World Peace? Nope. Peace World. An Interview With Consumer Expert Steve Peace

So, this kicks off what I hope will be a regular series of interviews with industry leaders. One of the best things about digital is that there are many people who have such strong and often contradictory views -- because we are in an environment of constant dynamism. I hope you enjoy reading these interviews as much as I do providing them!

So...Steve Peace. What can I tell you about one of my favorite people in the biz?

Steve is a nosy opinionated guy, which works out pretty well for him
professionally since he is paid to understand consumer behavior and
develop communication strategies. His nosiness was bred into him by a
theologian father and author mother, then cultivated through his studies
in cultural anthropology.

It was not until Steve worked in the governmental sector that the opinionated part really blossomed. A career in International Development work, including stints at the Harvard Institute of International Development and the Peace Corps
taught Steve that the best way to influence policy is through strong opinions backed by fact.

Steve began an online marketing career in San Francisco in 1997 where
his talents for asking questions and crafting arguments were put to good
use. He has worked both on the agency and client side through the boom and
subsequent bust, gaining exposure to many different product and service
categories. Currently, Steve is the Director of Communications Planning
at Carat, a division of the Aegis group, and lives in Los Angeles.

1. For the benefit of those who don't know you, Steve, can you summarize
a little about your role and responsibilities at Carat?

As the Director of Communications Planning at Carat, my job is to
develop strategies that guide the placement of media. This includes
understanding industry dynamics, developing media-focused target
segmentation, tracking media behaviors, building allocation models, and
developing new methodologies to measure the impact of marketing programs
on sales.

2. One of my strongest memories of you is the breadth of categories in which you have led projects. Give us a sense of that range.

A key benefit that agencies have to offer is the ability to
cross-pollinate experience and ideas across industries and product
categories. For example, CPG companies do measurement platforms very
well and Entertainment companies do innovation very well. They could
learn from one another, and agencies can be the broker of that
information.

I've been fortunate in my career so far to work across
many different industries, including; financial services, retailers, CPG
manufacturers, consumer electronics, telecommunications, high
technology, entertainment, food services, online services, apparel, and
the list goes on. Exposure to the dynamics and drivers of growth across
a broad range of industries can be a catalyst for freeing one's mind
from well worn pathways by creating greater flexibility of thought.

3. So, this is a blog about digital marketing. How do you think the
principles of DIGITAL marketing differ from traditional marketing? Or do they?

The principles of marketing have always been the same, given the fairly
stable mechanics of persuasion. But our tactics in digital marketing do
differ quite a bit from traditional marketing. There are a couple of
key dynamics in the digital space that require the use of new tactics:

1. Interactivity
2. Accountability

Interactivity is well understood as a concept, but we've yet to tap out
the various ways in which this concept can be taken advantage of from a
marketing standpoint. There has always been a transactional nature to
advertising. Meaning, the advertiser provides something valuable (like
information or entertainment) and the consumer provides their attention
in exchange. This transaction can be more explicit and intricate in the
online space. Widgets are a good example of advertisers providing
actual utility in exchange for attention.

Accountability is the other game changer. Because we can track users
with cookies, we have far greater access to data. This allows us to
more finely tune the ways in which we attribute ad spend online to a
final sale. Lately, we've seen this methodology extended to the
traditional space. Google bought a company that automatically inserts
radio ads into a station's format, controlled centrally by a server.
They then correlate the time of insertion to volume of searches on
related terms to attribute spend. That's basically an online
methodology making it into the traditional world. It's exciting to me
that the digital space is now pioneering techniques that can make all
advertising spending more accountable and efficient.

4. How has digital changed consumers?

It has made them better equipped as consumers. For the people that like
to do their homework before they make a purchase, the Internet has made
the task of product research far easier. There are some holdout
industries, like mattresses, that have done a pretty good job of
continuing to obfuscate in order to protect their margins. But for the
majority of businesses, the increased flow of information requires them
to sharpen their benefits and be more competitive, since it is easier
than ever to comparison shop.

Some might argue that MTV is responsible for the degradation of
America's attention span, with the popularization of the jump cut. But,
digital must take some credit, as well, and YouTube is reaping the
benefit of that dynamic. Entertainment is now snack-sized.

Finally, consumers take on-demand access to entertainment for granted.
When I was a child people had to take money out of the bank on Saturday
morning and make sure they had enough for the week. There were no ATMs.
The dispersed computational power and interactivity of the Internet has
taught consumers to expect on-demand everything. This changes one's
relationship with the environment. The world, in general, requires less
incremental planning on a daily basis.

5. How do you see digital changing entertainment?

There have been a spate of important music deals lately that illustrate
a fundamental shift in entertainment. MySpace signed deals with most of
the major labels to launch an iTunes competitor and BestBuy bought
Napster. The MySpace deal is most significant, since executives on
either side of the table expect to monetize the new service through
advertising.

Filmed entertainment is suffering from a similar upheaval, but has yet
to react in any major way. Attendance at the box office has been flat,
or declining, and the number of major releases have been increasing.
The theatre owners have reacted by raising ticket prices - which has
helped maintain revenues over the short term. But, high-priced CDs
didn't help the music labels for very long...

The digital space has made it easy to pass content among consumers (aka
stealing content). But, it has also made it easier to publish content
(aka UGC). So, major entertainment companies are being squeezed on
either end. More consumers are unwilling to pay a higher price for
their product and there is increased competition in the entertainment
space, from consumers themselves.

6. One of the biggest challenges in entertainment is setting a prudent ad budget in support of a title -- and spend it in the right places. What advice can you offer in those areas? What's your approach to entertainment challenges like these?

Every movie is a unique entity, which makes entertainment marketing
challenging and also really interesting. It is possible, though, to
make some very high level generalizations. And, since 600+ feature
films are released every year, there is a rich set of data on which to
pressure test these generalizations.

For example, we've found that there is actually a sweet spot for the
volume of dollars to spend in supporting a new release. That sweet spot
is determined by the number of screens on which the release will open.
In general, the films that spend around $7,000/screen in advertising
reap the highest opening week return on ad spend (and opening week
revenues have a very strong correlation with overall success). The
trick, then, is determining how many screens a film should open on.
This is a bit trickier, given the complexity around how that gets
determined between studios and theatre owners. But, testing of the film
with a sample audience can help.

In terms of allocation of the ad spend across media channels, we've had
some success in using media time usage as a foundational principle. In
other words, we measure the percentage of time our target audience
spends with T.V., radio, Internet, etc., and use that as a starting
point for allocation. It ensures we'll be in front of the audience in
multiple forms of media (which has a demonstrated greater impact and
efficiency than achieving reach through only one form of media).

From there, we apply several filters on the allocation. Those filters are
related to how well a medium carries the creative message, and whether
or not our audience actively seeks out a medium to learn about our
product. Finally, we have an algorithm that translates the % of media
time we'd like to achieve in a medium into a dollar allocation. It's a
really flexible model that can be fit to any sort of film, since it's
sensitive to different audience types and different creative messages.

7. Can you give an example of a company that you think is kicking butt in digital marketing?

Compete.com out of Boston has been kicking butt for several years now.
They purchase click path data from ISPs and analyze it to uncover really
exciting insights about various industries. For example, they can
measure fluctuations in the overall pool of demand that exists for a
particular product (like cars) based on the number of people visiting
car related sites - then measure the ability of a competitive set in
attracting that interest and converting it. This means we can now not
just track the ad spend of our client's competitors, but understand who
is doing the best at converting that spend into prospects. This is a
really powerful concept.

8. I don't recall a time when you and I ever agreed entirely on anything. Which BTW was a very good thing in my view. It's because I think in terms of mass markets and you in terms of niches and segmentation. Why is my approach flat wrong? ;-)

Ok, I'm going to have to disagree with you Jim, you're not wrong. Mass
market products still exist, I agree with that. But, even a mass market
product must tap into niche communities to succeed in the current
market. A good example is pay T.V. Anyone in America can use the
service and 85% of Americans pay for some type of T.V. service.

But, what are the drivers of adoption for a television service? One big
adoption driver is moving. That's just the mechanism that gets a
consumer in-market. More interesting is how a service is selected once
a consumer is in the market. If you are a sports fan, you might take a
look at the available sports packages. DirecTV is a clear winner in
that case. Other folks, especially high HHI families, might be more
interested in the high speed Internet packages that are available with
the T.V. service. Cable has a distinct edge in this realm. To sell pay
T.V. services, it's important to understand these differences and market
to them.

The point is that the world is getting bigger and bigger. There are
more people in the world now and more segmentable sub-groups of those
people that represent attractive chunks of revenue to a marketer.
Because of increasing competition, we have to find ways to be relevant
at a more and more incremental level - relating to the specific
interests of a group of people in relation to the product we are
selling. This makes our job more difficult, but also fraught with
interesting complexity.

9. We talk a lot about start ups here. What are your favorite new companies in the digital realm, and why? This, of course, is your chance to shill for your favorites.

This company isn't all that new, but I haven't seen broad adoption of
their services, so I think they are worth a mention. Neurofocus. They
test creative by hooking their subjects up to electrodes and reading
their brainwaves. What they read are neurological indications that
something has made it into long term memory, and they can tell you
exactly at what point in the ad drove that happened. It's brilliant
stuff.

10. What do you think separates a great consumer insights person from the pack?

A facility with and sensitivity to both qualitative and quantitative
data - and an understanding of when to apply each. A consumer insight
might be related to a keen understanding of cultural nuance that gives
creative work greater relevance. Or, it might be related to addressing
a segment that has been overlooked by other competitors. The best
planners have symmetrical brains. The left sides are as developed as
the right.

Putting up with, even embracing, the process of culling through large
amounts of information is a critical skill as well. Everyone in
marketing has access to mountains of data. The trick to great planning
is finding the organizing principle, the golden nugget, within that
stack of numbers. For example, the credit card industry is completely
mature. Competitors beat each other up for share of a finite pie. The
nature of that battleground is the key to understanding the space.
People going through life events are more likely than the average
consumer to apply for yet another card (e.g. moving, getting a new job,
getting married, having a baby). You only know that fact by looking
through reams of data.

11. Ultimately work is...work. How do you keep your passion for the business and for consumers?

The fact that total ad expenditures in the U.S. are somewhere north of
$230 billion. That's a lot of money devoted to convincing America of
'something.' Our work has a definable impact on the culture around us.
That can be either hugely deleterious, neutral, or even positive. The
folks controlling those dollars control the outcome of that impact.

12. What do you love about this industry?

The innovation just keeps coming. And it's creating some odd dynamics
that are fun to think about. For example, let's take a look at
historical feedback loops as an illustration of one such dynamic. Jazz
is a great feedback loop. Slaves that were shipped to the United States
in the early part of the 18th century brought their own music with them.

That music went through a number of transformations - influenced by the
music of America, one path of which produced American Jazz, others
produced gospel and R&B. What's interesting to me is you have guys like
Yussef Latif rereferencing modern African music in his Jazz. The loop
has not just been closed, it's feeding on itself and producing something
new. The Internet industry is like that, as well.

New technologies produce new ideas, which then feed on one another and produce even more technologies and ideas. It looks boundless and endlessly interesting.

13. What chaps your butt about this industry?

It can make me crazy when folks confuse the application of subjective
vs. objective decision making in the industry. Yes, marketing is an art
and a science. But, we've got a firm grasp at this stage of the game on
exactly which pieces are art and which pieces are science. You confuse
them at your own peril.

14. Can you leave us with a final thought?

As Frank Herbert would say, "Fear is the mind killer." We cannot fear
continual evolution of our methodologies and must embrace innovation in
the marketing world, or risk irrelevance.

Many thanks, Steve.

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I am happy to be able to announce that Steve will be a weekly contributor to Oldest Living, beginning next week. I am certain the discussion here will be the richer for it!

Thanks for reading, and don't forget to write.