Growth is found now in uncomfortable places.
The literature on growth is vast, but almost all of it presumes that growth is a matter of following well-known principles of business as usual. This succeeds when growth is found in comfortable places. For decades, this has been the case, but it is true no longer.
Growth has not been squeezed out by adverse conditions. Rather, growth has shifted to places beyond the reach of companies unable or unwilling to get uncomfortable.
Growth in uncomfortable places is the clarifying lens that companies must bring to planning for the future. Thus, it is critical to know more about uncomfortable places. Five key facts about the global marketplace bring this into sharper focus.
Fact No. 1 is that real income per capita grew 43% from 1980 to 2016 for the middle four income deciles of the global population, according to the “World Inequality Report.” Essentially, this is the traditional middle-class. Contrast this with the bottom half of the population, which enjoyed 94% real income growth over that same period. In other words, the strongest growth is outside the traditional comfort zone. It’s true that incumbent brands have doubled down on this emerging middle class, but it’s not the same consumer.
Moreover, the top 10% of the income distribution grew 70% over this period. So growth is strongest at the top and the bottom. This idea of an hourglass economy is not new, yet the disappearance of a robust middle-class mass market is something that many brands have yet to adapt to.
Economic bifurcation is emblematic of the broader splintering of the mass market into niches of all sorts, including economics, culture, religion, identity, social engagement and—especially nowadays—politics. Every splinter requires a different strategy, and this is uncomfortable because it means grounding the economics of scale in a conglomeration of distinctive niches rather than the efficiencies of mass production and mass marketing.
Fact No. 2 is that in the 2017 Edelman Trust Barometer, for the first time ever, global trust declined year over year for all four of the institutions tracked—government, media, NGOs and business. The 2018 report was more of the same. Over the past decade, there has been an inversion of trust globally from institutions to individuals, from the status quo to reformers, from official statements to leaked information, from data to personal experience, from politeness to bluntness, from advertising to social media.
Consumers have lost connection with a broad, shared narrative and are turning instead to smaller worlds of influence and guidance. The worst of this has been described as post-truth, but it’s actually post-trust because truth requires a trusted authority to validate it, and that’s what has drifted away.
The issue is not so much corruption and incompetence as it is a lost sense of shared interests. People have come to understand that experts and institutions have their own agendas that don’t always protect or prioritize what matters to people, so they are turning to more intimate connections that offer a greater assurance of shared interests. Influence is now found in intimacy, not authority. Brands must find more intimate ways outside the comfort zone of traditional practices to convey transparency and honesty about shared interests.
Paralleling the shift to smaller worlds is an evolving view of digital technologies. Typically, the future is envisioned as more and more digitally immersed. However, the paradox is that the future is both more digital and more analog. Just as companies are getting comfortable with digital technologies, consumers are demanding more human-scale engagement as well, and not simply as a respite from digital technologies but as the very essence of digital engagement itself. In effect, consumers want an analog upgrade to their digital lives.
Voice technologies are deepening the appetite for analog interactions. Inherently, voice technologies require a conversation at human scale, thus with the rise of voice technology, analog engagement is the coming interface for digital systems. Consumers are responding in human ways already. Half a million people told Alexa “I love you” in the year after it was introduced. A JWT Intelligence/Mindshare study of U.K. consumers found that 36% love their voice assistant so much they wish it were a real person—context for fact No. 3: 26% of consumers admitted to having had a sexual fantasy about their voice assistant. Nothing is more human-scale than that!
Human touch is everywhere. Sales of vinyl LPs, printed books and Moleskine notebooks are up. Board games, specialty magazines and Fujifilm’s Instax instant cameras are hot. Greenways are the new byways. Podcasts are skyrocketing as are farmers’ markets, food trucks, cafés, festivals and coffee shops. Anxious push-back about technology is accelerating these trends.
Not only do brands have to operate more at digital scale. They have to operate more at human scale, too, and that paradox is uncomfortable.
The growing interest in analog engagement is part of the broader change in spending reflected in fact No. 4. Services accounted for 65.1% of global GDP in 2017, according to the World Bank. In the U.S., services accounted for 77%. In China, 56.1%, up from 44.1% in 2010. In India, 48.9%, up from 45.2% in 2010. Services dominate in trade, too.
This is uncomfortable for companies that must figure out how to turn goods into services or add services to goods. Service companies must stave off new competitors by inventing new kinds of value.
Nor will services in the future be the same as before. In its study of U.S. consumer spending on services, McKinsey split growth into experience-based and nonexperience-based services. Far and away, experiences were fastest-growing. It’s not merely services; as the marketplace pivots from experiences as a point of differentiation to table stakes, spending will continue to grow for services that deliver experiences. Add in voice technologies and augmented and virtual reality, and none of this is within the comfort zone of business as usual.
The final fact is best described by the title of one of the most frequently cited papers in the history of psychology, “The Magical Number Seven, Plus or Minus Two.” A literature review of studies on short-term memory, this paper pointed to a convergence of research on seven, plus or minus two, as the maximum number of things people can keep in their heads at any one time while deciding. In other words, human cognitive capacity is fixed at seven, plus or minus two. Yet the amount of information washing over consumers has skyrocketed.
Marketing overload is nothing new, but within the comfort zone of business as usual, marketers have consistently misinterpreted it. The prevailing view is that overload is an opting-out problem of resistance that necessitates stopping consumers from leaving. This overlooks the evidence that consumers love advertising and shopping. Consumers don’t want to opt out. In fact, they want to opt in more, but the ways in which companies force them to engage make it challenging because of finite cognitive capacity. As a result, WPP/Kantar MillwardBrown BrandZ tracking shows brand clarity declining even as brand awareness is up. In other words, consumers are opting in more, but they can’t keep up.
Instead of battling resistance, brands should rationalize and temper what consumers must do to opt in. This is tied to experiences, human scale, intimacy and personalization. All of these dynamics are interwoven and mutually reinforcing. What they add up to is a future of growth in uncomfortable places.
J. Walker Smith is chief knowledge officer for brand and marketing at Kantar Consulting and co-author of four books, including Rocking the Ages. Follow him on Twitter at @jwalkersmith.