The Loyalty Economy
About 80 percent of Google’s revenue comes from the ads it places next to search-engine results, on sites across the internet, and before YouTube videos. Meta makes considerably more than 90 percent of its billions in revenue from advertising. Amazon has the third biggest share of the U.S. ad market, thanks to what it charges independent retailers for placement on its site. And although few people think of Microsoft as a company that benefits from digital ads, it, too, makes billions from them every year.
Even Apple, which foregrounds user privacy as one of its selling points, is in on the ad game. Advertising makes up close to $4 billion of its annual revenue, according to the research company Insider Intelligence. All told, outside of China, the online-ad industry was worth about $500 billion last year, according to data from Omdia, and Google, Meta, Amazon, and Apple are believed to have taken some $340 billion of that. Companies that traditionally opposed advertising are looking for their way in too: After resisting ads since its inception, Netflix introduced an ad-supported version of its streaming service last year, as did Disney+.
Recall the scene from Steven Spielberg's 2002 Minority Report when Tom Cruise, on the run, enters a mall and is assaulted by ads that address him personally like going to Time's Square on environmental activism day, every turn away from one clipboard wielder reveals another and another.
Each of us is Tom Cruise these days (minus the uncanny ability to run like a movie star). Social media, once a source of part news, part family and friends connection and part photos of food and pets, is now littered with ads. The only person who does not hit 'skip ads' on Youtube has expired just seconds before launching the app. Local television has blocks of ads for drugs for any and every ailment, real or imagined, the Boomers may have. Local radio plays blocks of ads eight minutes in length. Pop up ads on websites. Podcast hosts reading four-minute ads for mattresses and vitamin supplements. Local theaters actively lie about the start times for movies to trick you into sitting through thirty minutes of advertising before you finally get to see the film you paid to see now without a single kernel of popcorn left because you gorged it all during the marketing block. Everyone except those who sell ads for a living hates advertising.
The Law of Diminishing Returns predicts that as more of our environment is designed to sell us things the less effective each campaign becomes. At some point the noise is too much to focus on any one thing.
As the Tower of Digital Babel starts to fold into itself rendering the use of media to effectively create that elusive thing that all marketers should strive for but have abandoned in favor of the easy mantra of more selling must done all the time—brand loyalty.
Loyalty is better than attention. The attention economy assumes a limitless amount of attention per human which is radically stupid. The loyalty economy favors fewer messages with more personalized touch. No one is truly loyal to a brand unless that brand comes from a human being, in person, making the persuasive case. Further, if that in person experience is about selling it will fail—the loyalty economy comes from a mutually beneficial sense that a company or brand is meeting the consumer on their level, with their interests in mind.
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“Can I interest you in taking a quick survey?”
Walking through a pop up arts market—I wanted more art and less handcrafted soap but whaddya gonna do—a young lady held out her clipboard and smiled as she asked her question.
"No thanks. I'm just browsing."
"You don't want to take five minutes to just fill out a survey," she pouted like a street person getting put out by my lack of cash.
"No, thank you. Your highly personalized approach was so compelling I must simply refuse."
"Fine. You don't even know how defeating this job is so have a great day!"
"Let me guess. Marketing or Communications degree, no one's hiring except for these lame quasi-sales roles at festivals and you're feeling sorry for yourself?"
"Let me guess. Old guy tired of his marriage, his kids are all grown up, bored, looking to bust on women young enough to be your grandchildren?"
"Wow. Wrong on everything but the old part. That's like a record or something."
"So, you gonna take this survey or what?"
"Nah."
I walked on with a grin. Strange exchange but not entirely unpleasant. Just sort of funny. Then she calls out. "You think you could do better?"
What the hell?
"For the record, I could but not because I think I'm smarter or better than you. You're getting paid to do exactly what you're doing because modern marketing has everything to do with numbers and next to nothing to do with people.
"For example, I don't even know what your survey is for. Is it a cause? A product? I don't know because you didn't get me invested in the cause or product because you don't actually care about my answers on the survey, just the quota you have to meet to get paid—what? Ten bucks an hour?—so the interaction is strictly transactional rather that personal.
"The best marketing is the kind I can't see. It isn't a direct sale. It's a decision to inspire brand loyalty rather just a cash grab by a faceless corporation. That's why, even though I'm not buying any soap today, I'd buy it from that lady over there. She asked me how I liked the market first. In fact, we spoke for about three minutes and she never even mentioned her soap. I didn't buy today but I might if she's still here tomorrow because I'll remember her. Now you'll remember her, too."
She handed me the clipboard and stared. "Fine." I filled out the survey (but used a fake email and phone number). I mean, she won the day but the company she worked for didn't.
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His restaurants are Spartan. And Jerry Murrell never advertises. Instead, he prefers to spend on worker bonuses and fresh ingredients.
As I read this man's story and his absolute stubborn refusal to compromise the quality of his hamburgers and fries, I am inspired by it. Worker bonuses and fresh ingredients. So simple. So different from the lessons of every business course ever taught and every book on marketing.
"Three days before we opened, I was still working as a trader in stocks and bonds and was in a hotel for a meeting in Pittsburgh. I found a book in the nightstand, next to the Bible, about JW Marriott—he had an A&W stand that he converted and built into the Hot Shoppes chain. He said, 'Anyone can make money in the food business as long as you have a good product, reasonable price, and a clean place.' That made sense to me.
"We figure our best salesman is our customer. Treat that person right, he’ll walk out the door and sell for you. From the beginning, I wanted people to know that we put all our money into the food. That’s why the décor is so simple—red and white tiles. We don’t spend our money on décor. Or on guys in chicken suits. But we’ll go overboard on food.
"Our food prices fluctuate. We do not base our price on anything but margins. We raise our prices to reflect whatever our food costs are. So if the mayonnaise guy triples his price, we pay triple for the mayonnaise! And then we’ll increase the price of our product."
Next time you go to Five Guys Hamburgers remember his philosophy. Marketing is about connection with people. Give them a reason to listen, to come back, to invest their limited attention and you win.