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Beware of the middle

America has long enjoyed a large and prosperous middle class. But over the last 12 years, the retail chain that has shown the greatest growth is Dollar General. This development highlights a new reality in America: a move away from the middle. As a result of income polarization, many consumers abandoning once dominant middle-market brands, like Kraft Macaroni and Cheese, in favor of either low-priced general alternatives or new, premium offerings, like Annie’s. And with these trends showing no sign of stopping, brands will need to adapt their product portfolios and commerce strategies to meet changing consumer expectations.


Consumers on the move

In 1920s and 30s in the United States saw a phenomenon known as The Great Migration. African Americans, driven away by racism and attracted by job opportunities, left the South in droves and settled into Northern cities. These cities in turn became highly segregated, with Caucasians tending to live in suburban neighborhoods, while African Americans settled into the urban core. Now, for the first time in decades, Americans are on the move again. People from the center of the cities are moving into more integrated suburbs. Cities that were once largely abandoned by the middle class are also being revitalized as new urbanites return to enjoy their concentrations of cafes, shopping, entertainment, and restaurants. Pittsburgh, for example, turned heads when it was selected as the pilot city for Uber’s self-driving car program, but this was not surprising to those who lived there. In recent years, the government has successfully focused on supporting a new wave of startups and incubators, which have attracted a young, ambitious workforce.


The new brand champions

In a United States today, hip-hop and R&B have soared into mainstream popularity. While some brands, like Sprite and Puma, have long embraced hip hop artists, it’s traditionally been much more common for rappers to do the endorsing without compensation (Hennessy’s popularity among rappers has often been traced to its adoption as drink of choice by Tupac Shakur).[1] Brand managers should rethink their long-held preconceptions of what it means to be urban or suburban and prepare to meet their customers where they are, both physically and culturally.


The emergence of Internet-first brands

Driven by the cheap availability of cloud-computing power, Internet-based companies with entirely new business models are rapidly taking market share from traditional players. Their major advantage is customer-centricity. Built from the ground up with strong brands, they ensure that the customer has a consistent experience across every touchpoint. Most often, these brands seek to remove friction and pain points in customer journeys—including everything from cost to convenience. While some, like Netflix and Amazon, do have strong overall brand value, more often their impact is felt in a negative way, as they take market and mindshare from long established brands that fail to innovate quickly enough. As a result, the United States is seeing an emerging battleground, in which brands will use AI, machine learning, and the Internet of Things (IoT) to build ever more accurate views of their customers—and provide innovative experiences to meet their needs and expectations.


The expanded remit of brands

America is in a period not merely of digital disruption, but cultural disruption. Brands in the country have traditionally taken a muted role in ongoing cultural debates—and rarely mixed in politics. But today, they have many more entry points to consumers lives and are far more transparent than in the past, whether they like it or not. Consumers are ready to assess them not merely on the value their products and services bring, but also on how they behave, what they support, and even what lies at the far end of their supply chains. However, they are not demanding that brands step directly in the political arena, but that they make it clear they have a strong brand purpose and make it clear what they stand for culturally. A number of Super Bowl ads from 2017 illustrate the point, whether it was Budweiser celebrating its immigrant founder or Coca-Cola’s “It’s Beautiful” ad that featured the song “America the Beautiful” sung in many different languages.


Recharging the manufacturing base

During the 2016 election, coal jobs were constantly in the headlines, but the real (and sometimes literally) earthshaking development has been the unlocking of vast reserves of cheap natural gas. Unlike oil, natural gas tends to be sensitive to local supply and demand, leaving the United States with some of the cheapest energy prices in the world. This has had far reaching effects but none greater than on manufacturing. The United States has steadily added around 1 million manufacturing jobs since 2010 with employee earnings also rising (currently, the average hourly wage for a non-supervisory employee is $21).[2] This revival is helping contribute to the United States’ very low unemployment rate, and may encourage brands to find more ways to put “Buy American” on their products.


Generations: not as divided as you think

While much is made of the fact that Gen Z is the first generation to grow up entirely digital, the differences between generations are often less than they might initially seem. For example, Gen Z is more concerned about privacy, but millennials and GenX are also concerned about the problem. Differences do tend to show up in small, but important ways, however. Gen Z, for example, over-indexes on Snapchat and prefers shorter ads and content. Millennials are the main consumers of Amazon’s Alexa (probably because they have more disposable income). And the younger you are, the more likely you are to spend more time on your phone than your TV. However, many significant usage patterns, such as time spent on Facebook, can be attributed to other factors, such as unemployment, which is much higher among school children than adults.


Yesterday was a great day to get into AI

Artificial intelligence, or AI, promises to be a transformative force for brands, enabling them to get a 360-degree view of the customer, and deep insights into their mindset. Brands that want to excel in measures like brand experience will increasingly need AI and machine-learning to draw an ever more precise picture of them. With AI tools just coming on the market, it’s a good time to get ahead of the curve and make a real difference. IBM, for example, is betting heavily on its Watson platform to help brands interact with real language queries their customers have.


Brands increasingly have a face

Leaders of big brands are now household names in the United States. Jeff Bezos, Mark Zuckerberg, Elon Musk, and even Bill Gates are inseparable from the brands they founded. This is largely a phenomenon found in technology, where markets and consumers alike pay close attention to every word a leader says. As Uber found out when a video of its CEO berating a driver made the rounds on social media, it can backfire too. Large brands would do well to apply the same marketing principles that have made them successful, to ensure that their executives have a meaningful difference in their approach and make a positive impression on the public.  


Brands as nouns and verbs

If you’re looking for a quick way to find the most dominant brand in a technology category, ask yourself if its name can be used as part of speech. Americans have long been able to photoshop an image and FedEx a package, but now they can “google it,” “Facebook” someone, “tweet” something, or order an “Uber.” This trend shows how incredibly strong brands can come to stand in for an entire category. Selecting or rebranding with a name that can become a catchy noun or verb may be a tactic worth considering if world dominance is your goal.


Data is a social contract

Consumers today know that brands are collecting their data. While most Americans seem unconcerned about sharing that data, they do expect something in return. Brands that collect data must show that they’re not merely using it to sell, but to improve the customers experience. Companies like Amazon, that obsessively use data, often rank highly on brand experience, a key component of brand health.  And if you break the contract, you hurt the brand. Nike, for example, collects a large amount of data from its fitness apps, but uses it to help support people in their workouts and design products to better suit their needs.


Provide value beyond product

Years ago, companies could thrive with discrete products, but today, they must increasingly build a diverse ecosystem to support their customers, giving them additional value from their experience with the brand. Brands that offer something more to support their customer’s lifestyle or enable them to get more out of products and services are best positioned to create real differentiation and increase brand value. Many of the United States largest technology brands—like Microsoft or Amazon—are entrenched in people’s lives and support them in numerous ways.


Qual sometimes beats quant

America’s election polling misses, while smaller than commonly believed, clearly demonstrated the problem with an overreliance on quantitative data. What people answer in polls and surveys is useful, but typically should go hand in hand with softer research that tries to uncover the why behind the what. American consumers have strong cultural proclivities and a deep sense of what it means to live in the country. Qualitative research can uncover individual rational emotions, emotional needs, as well as help uncover how a person gets information and forms opinions about both brands and current events.


Avoid the echo chamber

The American brand world can be highly insular, with marketers, agencies, and employees all sharing the same narrow, largely urban worldview. People in global cities today sometimes have much more in common with one another than they are to the countries where they are located. In the United States, many people feel left out of the cultural mix, not least by the brands seeking to sell them products. Marketers need to understand and connect with real consumers across their entire geography, or risk losing ground to more in touch competitors. Occasionally this requires them to be confronted by uncomfortable truths, but that’s still preferable to communicating without information.


Everyone uses Facebook

And several times a day. Of course, young Americans might tell their friends they never go on their parents favorite social media platform, but data suggests otherwise. According to Kantar, 64% of Gen Z say that they look at Facebook multiple times a day, more so than Gen X at 54%.[3] The reason is likely scale. Facebook’s huge reach makes it something like the modern phone book, an unavoidable way to connect with everyone you know.


Take a stand

American consumers are showing an increased preference for brands that share their values. Brands should boldly state their values and champion causes in the world today. Many leading brands are increasing brand love through efforts that ally their purpose with outside causes. The key, of course, is to find an authentic way to join the conversation and to contribute something meaningful to it. As Pepsi’s Kendall Jenner ad showed, a vaguely-stated attempt to join forces with an ongoing movement can create a serious backlash. Speaking out is easiest done when the brand has a strong purpose. Starbucks did well with its pledge to hire 10,000 refugees, underlining its values; while Patagonia’s championing of the environment is its raison d’etre.


Target more than demographics

Increasingly sophisticated data capabilities have opened the door for American marketers to move beyond demographic targeting into psychographics, emotions, interests, and personality types. Rather than trying to appeal to a married father with children, brands can now use sophisticated analytics to reflect how he is feeling, understand his decision-making process, and ultimately communicate that “this brand gets me.” To do so, brands need to communicate naturally and in the language of their consumers, and then produce and test messages over time, to find out which ones resonate with which people in which state of mind.


Do less not more

According to Kantar, 20% of marketing touchpoints account for 80% of the brand impact. In an increasingly fragmented digital landscape, the answer is not to be everywhere your customers are, continually interrupting them with messages they may not want to hear. It’s to be in the places where they’re open and receptive to communication. Brands need to do the necessary quantitative and qualitative research to uncover these key touchpoints. Then, by drilling down, they can discover what consumers really want at those moments and how they can provide real value that resonates.


Re-humanize the over-digitized

As the old adage goes, if you’re a hammer, everything looks like a nail. With vast investments in data and technology, marketers can be tempted into overreliance on algorithms. But consumers are still human beings and want to be treated as such. Brands need to find and emphasize basic human truths, such as friends and family, while using algorithms to target them with relevant, tailored messaging.


Get niche-y with it

American retailer Costco is a niche player in the warehouse space, but it’s bigger than some European economies. Many of America’s top brands today occupy and dominate important niche markets, anticipating consumer needs in unexpected ways. Rather than trying to do many things and failing to do any of them well, brands should make sure they get a few things absolutely right. Mastery of a niche helps create the meaningful difference that drives Brand Value.


Protect that data

Data breaches at major United States companies have hit the headlines with alarming frequency in recent years. While nearly every demographic considers digital privacy as a concern, for Gen Z, it is particularly acute with 52% valuing it highly.[4] As brands collect data on their customers, they need to ensure that that data remains private and secure.


Stalking is a brand killer

Some 33% of Americans, and a larger share of young consumers, feel followed by brands. The same tools that allow marketers to reach out with relevant messages can often feel creepy or invasive when used with too much precision. Brands should avoid the appearance of stalking their customers and use a measured approach that ensure they’re not increasing conversions at the expense of brand value.


Remove friction and pain points

Consumer expectations, which are always high in the United States, have gotten a shot in the arm as new, upstart brands and services have offered a heightened level of simplicity and convenience. Whether it’s financial or FMCG, their perceptions are shaped by the service they receive from companies like Amazon and Apple, which seem to make everything work seamlessly. Brands need to find all pain points in their various channels of commerce and remove them to provide a great overall experience. The success of Domino’s Pizza in recent years has come partly from a revised recipe, but more importantly from an outsized digital outreach that enables its customer to order its pizzas from the apps and other platforms they already use.


Interrupt less, deliver more

If there is good news in the ad blocking world, it’s that demand for the technology seems to have leveled off. Likely this is happening for two reasons: brands are making better ads and using formats that cannot be blocked. Still, across a broad range of categories, consumers are becoming resistant to or ignoring advertising they don’t find relevant. Brands need to dig deep into their data to find relevant segments and contexts, and target them with appropriate content.


Lead to common ground

Americans are not always as divided as they think. In spite of mutually divergent political views, they share the same culture, watch the same movies and TV shows, and root for the same sports teams. They also share a number of shared cultural values, including love, family, and hard work. Under Armour captured this shared sense of sacrifice with an ad featuring Michael Phelps that showed him training before sunrise so he could achieve everything he has. Brands that can tap into these universal themes can reach American consumers of all persuasions.