Tomorrow’s World – Where are markets heading?

I am writing this blog the day after British, American and French forces carried out raids over Syria to knock out chemical weapons facilities.  This is just the latest example of how our world has changed since the cold war.  I was listening to an expert on the middle east trying to explain the Syria situation, and even he was struggling to put coherent labels on the situation.  He basically said that Syria was part civil war, part proxy war, part tribal conflict; in short a complete and confusing mess.

And that, at least in the medium term is the state of our world, one of confusion and complexity.

JP Kapferer in his book The New Strategic Brand Management describes our world as one of disequilibrium.  The old certainties, the balance in the world, has suffered entropy and it is going to be a long time before a new set of equilibria are established.

After World War Two a number of equilibria developed which gave certainty to brand planners and marketers.  There was a political balance between the capitalist entrepreneurship of western nations and the planned economies of communist dictatorships.  However, even China is now trying to balance a Communist one party state with capitalist markets.  For a while, following the collapse of the Soviet bloc, the United States was seen as the world’s sole superpower.  It is arguable, particularly with the situations in Ukraine and Syria, that Russia is now trying to re-establish its former status.

For many years, America and its allies had a clear purpose, to defend democracy against dictatorship.  The collapse of the Warsaw Pact and the fracturing of the USSR means that purpose is less certain.  Trump’s ‘America First’ policy is seen as increasingly isolationist and as threatening the economic consensus of organisations such as the World Trade Organisation.  Trump’s election campaign also put pressure on the NATO treaty as he accused other members of not pulling their weight.

In recent years we have seen the rise of the BRIC economies and political commentators have talked of a new world order emerging.

There is also a financial disequilibrium.  China is now the USA’s banker.  The Chinese hold significant numbers of US government bonds.  Households are spending more than ever before but wages are stagnating.  Despite the 2008 credit crunch, consumer debt is rising.

There is an ecological disequilibrium.  For most of human existence, there have been enough natural resources for demand to meet supply and the main concern was variation of price.  Now because of the growing human population; soon there will be 9 billion of us; there will no longer be sufficient resources to go round.  China has been stockpiling resources such as diesel and mineral ores.  In Africa, and other parts of the developing world, China has embarked on a campaign of resources for infrastructure.  China is building Africa’s roads, railways, dams and schools.  In return it is paid in iron ore, copper and timber.

There is a demographic disequilibrium.  There are aging populations in developed western nations where birth rates have fallen.  The world population is increasing but the majority of this increase can be put down to two factors, a high birth rate in the developing world and people living longer as health services improve.

Our world has never been so connected, with the rise of the digital world, but continents are developing divergent socio-economic models.

Sociologists state that human mentalities do not change, they are added to.  Deep in our brains, the ape which climbed out of the trees still exists.  Sports psychologists talk of our ‘inner monkey’, the primitive part of our brain that takes over in times of stress and excitement.

Sociologists talk of four social mentalities:

  • Tradition:  This mentality has been dominant in humans for thousands of years.  It is our tribal instinct, our sense of belonging to a particular community.  It is still relevant in some parts of the developing world.  It means we are all what our parents were.  We inherit tastes, religion and cultural norms.
  • Material Success:  This mentality promotes individual success and breaking free from the tribe.  Existing as a person and not as part of the whole.  China is a primary example of this mentality where the uniformity of the cultural revolution has been replaced by a desire for a western lifestyle.  Many Chinese now see themselves by what they buy and consume.  Shopping is now the primary leisure activity in Shanghai as much as it is in Seoul.  A process described as the ‘malling of Asia’.  It is an attitude of ‘I buy therefore I am’.  An attitude of success through the material goods you own.
  • Individualism:  This is the mentality where the individual is the centre of their own life.  At its extreme this mentality is evidenced by an egotistical, self-centred vision of human relationships.  We can all remember Margaret Thatcher’s comment that, “There is no such thing as society”.  David Cameron’s attempt to build a ‘big society’ went down like a damp squib.  Individualism at its worst can be shown through the election of Donald Trump and to some extent, Brexit.
  • Re-alliance: Sometimes referred to as ‘Me-Us’.  This is an attitude of a deeper me through connection to a greater ‘us’.  It is mirrored by the rise of social media and networking.  It is a mentality of there being no individual benefit if it does not supply collective benefits too.  It is a re-alignment of the tradition mentality.

So what does all this sociopolitical uncertainty and different parts of the world exhibiting different sociological states mean for brands and marketers?

A brand is a name which symbolises long-term engagement, a crusade or a commitment to a unique set of values which is embedded in a product, service or behaviour.  The goal of a brand is to make your chosen name become a reference point, a landmark, of a category or territory it has itself created.  For example, people ask for a Coke, not a cola’ (who has not experienced the ‘will Pepsi be okay?’ response at some fast food restaurants’).  The aim of a brand is for people to make it their number one choice criterion.

One way to examine where branding is heading is to look at the attitudes of young consumers, many of whom exhibit a ‘Me-Us’ mentality.  When asked about the attributes of their favourite brands they point to the following specific characteristics:

  1. Being known by their peers.
  2. Being active in communication.
  3. Symbolising a unique and strong value proposition
  4. Holding a deep, authentic, long-term value
  5. Being flawlessly incarnated into products and services that change the lives of consumers.
  6. Being a brand you can meet, interact with and which provides experiences through people, places and in different modes (both physical bricks and mortar contact AND digitally).  Note that digital contact on its own is not sufficient.
  7. Being extremely ethical.

Many fans of the Apple brand see it as meeting these criteria.  They view the Apple brand as:

  • 35 years of unchanged, meaningful high goals;
  • Consistency in the delivery of brand promise;
  •  Producing disruptive innovations and creating new product categories and changing lives:
  • Optimism and peacefulness;
  • Holding strong values and not compromising on them; even when under pressure to do so.  For example Apple bans apps which have sexual content; a position which caused significant problems for the Playboy corporation.
  • Being charismatic. Often through the executives promoting the brand (e.g. before his death, Steve Jobs).  This is seen as making the brand’s high technology pleasurable and which epitomises the company spirit.  This results in the brand seemingly having a magic touch.  Steve Jobs was seen as performing magic, so Apple products are seen as magic.

Apple is very much a post-modern brand.  It creates passion through the championing of values which appears to change the lives of people for the better.  Contrast this with the current problems facing Google and Facebook.  Google uses the tagline ‘Don’t be evil’ yet there was shock at some of the less ethical investment decisions of the brand’s parent company.  Facebook may be in serious trouble following the theft of personal data and its failure to take seriously data protection issues.  Facebook’s failings may cause a significant backlash from its core ‘millennial’ demographic which has the ‘Me-Us’ mentality.

As consumers move to a ‘me-us’ mentality, brands need to offer both individual and collective benefits.  It is not longer sufficient just to offer individual pleasure.  Hybrid cars are an example.  These vehicles may actually, through their lifespan, be more polluting than a diesel car fitted with a particle filter.  For example, the disposal and recycling of heavy metals in batteries may be an environmental concern.  However, these vehicles offer a ‘Me-Us’ position.  I am individually expressive in my choices but I am also contributing to the greater good by being green.

We are entering a world where big is good but big also needs to be responsible.  Brands need to be leading on ethical values, not a follower.

Future brands need to be optimistic.  The complexity of the current world and the prevalent disequilibria means that consumers face two choices.

  1.  To escape into dreams and to forget realities; or,
  2. To work harder in confronting difficulties and negating them.

Disney is a brand exhibiting the first option.  It is a brand which promotes happiness and which encourages social ties through connectivity, interaction and by being experiential

Nike is a brand following the second option.  It’s ‘Just Do It’ slogan is a hymn to social willpower and the determination of the spirit to overcome adversity (in the sporting world).

We live in a world of rapid change and uncertainty.  We live in a world where social mentalities are fragmenting on continental lines.  We live in a world of increased connectivity but divergent social norms.

To exist in such a world marketers and brand managers need to offer flexibility beyond their traditional values.

ODR, ADR and Regulatory Divergence

Online and Alternative Dispute Resolution

As a member of the Federation of Small Businesses Philmus Consulting meet numerous online retailers. Much of the talk amongst these firms currently involves the General Data Protection Regulations. However EU directives relating to Online and Alternative Dispute Resolution are often ignored. It is anticipated that EU rules on ODR and ADR will continue in the UK if a Brexit transition agreement is initiated in 2019.

Many of the small businesses I meet operate solely on the internet. They have no retail premises and are often based in their proprietors home. Many of these businesses are unaware of their legal responsibilities in relation to dispute resolution.

In 2016, the EU created an Online Dispute Resolution portal. This links consumers with an appropriate dispute resolution provider. The portal operates across the EU and applies to both domestic and cross-border electronic contracts for the sale of goods and services. The EU has an ever-growing list of approved alternative dispute resolution providers.

The aim of online and alternative dispute resolution is to make it simpler and cheaper for consumers to achieve restorative justice without the need for costly civil court proceedings.

The EU ODR portal allows documentation and information to be shared electronically. Consumers and traders can agree on a suitable independent arbiter to resolve disputes.

In some industries, such as financial services, legislation prescribes an official arbiter. Membership of certain trade associations requires acceptance of their arbitration service. Consumers can choose to accept the arbitration role of the trade association or agree with the trader to use a separate independent arbiter. If a consumer and trader cannot agree on an independent arbiter within 30 days, the complaint cannot be proceeded with and more formal resolution processes, such as the small claims court must be used.

Depending on the industry, alternative dispute resolution can result in a range of judgements, from formal advice through to legally binding decisions. ADR providers have to be registered with an appropriate certification body such as the Financial conduct authority.

If you are an internet trader please ensure that your systems are ODR and ADR compliant and that your website contains the above, legally required links and information.

Failure to comply with ODR and ADR protocols is a criminal offence enforceable under the Enterprise Act 2003.

The following questions and answers will help you decide on what action you need to take in relation to ODR and ADR compliance:

  •  Do you sell goods and services through a website?   If the answer is no, you do not need to put details of ODR on your website.  If you do, go to the next question.
  • Are you operating in a sector where an approved ADR scheme is
    mandatory under legislation?   If the answer is yes, you need to:
  • You need to inform consumers of the existence of the EU ODR platform and their opportunity to use it. You are required by law to provide:
    A link to the ODR platform on your website
    Emails to consumers must include a link to the ODR platform as first point of contact for dispute resolution
    Information on the ODR platform including terms and conditions relating to online contracts
    This information is in addition to giving details of your approved ADR provider.  If the answer is no, go to the next question.
  • Are you required by your trade association to participate in an approved ADR scheme?  If your answer is no, you need to provide a link to the EU ODR platform on your website. You also need to provide an email address on your website so that customers have a first point of contact for dispute resolution.  If the answer is yes, you are required to:  Place a link to the ODR platform on your website;
    Emails to consumers must include a link to the ODR platform as first point of contact for dispute resolution; You must include information on the ODR platform including terms and conditions relating to online contracts.

Regulatory Divergence

In recent months there has been significant attention paid to regulatory change by marketing industry commentators.

Much of this has focused on GDPR (The General Data Protection Regulations). However the prospect of Brexit could mean regulatory change which makes the changes to consumer protection law look like the proverbial drop in the ocean.

UK firms currently benefit from our EU membership. They can sell goods and services across the block without tariff and non-tariff barriers such as regulatory divergence.
The UK government is proposing a new trade agreement with the EU but it is highly likely that Theresa may’s red lines, in particular her opposition to the European Court of Justice precedent applying in the UK may make such an agreement impossible.
Some hard-line Brexit supports are keen to see mass deregulation within the UK which will put us at odds with our biggest trading partner. All trustworthy forecasts show that the potential increase in trade from non-EU countries will not match the trade we will lose with the EU. Rather than having one set of regulations to follow, UK firms may have to apply multiple sets of divergent regulations to their production. This is potentially a lengthy, complicated and expensive process.

Most commentators agree that it is in the interest of British Industry to have as little regulatory framework divergence as possible. This is unlikely as EU agencies which coordinate regulatory enforcement and conformity will have to be replicated within the UK. There is real concern about a reduction in economies of scale which will make it harder for UK firms to compete.

If the UK regulatory framework does diverge from that of the EU, British businesses will find it harder to sell into the EU as existing standards require compliance throughout the supply chain. They may also find that they face double or treble the regulatory burden than at present. This could be incredibly costly and seriously harm the competitiveness of the UK.