2 142014 UPSHOT’S TRENDS

Eight Trends Influencing the Marketplace and the Culture

FOR THE YEAR IN MARKETING

Returning readers may recall that our 2013 report advised marketers not to underestimate the potential for change this past year. Despite the lack of quadrennial Olympic and election hoopla, we predicted rapid change, marketplace upheaval, and plenty of new opportunities for brands to connect with their consumers. Looking back as we prepare for what’s ahead in 2014, we see that 2013 was indeed characterized by tipping points related to technology, demographics, and communications. Just consider the many new digital platforms that emerged as places on which brands could connect with consumers. It also became apparent that the multicultural market captured the attention of many more brands hoping to establish relationships with the emerging minority majorities. And with mobile and ecommerce sales continuing to grow across a variety of categories, more CPG brands took note and began shifting their approach to encompass a retail everywhere world. These and many other changes marked 2013 as a revelatory year for all marketers.

In today’s world, where marketing is expected to be real-time responsive, it’s crucial that we understand the forces shaping our collective expectations of brands in both the short and the long term. To succeed today, we must look back and assess, while forecasting forward to prepare for what’s next. Such an approach begins with an awareness of the cultural, demographic, economic, and technological shifts at work across the culture and marketplace. Combining the resources of our Strategic Planning, Digital, and Market Intelligence teams, we’ve compiled a list of the major trends that are inspiring consumers, shoppers, and businesspeople to act in 2014.

And when we say “trends,” we mean it. The following selections shared are indicative of long-term shifts in values and attitudes, not just fads that come and go willy-nilly like the latest YouTube sensation. As such, the trends we’ve chosen to highlight aren’t appearing out of thin air; rather, we’ve focused on them as they build momentum and garner mainstream adoption. Likewise, in many instances, trends we’ve shared in past reports serve as the foundation for this year’s market-moving forces. History demonstrates that those who track and anticipate the evolution of the marketplace are more likely to succeed with consumers whose expectations are changing faster than ever before.

Finally, before we get to the fun stuff, it’s important to note that these trends are not intended to be an exhaustive list of everything that’s going to happen over the next twelve months. After all, we’re a marketing agency, so our trends are laser-focused on the shifting values and attitudes that will inspire action among consumers, shoppers, and businesspeople. These trends should serve as instructive inspiration for just about any brand, retailer, or business, enabling you to deliver marketing programs that resonate and deliver results.

EIGHT TRENDS 02

Underemployed, narcissistic slackers! Did Millennials immediately come to mind? Well, let’s not forget that it wasn’t that long ago that the zeitgeist was obsessed with those feckless kids known as Generation X. In this year’s countless articles and blog rants, Millennials became the latest generation to experience the collective cultural scorn of their generational predecessors, namely Boomers and the formerly and similarly attacked Gen Xers. Opinion remains split between those who believe Millenials are doomed to a life of disappointment in a world that doesn’t reward them for merely showing up and those who predict they’ll reshape the world into a better place. Regardless, at approximately 80 million strong, this group will continue to both befuddle and captivate the marketplace next year.

Coming of age at the height of the Great Recession, they continue to face a variety of economic challenges including high levels of debt, underemployment, and unemployment. It’s no surprise that they’re rejecting a linear life trajectory where job, marriage, and family are the markers of adulthood and success. Success for this generation is instead increasingly defined more by the accumulation of experiences and a desire to live a happier life than their stressed-out parents. Even their constant and fluid use of digital tools to record, share, curate, and communicate demonstrates their priority on experience. Millions of their shared photos are invitations to say, “look at what we’re doing, eating, listening to, making, and experiencing right now.” And look at what we love. The same technology that powers all that sharing of experiences and real-time communication has also allowed Millennials to embrace a sharing economy based less on traditional approaches to ownership and more on access. Think Spotify, Zipcar, Airbnb, and the popular bike sharing programs emerging in major U.S. cities.

MARKET MANIFESTATION: As a result of Millenials’ shifting priorities, brands have had to innovate how they appeal to the largest generation in American history. Challenged to sell them cars, auto brands like Dodge and Hyundai have experimented with new tactics like crowd-sourced purchasing, while ads from Honda feature a “Leap List” spotlighting the adventures that await them when they own their Gen Y friendly CRV before they actually “settle down.” Food brands and restaurants are focused on enticing them with new flavors and experiences. Employers are trying to offer the right balance to employees who want both the recognition they’re accustomed to and the flexibility to “punch out” and get to the good stuff. Fashion brands like Urban Outfitters and Under Armour are inviting their Millennial shoppers to showcase their unique take on fashion across the brands’ social media in a lo-fi and authentic manner. And finally, for an example of a brand that’s acknowledging their current frustrations, but with an empathetic message of hope, look to Johnny Walker’s new global iteration of their “Keep Walking” campaign. Things are tough today, but you have the grit to achieve your dreams.

OPPORTUNITIES: Millennials were not to be ignored this year, and next year they promise to rise to even greater prominence as more of them benefit from what is hoped to be a continually improving economy and they begin to establish their own households. Consider how your brand can respect their aspirations and indulge their desire for experience. How can you deliver messages and programs that help them to achieve their goals and reflect their notions of success and sense of optimism? And most crucially, are you providing ways for them to share their experiences with your brand via the visual tools that mark their interactions with friends?

MILLENNIALS:CONTENTMENTIS THE NEW COOL

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Text is so last century unless it’s limited to 140 characters or delivered in your phone’s text messaging bubbles. Tweets and bubbles aside, with the rise of today’s visual web, the image is ascendant. Ask any teen with Instagram and Snapchat addictions, but if that’s not authoritative enough to to prompt you to seriously consider your brand’s visual personality in the digital world, trust the smarty-pants at Goldman Sachs and KPCB who’ve forecasted the visual web’s continued growth potential in 2014. Given that at least half of Americans’ time online now occurs on smartphones and tablets, it’s not surprising that we’re collectively smitten with the “on the go” immediacy and ease of visual and video platforms like Instagram, Pinterest, Snapchat, Tumblr, and Vine.

These platforms provide not only entertainment and diversion, but they also allow us to create visual versions of our digital identities. MTV Insights’ recent research about teens’ use of social media revealed that Instagram is both “gallery and journal,” providing them an outlet for self-expression and creativity. (How perfect and filtered was your last selfie?) And sure, Pinterest is a useful tool for organizing visual content, but it’s also another potentially public expression of who we are and aspire to be. According to one survey from NBC’s TODAY show, nearly half of moms say that they suffer from Pinterest stress, fearing that they are not as crafty, creative, and stylish as other Pinners, leading one mom blogger to rally her readers to stop the “pinsanity.” Yet, despite the potential for feelings of inadequacy, the site continues to grow and influence actual sales, the holy grail of social media for brands.

MARKET MANIFESTATION: Many of the world’s top brands have already created Instagram profiles, while others are even dabbling in paid advertising on the site. Instagram’s video capability, as well as Twitter’s short-form video format Vine, have prompted brands like VW, Taco Bell, and GE to indulge in a little video fun. We also continue to see more Pinterest innovation with retailers like Nordstrom, Target, and Walmart looking to the site to predict their shoppers’ wish lists and stock accordingly.

Image Ascendant’s influence extends beyond social media. Just look to the new Duncan Hines site for an example of a brand that’s recognized how our growing reliance on visuals for discovery can shape a brand’s digital presence. The site is meant to reflect the many points of inspiration a baker may consider and presents a visitor’s search results as images–useful, simple, and pretty.

Finally, as traditional news organizations continue to struggle to appeal to readers accustomed to short-form and visual communication, we’re seeing image-based experiments from stalwart old media brands including The Washington Post’s new visual news site Topicly and The New York Times recently announced daily video series The New York Times Minute. And for those who consider a minute too great a commitment, look to NBC’s new venture with NowThis News, the site that promises your video news in six-, ten-, and fifteen-second helpings.

OPPORTUNITIES: Savvy brands have recognized the potential in the visual web to connect in new ways, showcasing their personalities and creativity. Shoppers are already determining their next “must haves” on sites like Pinterest. They’re snapping a photo, getting feedback from friends, and crowdsourcing their choices via Instagram and Snapchat. Their behavior is driving brands to innovate and communicate in kind. Consider how your brand can participate on the visual web in ways that are fun, helpful, and shareable.

IMAGE ASCENDANT

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As evidenced by the early numbers for 2013’s holiday season, retailers today are facing the most competitive landscape in history with shoppers making more purchases online, flexing their tech skills to find the best deals, and demanding the lowest prices from brick-and-mortar stores desperate to win the sale rather than cede it to the likes of Amazon. With shopping now a truly anytime, anywhere option, the challenge of getting the shopper to choose your store has elevated the pursuit of shopper loyalty to mission-critical status. Increasingly, retailers are turning to personalization strategies that leverage shoppers’ growing dependence on digital and mobile tools. With powerful digital back-end solutions and mobile apps, retailers can now maintain individual profiles of shoppers that promise to deliver discounts, relevant offers, and purchasing flexibility in exchange for access to their personal information and, increasingly, the shopper’s location. As retailers begin to roll out in-store tracking and mobile communications via technologies like Apple’s iBeacon, shoppers will be invited to opt in to benefit from such personalized offers and content at the store level. You’ll literally hang out with your Retail BFF as you shop.

MARKET MANIFESTATION: Retailers across multiple channels are upping the loyalty game. Despite being the last of the big three drug chains to roll out a loyalty program, Walgreens embraced an omnichannel strategy with its Balance Rewards platform. In addition to perks typical of most retail loyalty programs, the retailer has integrated Steps with Balance Rewards, a community-based and digitally hosted feature that encourages members to not only share their progress toward wellness-related goals, but also accumulate extra points to be applied toward additional savings on relevant products. Not to be outdone, rival CVS then announced that it would deliver its ExtraCare members myWeekly Ad, a digital version of their circular with, you guessed it, tailored offers.

In the grocery channel, Safeway continues to enhance its Just for U program in order to seamlessly deliver personalized pricing and relevant offers to its best shoppers via mobile and online tools. With sophisticated “Big Data” software analyzing past purchases, no more coupons for items you never buy–plus you’re offered just the right prices known only to you. In fact, in a presentation to Wall Street in 2013, CEO Steve Hurd predicted that shelf pricing may eventually become irrelevant.

With Amazon targeting the highly competitive beauty category, Sephora continues to solidify its standing as a best-in-class loyalty marketer that’s driving mobile sales, as well as strengthening its relationship with shoppers. A recent upgrade of its mobile app integrates the “My Beauty Bag” with its Beauty Insider loyalty program so that a shopper’s past purchases and product preferences (their “loves” in Sephora speak) are tracked and accessible online, in-store or by mobile. Its shoppers benefit from useful access to their information anywhere, anytime, while Sephora mines this data to deliver the right offers, products, and solutions.

OPPORTUNITIES: The desire to be “your retail BFF” is evident in the sophisticated new approaches many retailers are already implementing, but we expect to see even more personalization as shoppers become more comfortable with the digital and mobile platforms that allow for such customized rewards, promotions, pricing, and profiling. Strategies that leverage shoppers’ tech-enabled behavior in combination with powerful data analytics are already increasing trips and basket size. Can you reward your best advocates on social media via your loyalty strategy like Millennial-fave Free People has? Or maintain profiles of shoppers that promise to simplify their shopping and organize their projects as Lowe’s has done? Consider how your brand can engage in a more personal, valuable relationship with your consumers and shoppers.

YOUR RETAIL BFF

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In today’s transparent marketplace with tech-enabled consumers firmly in control of when, where, and if they receive marketing messages, brands have been forced to innovate in order to communicate with their customers. For the past several years, we’ve been tracking the concept of “brand utility” whereby brands extend beyond product to service, content, and community building. From the launch of Nike+ (way, way back) in 2006 to today’s myriad content marketing and branded app examples, brands realize that providing something useful and/or entertaining can influence whether a consumer chooses to respond to rather than ignore their marketing. Recognizing that consumers the world over view the internet as their personal university and how-to guide to everything, brands are now exploring how to tap into consumers’ desire for digital learning. With how-to videos only second to comedy videos in terms of popularity, we expect to see more brands taking up the role of teacher or partnering with established learning destinations this year.

MARKET MANIFESTATION: In November 2013, Google announced the launch of its Google Helpouts service with the promise of “real help from real people in real time.” Using its Google Hangouts video technology, Helpouts creates a Google-vetted system to connect experts with interested video learners. While hosts can opt to charge a fee for their instruction, a portion of which goes to Google, brands like Sephora and The Home Depot launched on the service with complimentary tutorials. Bank of America also took a complimentary approach when they partnered with non-profit Khan Academy, one of the web’s largest online education sites, earlier this year to offer consumers personal finance education via a standalone website called Better Money Habits. Promoted in BoA’s bank branches, the program also created broader awareness among the bank’s customers and employees of Khan Academy’s brand in the online education world. While in a more whimsical vein, GE was lauded for its early use of Twitter’s Vine video platform to create its #6SecondScience Fair.

OPPORTUNITIES: Consider how your brand can share its expertise and tap into consumers’ propensity to turn to the online world for advice, how-tos, and other educational content. To capture your consumers’ fragmented attention, how can you provide value that empowers them, builds on their sense of self-sufficiency, and solidifies your role as an expert, an especially helpful, empathetic expert?

PROFESSOR BRAND

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Last year’s Upshot trend report highlighted the idea of Hispanicity, i.e., the huge influence that the country’s Hispanic population now has on the total marketplace. Population growth, buying power, and, most importantly, Hispanic consumers’ role as trendsetters were all hot topics throughout the year. We expect more marketers to recognize the enormous opportunity that exists to connect with these consumers this year. And in many categories, this year’s smart marketers will recognize and focus on the influence of the Latina shopper. Earlier this year, Nielsen released its report, Latina Power Shift, which summarizes the myriad reasons brands should hone their skills in appealing to today’s Latina consumer. She’s embracing educational and entrepreneurial opportunities leading to greater buying power. The resulting income gains have also increased her influence on household purchases with Nielsen’s research indicating that 86% say they’re the primary decision makers in their homes. And when you consider that almost a quarter (23%) of all U.S. births in 2011 were to a Latina mom, with nearly two thirds (63%) of Hispanic families having children under the age of 18, compared to 40% for non-Hispanic white females, it’s clear that a variety of categories stand to benefit from connecting with Latina moms.

MARKET MANIFESTATION: Retailers such as Walmart, Target, and Macy’s are aggressively courting the loyalty of the Latina shopper. Whether via exclusive partnerships like Macy’s recently announced line with Mexican pop star Thalía Sodi, or with the sort of bicultural and bilingual television advertising now common from Target, they recognize the desire of these shoppers to be reflected in the marketing and the merchandise of the stores they choose to frequent. In an effort to appeal to the Latinas, many of whom are likely to move seamlessly between both languages, Mattel’s first major Spanish language campaign employs a playful bilingual pun with its “Toy Feliz” tagline.

Many Hispanics are demonstrating cultural sustainability, crafting flexible identities that blend their cultural ethnicity with their American-ness. For these bicultural Latinas, approaches to food and cooking play out in an eclectic mix that combines traditional foods with traditional American fare, as well as other global flavors. In a 2013 Spanish language campaign, Kraft Mac & Cheese assured Hispanic moms that adding the blue box to their routine would make their families no less Hispanic.

OPPORTUNITIES: Consider how your brand can connect with today’s progressive, bicultural Latina shopper. Are you empowering her desire to preserve her culture and traditions, but with a modern sensibility that recognizes that she’s not a stereotype or caricature? How can your brand acknowledge her priorities, celebrate her confidence, and reflect her life in your messaging? Also, is your mobile and social strategy inclusive of her? We know that the Latina shopper’s definition of value places a higher priority on quality, but research shows that in order to maximize her budget, she’s also willing to seek out deals, especially via mobile and online, platforms where Hispanics have proven to be the most enthusiastic early adopters. Connecting with these consumers requires cultural understanding and insight. Mere translations of your general market campaigns won’t suffice, but given her influence and power in the marketplace, the payoff will be all the greater when you earn her loyalty and win her respect. ¡Adelante!

“LA NUEVA” SHOPPER IN CHARGE

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Lists of 2013’s most memorable marketing moments will surely include the now infamous Oreo tweet during Super Bowl XLVII’s blackout. The brand’s eleven-word response set off countless commentaries about the need for real-time marketing. Unfortunately, the buzz also led to far too many examples of brands pursuing the perfectly timed pop culture tweet with questionable success. We expect 2014 will see a more nuanced approach to marketing in the moment based less on a frantic need to interrupt and more so in recognition that brands can now help meet consumers’ expectations for immediacy and ease. With more consumers constantly connected via their mobile devices, the collective expectation is to access what we want, where and when the need or desire arises. Our research partners at the Futures Co. have described a “pivot to passive” whereby consumers now expect technology to deliver benefits and content seamlessly in environments that are responsive to our presence and preferences. Such a dynamic demands that marketing be contextual rather than disruptive in order to be truly effective.

MARKET MANIFESTATION: In the mobile gaming space, we’re following the Kiip mobile platform that promises achievement-based branded rewards in Kiip-enabled apps. When consumers achieve a goal in games, fitness apps, and task-focused apps, they receive branded rewards to highlight what the company describes as a moment of happiness.

As the internet of things moves from niche to mass, we’ll see more opportunities for brands to respond and react in the moment. Our Retail BFF trend highlights the advances many retailers are already implementing in order to make the store environment more responsive. This year, we’re expecting more applications of Apple’s iBeacon technology to this end. And yes, we’ll see plenty of Twitter-based attempts to be responsive to the culture.

OPPORTUNITIES: How can your marketing be responsive, but also respectful and relevant in a constantly connected world where messaging is ubiquitous? Don’t let the temptation to communicate everywhere, anytime allow you to lose sight of the need to be true to your brand’s voice and personality. Consider how the ability to share micro-moments with your consumers can showcase your brand’s smarts, benefits, and place in their lives.

MARKETING IN THE MOMENT

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The influence of the digital world on CPG sales has remained primarily informational versus transactional with Americans only purchasing an estimated 2% of household goods online. Still, that translates to an estimated $16 billion in 2012, according to Nielsen. The stakes are certainly high given the research firm’s forecast that online sales will grow by 25% a year to $32 billion in 2015. This year we expect CPG brands of all sizes will dedicate more time and resources to ensure that they’re positioned to benefit from that growth.

MARKET MANIFESTATION: Looking to solidify an advantage in the household staples space, Amazon now has co-location arrangements with P&G that allow the internet giant to set up shop within P&G’s warehouses to expedite the processing and packaging of P&G brands sold via Amazon’s sites. With other Vendor Flex partners in the works, including Seventh Generation, Kimberly Clark and Georgia Pacific, participating companies stand to benefit from increased consumer use of Amazon’s auto-replenishment service, Subscribe & Save. And the opportunity to grow their online sales will only increase with the expected launch of Amazon Pantry in 2014. Meant to compete with the club channel, the service will allow Amazon Prime members to select from over 2,000 center-store products for shipment via preset size and weight limits. Recent reports also indicate that some of those products could end up being Amazon’s own grocery house brands.

A drive to capitalize on shoppers’ desire for ecommerce convenience is also creating a race for immediacy. Can’t wait two days for your shipment? Amazon’s plans to conquer same-day delivery are now well known. From its rollout of Amazon Fresh to drones, the race to provide instant gratification in a retail everywhere world is on with eBay’s eBay Now service experimenting with delivery of goods in an hour and Google Shopping Express also promising same-day delivery.

OPPORTUNITIES: Online CPG sales will continue to grow as Amazon and other retailers like Walmart, Walgreens, and Target aggressively compete to expand omnichannel solutions that provide convenience, immediacy, and ease for busy shoppers prioritizing the best use of their time. Rather than sit back and wait for scale to drive action, it’s imperative that brands optimize their online presence with a focus on capturing and retaining these shoppers. Truly integrated marketing plans must now include strategies for visibility, accuracy, and relevance on the digital shelves of both pure play ecommerce and multichannel retailers.

THE CPG ECOMMERCE IMPERATIVE

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With many forecasts promising continued improvement in the American economy for 2014, marketers have reason to be optimistic. The economic prognosticators point to rising consumer confidence, a recovering housing market, tempered gridlock in Congress, and falling energy prices. Yet, despite these positive indicators, concerns about static household income growth and a widening wealth gap will influence consumers’ participation in the economy this year. Lower- and middle-income households will continue to aggressively pursue deals, emphasize quality and durability, and carefully consider their purchases with a mindset shaped by the Great Recession and its aftermath.

With President Obama and other members of his party focusing their attention on income inequality, Americans across the political spectrum are now more aware of the mounting research that is painting a rather discouraging picture of the state of the U.S. middle class. According to recent Census figures, the average income for the wealthiest 5 percent of U.S. households, adjusted for inflation, has surged 17 percent in the past 20 years. By contrast, average income for the middle 20 percent of households has risen less than 5 percent. In a December 2013 Associated Press survey of more than three dozen economists, a majority agreed that the growing gap between the richest Americans and everyone else is hurting the overall economy. While about 80 percent of stock market wealth is held by the richest 10 percent of Americans, affluent households spend less of their money than do low- and middle-income consumers who make up most of the population, but whose pay is barely rising. Such a dynamic results in a narrowing of the consumer spending base and creates a potential drag on long-term economic growth.

MARKET MANIFESTATION: This bifurcation of the American marketplace has been most notably evident in the retail sector with many of today’s most successful retailers catering either to lower-income shoppers or to the very affluent. Over the past three years, analysts have been tracking the gains made by retailers that tend to appeal to more affluent shoppers, such as Nordstrom, Amazon, and Whole Foods, and those that serve the needs of the lowest income shoppers, chains like Dollar General, Aldi, and Dollar Tree. This polarization has made the middle a challenging space in which to operate. Most troubling though are recent struggles at retailers like Walmart and Family Dollar, a signal according to some analysts that the lower- and middle-income households remain under pressure and are not benefitting from the recovery.

OPPORTUNITIES: Global marketers are already experienced in meeting the needs of customers at the high and low ends of the marketplace. Typically, their large brand portfolios allow them to appeal to focused segments. However, we expect smaller brands and those operating primarily in the U.S. market will need to refine their strategies in an economy where the middle is increasingly challenged. Does your portfolio allow for focused offerings, or is it time to evaluate the potential at either end of the market?

Amid an escalating debate sure to dominate this year’s mid-term election battles, we expect Americans will be assessing whether brands and retailers emerge as supportive and understanding of middle- class concerns. From a messaging perspective, consider your role in bolstering their confidence and demonstrating your support of the American Dream with its foundation in social mobility and opportunity across all income levels.

THE MISSING MIDDLE & CONSIDERED CONSUMPTION

With these eight cultural, demographic, economic, and technological shifts at work across the culture and marketplace, we expect great things, including plenty of new opportunities, for brands in 2014.

We hope this report inspires you to consider how your brands are positioned to act and succeed with today’s consumers, shoppers, and businesspeople. We’d love to begin a conversation about the specific implications of these trends for your brands and categories. So don’t hesitate to contact us with your thoughts, questions, and predictions for the year.

LIZ AVILES, VP Market Intelligence lizaviles@upshotmail.com

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Upshot is an independent Chicago-based marketing agency that inspires people to take action with a focus on consumer, shopper, and business-to-business marketing. Our clients include Procter & Gamble, Crown Imports, Subway Restaurants, New Balance, and Kraft Foods, to name a few. For additional information, visit upshot.net or contact Kristie Ritchie, VP of New Business & Communications, at 312.895.6151 or kristieritchie@upshotmail.com.