of Best Buy, Target and Walmart combined.
- A relatively new player in the food and beverage game, Amazon already controls roughly 25 percent of online grocery sales, driven by Prime Pantry and AmazonFresh.
- Alexa, Amazon’s voice assistant, was the talk of CES 2017—built into everything from refrigerators to cars. Starbucks just launched voice ordering capabilities within Amazon Alexa.
- Amazon completed its first Prime Air drone delivery on December 7, 2016. Click to delivery time: 13 minutes. Amazon’s 2017 Super Bowl ad for Echo even featured a drone cameo in response to a woman asking for Alexa to “reorder Doritos from Prime Air.” Amazon’s recently approved flying homebase for delivery drones has even made blimps cool again. Get ready for “the prancing and pawing of each little hoof” to be replaced with the whizzing and whirring of each little drone this Christmas.
*NOTE: Drones are poised to disrupt a lot more than e-commerce home delivery. Check out PwC’s global report on the commercial applications of drone technology to learn more about drone applications in agriculture, security, mining, infrastructure and more.
Big box retailers feeling the pain.
The pain being felt by big box retailers is evident, and Sports Authority isn’t alone. Finish Line is expected to close 150 stores by 2020 and Macy’s is in the process of closing 100 (15 percent) of its stores. Sears/Kmart, Aeropostale, Ralph Lauren, Walmart and more have all recently announced closings. Even CVS is closing underperforming stores en masse, indicating that the impact of e-commerce is reaching into personal care and beauty products as well.
Think Amazon isn’t scaring Walmart?
Think again. Walmart acquired fast-growing e-commerce site and up-and-coming Amazon competitor Jet.com last year for $3 billion, and since then acquired ShoeBuy for $70 million and active lifestyle retailer Moosejaw for $51 million. Walmart also announced it will offer free two-day shipping for orders of $35 or more—a direct challenge to Amazon’s popular shipping model.
Everyone’s favorite shopping companion.
When consumers do visit stores, nearly half use cell phones in-store to look up online reviews or try to find better prices online. A Deloitte study indicates that 84 percent of shoppers used a digital device for shopping before or during their most recent trip to a store. According to Google, many consumers who visit stores are not looking to make a purchase. Roughly a third of all consumers use physical stores for research and 32 percent use them for inspiration.
So where are consumers going when they turn to their mobile device? Forty-four percent initiated product research on Amazon in 2015—up from 30 percent in 2013. Thirty-four percent start on Google, and 22 percent start on specific brand sites. Seventy-four percent feel it is important to read product reviews by other purchasers.
What’s missing in-store?
A great experience. A recent global report by Capgemini’s Digital Transformation Institute shows that 40 percent of consumers view in-store shopping as a chore, and 32 percent would rather be at home washing the dishes. This is apparently no surprise to retail execs, more than half of whom admit they have been slow to digitize their physical stores. Some of the biggest consumer frustrations with in-store shopping are the simplest: 65 percent say they simply can’t find the product they want.
Beyond easy access to inventory (71 percent of all consumers expect to view in-store inventory online), other consumer desires for physical stores include same-day delivery for products purchased in-store, loyalty points for store visits and an experience that goes beyond the transactions, such as social spaces (e.g. Whole Food’s in-store bars), DIY workshops or cooking classes.
Long story short: retail needs to rapidly evolve to remain relevant.
2. Chatbots and conversational commerce.
There’s still an app for that. But no one is using it anymore.
From May of 2015 to May of 2016, app downloads in the U.S. decreased 20 percent. Snapchat, Uber and Airbnb are the only apps that saw an increase in downloads. According to Forrester, mobile users now spend 88 percent of their time in just five apps, and as early as 2014, only one-third of U.S. smartphone users downloaded at least one app per month. Facebook app downloads have been eclipsed by Snapchat—likely due in part to the fact that the majority of people already have the Facebook app downloaded—but Facebook Messenger now leads the way as the most downloaded app.
Which leads to the next major shift in mobile consumer behavior: messaging apps are now bigger than social networks. What does that mean exactly? The combined user base of the top four chat apps is larger than the combined user base of the top four social networks.
The popularity of messaging apps is driven by the convenience of having everything in one place, and the opportunity for brands is huge. Messaging apps have higher retention and usage rates than other apps and the majority of their users are those elusive Millennials and Gen Zs. Unlike when consumers used a different app for every purpose, brands can now target and engage consumers far more frequently on a smaller number of platforms. And with chatbots powered by artificial intelligence, they can build much closer, personalized relationships.
What is a chatbot?
A chatbot is an application typically powered by artificial intelligence that is designed to simulate conversations with consumers. They are rapidly being integrated into existing messaging platforms like Facebook messenger and Kik, and they allow companies to answer questions, recommend products and deliver custom news in real time in response to messages from real customers. They are—among other things—the future of customer service. As Josh Elman, partner at Greylock states, “It is ridiculous we still have to call most businesses.” Put simply, chatbots allow brands to engage with consumers one-on-one where they already spend the majority of their time.
The proliferation of chatbots is already immense. Facebook went from having zero bots in February of 2016 to 18,000 just five months later. In the first seven months that Kik introduced promoted chat, its 200 million registered users exchanged 350 million messages with bots. Consumers are also not as wary as you might think of this new technology—37 percent are willing to make a purchase through a chatbot and spend an average of $56 per purchase.
Some early examples of branded chatbots include:
- Sephora prompts Kik users who message it to provide more information about themselves, then offers personalize beauty tips and product recommendations.
- Through CNN's Facebook Messenger bot, you can message topics like "zika virus" or "politics" and CNN will reply with related stories.
- Uber integration with Facebook Messenger allows you to request a ride by tapping an address in any conversation.
- Kia launched its 2017 Super Bowl ad via its Facebook Messenger “NiroBot” which has garnered about 500,000 engagements since it launched in November of 2016.
The next phase for chatbots? They will begin to anticipate needs and proactively talk to you.
3. Experiences over possessions.
More and more, consumers—especially, but not only Millennials—value experiences over possessions. And emerging technologies, like augmented reality (AR) and virtual reality (VR) appeal to this desire by merging physical and digital worlds to create easy access to new experiences.
Isn’t VR just a fad?
No. More than 200 million VR headsets are projected to be sold worldwide by 2020, and total revenue for VR and AR is projected to increase from $5 billion in 2016 to $162 billion in 2020, more than half of which coming from hardware sales—first driven by affordable smartphone-powered models, then by mainstream adoption of standalone headsets.
The key to this growth? Content that is compelling, robust and useful enough to incent consumers purchase a VR device. As AR and VR adoption increases, content will explode far beyond gaming and short-form video that is currently leading the way. AR and VR are poised to disrupt the travel industry (walk beaches across the world before booking your honeymoon), medicine (from exposure therapy to surgical training), education (dissect a frog without that formaldehyde-y odor!) and more.
How can brands capitalize? Check out Hyundai’s VR project that allowed a displaced North Korean man to go home again.
4. How big is big data and why does it matter?
Big data is big enough to make statistician the sexiest job of the next 10 years, according to Hal Varian, chief economist at Google.
The size of the digital universe is expected to grow 50x from 2010 to 2020. Ninety percent of Fortune 500 companies have a big data initiative underway, and are using big data to inform business decisions. With endless amounts of data now available, companies need to be able to distill it down to meaningful insights and react in real-time to provide a superior customer experience.
What’s the value of a superior customer experience?
Eighty-six percent of U.S. adults say they will pay more for a better customer experience, and 89 percent who stopped doing business with an organization due to a poor customer experience began doing business with a competitor. According to a recent six-year study, customer experience leaders outperform laggards by 77 percent.
Big data solutions can dynamically test and adapt offers based on customers’ in-the-moment activities, such as clicks on a website, to deliver a more targeted, more persuasive experience. Oracle has a solution that enables fast, Google-like searches and makes it easy to visualize and understand big data through geographic heat maps of customer locations or activity on mobile devices.
Using big data to personalize customer offers can have a direct impact on conversions.
The Land O’Lakes crop protection products and seed company uses a big data solution to combine transactional data from customers, marketing data about which farmers have been targeted with offers for specific seed types, government crop acreage statistics, soil type data and more to enable salespeople to quickly match farmers’ needs with the right seeds. The switch to the Oracle tool from traditional business intelligence tools has saved the company $4 million and the equivalent of 1.5 years’ worth of IT hours. It has also increased sales in the company’s crop inputs division by 20 percent and profits by 30 percent.
5. There is such a thing as too much personalization.
Big data plus artificial intelligence equals huge personalization potential, and the benefits of personalization are well documented, but companies must be strategic in their personalization efforts with today’s consumer.
Personalization is becoming engrossed in consumer technology—and who doesn’t love a bed that adjusts in real-time to your biometrics—but when it comes to improving life vs. narrowing our experiences, many emerging products and technology have more potential to do the latter. GeniCan, is a smart garbage can—that’s right, even your trash receptacle could be better—that scans the barcodes of things you throw away and automatically adds them to a virtual shopping list, allowing Amazon Dash to initiate replenishment. Great that you’ll never be wanting for more Kraft Mac & Cheese. Not so great—especially for other brands—that you may never be exposed to new late-night snacks.
Personalization polarization is the result of consumers, especially younger consumers, craving new experiences but being served up narrow, related content everywhere they look, thus limiting their horizons. The proliferation of personalization has resulted in consumers being exposed to narrow content, information and entertainment—if you’ve ever had Pandora “learn” your preferences and play the same five songs over and over, you understand.
For brands and retailers, this means it is crucial to balance personalization and related recommendations with new experiences and products.
A great example of creative personalization that counters personalized monotony is Toyota’s recent “RAVtivity machine” campaign in partnership with IBM’s advanced AI pioneer Watson. The campaign serves up targeted videos (created in real-time by AI) to consumers mashing together unlikely pairs of activities, like martial arts and barbeque, into a new sport (Tai Kwan Tenderizer, anyone?).
“RAV4 buyers are one of Toyota’s most active audiences, seeking out new journeys, and we wanted to tap into that adventurous behavior,” Nancy Inouye, national media manager at Toyota, said in a statement. “With the RAVtivity machine, we combined Facebook’s behavioral data with AI-created activities to deliver hyper-relevant content, personalized to their interests.”
Nancy gets it. The content is indeed “hyper-relevant and personalized” but it is also new and surprising.
6. Companies must live a strong, authentic belief system.
At the end of the day, all the technology and personalization in the world doesn’t mean a thing if your messaging doesn’t resonate with consumers and your actions don’t align with their beliefs. Hanson Dodge has published numerous articles about the power of belief-based branding to overcome commoditization and differentiate a brand among product-focused companies—check out Mike Stefaniak’s “Three Keys to Belief-Based Branding” to learn more. You need to look no further than Patagonia to realize that living an authentic belief system generates fierce brand loyalty. Consumers will remain loyal to, advocate for and pay more for brands with a shared belief system.
Today’s partisan political environment only heightens this reality, as consumer now more than ever expect companies to take steps to fill the gaps in good that they can’t depend on the government to fill—and the world’s biggest brands have taken notice. Super Bowl LI—the ad world’s biggest stage—was riddled with major brands taking a stance in favor of equality, and in its recent Grammy’s ad, Nike challenged the world to treat others the way they do on the court or playing field, where “you’re defined by your actions, not your looks or beliefs.”
Actions remain louder than words.
The smartest brands aren’t stopping at strong messaging to win over consumers—they’re taking action. Starbucks’ new food donation program, Patagonia’s fight to preserve public lands, Microsoft, Apple and Walmart fighting climate change or the ongoing corporate reaction to government actions are all great examples.
The image below from Morning Consult shows how Starbucks, Lyft, Uber and Amazon reacted to President Trump’s travel ban—and also shows that the majority of young adults support their actions.
Doing good never gets old. Let consumers know what you stand for, back that up with action, then share the hell out of those stories. Your consumers will, too.