What gets millennials’ attention and wins their loyalty? Marketing expert Jeff Fromm lets brands in on what they ought to know.

After working on cruise ships for almost seven years, it was time to return to America and “real life.” I could have lived anywhere. I chose to live in Los Angeles because of my connections. I went to high school there, my parents are there, I love the weather. My dad has always said, “It is not what you know but who you know.” It turns out that advice works for picking where to live, what to do—and how to use social media. Partnerships and people are key to social media strategy success (especially if you're partnering with these guys, the Entourage crew). Social media has saturated all the strands of our existence over the last 11 years. It is now part of our lexicon. We say, “Let me Google that.” We see television shows promoting hashtags at the bottom of the screen begging for engagement. Given the omnipresence of the tools of technology, brands need to be clear on how to best engage their consumers. That’s a big “how.” Should brands focus on search engine marketing and optimization? Email? Definitely social media, right? Perhaps not, says Nate Elliot, vice president and principal analyst at Forrester. “Social media is not properly understood or measured. Social in comparison to search is less useful and generates less revenue. Excusing social as a young channel doesn't make sense anymore,” he said. Why? Social media is too big now to get wrong. According to Elliot, almost 100 percent of marketers used social media last year and $7.3 billion was spent on social media in the U.S. He projects that number will grow to $9.7 billion this year, with 83 percent of social marketing spending goes toward ads (as opposed to agency fees and other costs). Elliot states that social media is nowhere near realizing its potential. Marketers and brands include their top fans as ambassadors and harness social media word-of-mouth to share information about new items, sales and extra options. Brands need to understand when and how their customers are engaging and if social media is important to them. Determining your objectives is the first and most important step. Are you trying to create awareness? Increase sales? Engender loyalty? Each of these goals will mean you need a different strategy to achieve them. Only after you have assessed your assets, strengths, objectives and strategy can you turn to technology. Starting with picking a social media channel is “asking the wrong question first,” Elliott told me. “It is not about technology and channels, it is about building relationships with people. Social was supposed to be about interaction, not about buying ads on Twitter chats.” After interviewing Elliott, I was able to speak in person with Wheels Up CEO Kenny Dichter and on the phone with serial entrepreneur, J.R. Johnson. Both of these men exemplify what I learned at home and what Elliott has been researching. Building relationships is the most important thing to focus on to achieve business goals. The author with Wheels Up CEO Kenny Dichter Wheels Up was featured in the Entourage movie, just as his previous company, Marquis Jet, was seen in the Entourage television show due to Dichter’s close friendship with the production team. Dichter shared that a key to his success comes from “hiring passionate talented people that are smarter than you.” But a closer look reveals that many on his team have been with him for decades and have rejoined in several companies due to their relationships with him and others on his team. The way Wheels Up shares in social media is an extension of his personal philosophy to care about people and to build community. As most people are on the ground more than flying in the air, they have created Wheels Down events so that some of the #WheelsUp8760 experience (based on the number of hours in a year) can be continued together. His choice to partner with Triple Crown winner American Pharaoh was based on evaluating risk and reward and years of experience. He recommends that all marketing directors “leave some opportunistic dollars in the budget so when a good idea appears you can take advantage in the moment.” Due to Dichter’s vast network and thriving relationships, he got a call at 6:30am one morning that led to the latest media partnership that has been well worth its investment. How can your brand leverage relationships to thrive among social strands and styles? J.R. Johnson is a veteran of the travel industry who founded the websites Virtual Tourist, Lunch and Trippy, the latter which was listed in Business Insider May 2015 as one of the “25 hot Los Angeles startups you need to watch.” Johnson told me that the bigger point about social media is that people desire unique experiences. They do not want cookie cutter franchise consistency. “Hotel chains are being outmaneuvered by the experiences available on Airbnb.” Consumers want something special and they are “drowning in reviews.” The next generation user experience is to have content with context. The bigger picture is not which social media channel your company is on but rather whether your company has something to say. Can consumers find the solutions and experiences they desire from your brand? People want to participate and belong and find others who “travel like us.” For brands or people not sure how to get started or what to do next, Johnson recommends trying out Airbnb. Better yet, he told me, “Ask a question on Trippy or answer a few questions on Trippy. You will feel smart and helpful.” People want to participate and by giving them an opportunity, your brand can host user-generated content with a purpose. Johnson explained: “I have never had the opportunity to help an old lady walk across the street like a boy scout, but I can answer a question and feel good about myself. I can participate and feel good about my hometown.” Social media tells a story and builds a community, especially when you know who makes up that community.  

In metropolises like Los Angeles, New York, Miami and Chicago, more than half the millennial population is Hispanic. Every year from now until 2028, an average of 904,000 Hispanics will turn 18, making it the fastest growing segment of consumers. For brands, this means that a greater focus needs to be spent creating targeted messages, campaigns and content for engaging Hispanic millennials. Too often, brands believe that translating a non-Spanish marketing message into Spanish is all it takes and wipe their hands and call it good. But that is not sufficient enough. With the population of Hispanic millennials becoming more prominent, it should be a key target demographic for marketers interested in young consumers. Here are four important considerations that brands should have in mind when engaging Hispanic millennials.

Remember the importance of family ties and heritage.

Unlike their immigrant parents who believed that blending in meant fitting in, Hispanic millennials are proud of their culture. While many Hispanic millennials were born in the U.S. and have woven American values into their repertoire, they still hold dear the culture and customs of their own heritage. Hispanic music, food and family culture have not been abandoned, even by those Hispanic millennials who have grown up in the States. According to the Pew Research Center, only 33 percent of second generation Latinos identify themselves as American first; the rest refer to themselves as Hispanic or Latino first. This emphasizes how Hispanic millennials are proud of their heritage and would rather embrace it instead of hiding it to assimilate. Ultimately, Gen X and boomer Hispanic immigrants were considered Hispanic because of their language and cultural differences, but Hispanic millennials are Hispanic by choice. They want to embrace their roots in a modern, connected way. But as a marketers trying to reach this demographic, trying too hard to “be Spanish” could be hazardous. Instead, advertisements should represent the diversity the Hispanic millennial demographic sees within themselves.

Draw from a broad pool of influences.

Representing the diversity this demographic sees within themselves means drawing from a broad pool of cultural influences. When it comes to pop culture, Hispanic millennials are influenced by their own heritage, as well as the diverse backgrounds present in America. Rather than limiting themselves to experiences within their own cultural landscape, Hispanic millennials welcome variety and diversity and are open to embracing aspects of different cultures. Hispanic millennial fashion, movies, music and video games increasingly reveal broad inspiration, from Japanese anime to East L.A. graffiti art. To appeal to this population’s wide range of interests, retailers should increase product selection to create value for consumers beyond a low price.

Engage on mobile.

Mobile presence is critical for brands engaging with Hispanic millennials. When it comes to social media use, this demographic considerably over-indexes compared to the non-Hispanic millennial population; Hispanic millennials are nearly 66 percent more likely to connect via mobile. Culturally, Hispanics have larger social communities and larger families, including family and friends living in Latin America. It makes sense for them to be more engaged with Facebook and Twitter to stay in touch and up to date with loved ones. Not only are they heavy users of Facebook, YouTube and Twitter, but they are also constantly texting their friends, classmates, colleagues, bosses, and international family members. This includes opt-in-texts from brands they are interested in. If brands reach out in useful and engaging ways on mobile, they will be more likely to connect with the Hispanic millennial population.

Integrate Spanish and English.

While Hispanic millennials feel connected to their Hispanic culture, they express a strong preference for English as their primary mode of communication. In a survey conducted by Adroit Digital on Hispanic online shopping habits and views on digital advertising, 92 percent of Hispanic millennials said they are more likely to respond to marketing displayed in English. Younger Hispanics are becoming more acculturated than their older family members, so it only makes sense that they would display a greater tendency to speak English and respond to English advertising. The challenge for advertisers is to find a balanced bilingual voice, integrating Hispanic culture with English language. As the buying power of Hispanic millennials increases, brands must focus more on earning the business and loyalty of this population. The Between Two Worlds campaign from AT&T designed to win over young Latinos, for example, used a documentary style series to celebrate the lives of multicultural Hispanic millennials.  

Watch a sample from AT&T's Between Two Worlds campaign for ideas on how to market to Hispanic millennials.

  Hispanic millennials are already entering into their greatest spending years, starting careers and settling down. With these life changes come new brand preferences, behaviors and patterns that will shape future buying habits. Brands need to tap into this opportunity like AT&T did and implement strategic plans to reach and retain Hispanic millennial customers. Editor’s note: Jillian Mullin, intern at FutureCast, contributed to this post.    

Jason Will’s years of experience as a consultant at Accenture and Slalom gave him the knowledge to launch his new travel app Zipkick, but he partnered with a social media influencer, Scott Eddy, for the marketing fuel to power the app’s trajectory. The two have begun an epic road trip with partners in all spheres of travel and transportation. Their efforts epitomize the new paradigm in which a new company no longer needs to wait around to be recognized by print publications to break news or break down walls. Brands realize that traditional marketing efforts are not leading to the desired level of direct user engagement, and they are reallocating their funding toward digital and social media. Facebook, Periscope, SnapChat and Twitter are the millennials The New York Times. Market intelligence and consulting firm Strategy Analytics published its latest advertising spend figures in the U.S., estimating total expenditure at nearly $187 billion and digital accounts at $52.8 billion of that. That is nearly $30 billion less than TV ad spending. However, digital remains the fastest growing of any category, increasing at a rate of 13 percent this year and up 2.5 percent versus 2014. TV’s number continues to decline annually; it is down 0.6 percent versus 2014). Print, by the way, is substantially less in third place at 15 percent of total ad spend ($28 billion). Meanwhile, social media ad spending is expected to reach $8.3 billion in 2015, up from $2.1 billion in 2014. This shift to digital media means an opportunity for social media influencers who are able to create real time engagement with their followers at the fraction of the cost. The queen of the phenomena, Kim Kardashian, has built an empire on this principle. One negative experience with a brand can catch fire on social media, though, and destroy the best efforts of said brand through TV and print media. This denotes the difference between “audience” and “influence.” Just because you have a large following doesn’t necessarily mean you have influence. The content and audience can determine what catches fire and what is background noise on social media platforms. In Will’s case, he made the choice to bring Eddy, a social media influencer in the travel industry, on board as his brand ambassador. Eddy has worked with Starwood and Marriot in the hotel industry, as well as with other travel brands in assisting them in creating strong audience engagement on social media platforms. Will recruited Eddy off of Twitter. They immediately connected as they are both believers in the dramatic shift occurring in brand marketing, which leverages an influencer’s existing audience and community online and offline to build a brand’s following. As Eddy has an audience of 671,000+ Twitter followers and growing, Will believes Eddy has the relevance he needs to share his app, the reach as Eddy’s audience is largely interested in travel and resonance as Eddy shares daily content. The Zipkick road trip team (with Scott Eddy on far left and Jason Will in the driver's seat). Photo credit: Larry Wong. “People follow me on Twitter because sometimes they just want to escape their daily grind of life, they have the opportunity to live my experiences, which for many reasons they might not be able to do,” says Eddy, perhaps echoing the sentiment of many influencers. “But because of their interest and following, when they do have the ability and resources to go to the places I’ve been, they need the tools to make this happen, which is why Will made the decision to leverage my audience to market his app.” So far it’s worked. Through this engagement, Zipkick has built up over 16,000 followers on Twitter and growing daily, with many travel professionals and travel business reaching out to the company to see how they can be involved in the app. This is prior to the app’s launch, which is scheduled for the last quarter of 2015. (The app will provide personalized, mobile travel search and booking.) To add some more fuel to their partnership, Will and Eddy are wrapping a KIA Sedona with their new Zipkick logo and driving 6,500 miles in 50 days. For some, that may be more about craziness than about influence, but stay tuned! Editor’s note: A bit of an influencer herself, Lisa Niver has been invited to join Eddy and Will on part of their Zipkick journey. She will spend one week traveling with them across Utah, Yellowstone, Mount Rushmore and Minneapolis.  

As someone deeply interested in bringing customer value to life, I find pushback from practitioners—and their dialogue with each other on shared experiences—to offer the most valuable insight into the barriers facing firms as they strive to achieve customer centricity. Here’s a quick rundown of key topics that I’ve heard recently:

Customer profits are harder to track than costs.

A critical component of moving firms toward customer centricity is rethinking performance metrics, from company valuation to salesforce incentives. One participant noted that the latter is complicated by the fact that customer profitability is harder to track than costs, especially at a granular level. This is a fair point and one that I’m hearing more often. In addition to valuation metrics (Customer Lifetime Value (CLV) alongside 10-K, 10-Q and others), we need to develop customer-centric accounting standards. Until we figure that part out, it may be harder for some firms to get a truly customer-centric sales/CRM system off the ground. This is an area I intend to discuss and research further with WCAI’s partner companies.

Branding is powerful, but it’s difficult to quantify.

I’ve said that I’m much more interested in customer acquisition, retention and development than branding for “what moves the needle.” Practitioners recently called me out for this with examples of strong brands and the resulting benefits. I should clarify that it’s not that branding has no impact, it’s just incredibly difficult to manage and measure. This is a reality we as marketers face. Conversely, I strongly believe you can value the customer base. In a crude example, you could calculate CLV for each customer, add it up, subtract operating costs and you have the value of the firm! I’m also a data jockey, so I don’t come without biases regarding branding. When we think about restructuring entire businesses around customer centricity, not just the marketing departments, I can’t help but gravitate to the more quantifiable, data-driven metrics that CFOs, CEOs and others will sit up and take notice. Having said that, I can’t deny how brands can create stickiness for customers, and it’s certainly an area that warrants further research to quantify.

Privacy.

As we think about customer centricity and calculating CLV, concerns for privacy increasingly crop up. This stems from thinking that if we want to be increasingly customer centric, we need to know more and more about our customers—and no firm wants to place creepy data collection at the center of its business model. The good news is that you don’t need creepy data to be customer centric. I would take RFM (Recency Frequency, Monetary Value) over invasive personal data any day—and that metric was around well before the digital marketing boom. Most of the appealing measures that are enabled by emerging technologies (e.g., social media, geolocation, browsing activities) aren’t nearly as predictive as we may think, and certainly not to the level of RFM. I’d hate for firms to stall their pivot toward customer centricity—or worse, for customers to feel their privacy violated—all because companies believe they need extensive (read: “excessive”) data gathering to move forward.

Customer Centricity: From Concept to Implementation

None of these ideas are set in stone, and while there are some great case studies in customer centricity, we’ve not arrived at a textbook consensus. But the dialogue is certainly evolving. A few years ago, it was the very concepts embedded in customer centricity that attracted the most attention, but now there’s plenty of books in circulation (one that’s particularly great)—and now it’s more about the barriers to achieving a truly customer centric organization. I will continue my roadshows and hear more from practitioners. And if you have any research, case studies or experiences that confirm or refute any of the above topics, by all means send my way. Editor’s note: The original version of this post appeared on the WCAI Blog on July 9, 2015.  

Since I was a little girl, I have always loved telling stories that were dear to my heart. I remember my teachers, even in elementary school, not wanting to be interrupted with my endless questions in class, but they always tuned in when I told a story. Humans have communicated through stories for thousands of years; it is a timeless talent. Stories can connect people, project ideas and allow concepts to adhere, and drive change. As I’ve grown up, I have found that captivating audiences and inspiring change is key in business as well, especially in today’s digital age, where information is abundant and attention scarce. In an ever-evolving global market with fierce competition and imminent change, connecting with people throughout all parts of the business food chain has become vital, more than ever before. But how can we create a convincing business narrative? What does it take to craft a good story? I have found that it is not so much what you say but how you say it. When faced with this task, I refer to the 7 C’s of storytelling: Character, Context, Connection, Curiosity, Conflict, Climax, and Change (or Conclusion). I use the storytelling skill a lot in my work as an MBA consultant. I regularly ask clients, “So, tell me why. Why do you want an MBA from Wharton?” “Well, it is obvious, isn’t it?” a client of mine answered. “It is one of the best business schools in the world and has the best programs; it would be perfect for what I want to do.” I responded back: “So what? Why should I care that Wharton is the best. The question is why do you care to go there? Share why you care.” What if a candidate started with the fact that she spent most of her adult years working as an investment banker in Manhattan when a series of unprecedented events led her back to Brazil? Perhaps she might want to expand on being born in Brazil and coming to the United States at a very young age, not knowing how or why. Back as an adult in Rio de Janeiro, the city where she was born, she was drawn to those with fewer resources who had not benefited from the recent economic growth. She would want to explain how her objective is now to be a change agent in the social sector through business. That’s why she wants to go to Wharton. Does she sound more convincing now? Yes, because I let you know what is behind her drive to get an MBA—her story. The same approach works in business. Whether it be a 30-second Super Bowl commercial to pitching a business idea to venture capitalists, the data might persuade us to think, but it doesn’t connect us on an emotional level. Stories, on the other hand, speak to our hearts, make us feel alive and inspire us to act. The success of crowdfunding is mostly due to the ability users have of telling the story behind the project, inspiring strangers and being funded as a result. Storytelling can also be put to good use beyond funding and sales strategies in business. From team-building activities to executive training, from staff meetings to management presentations, stories can help build camaraderie and understanding, creating a more cohesive organization. But there is a caveat to that. Stories need to be genuine, and the message told in a succinct way. If you don’t trim the fat, people will not pay attention. If you don’t believe in what you are saying, people won’t believe you. Individuals who master the skill of storytelling also will benefit as we evolve into a labor market that is ever more global. Succinct, compelling stories will enable them to stand out among the crowd and create a gripping personal brand. Storytelling translates across languages and cultures. The human imagination has no limits. Storytelling allows us in business to escape the traditional confines of the relationships with our customers and employees.

We are experiencing an epidemic. It is affecting 11 million millennials in the United States today. What is it that is taking over so many young lives and affecting nearly every decision they make? Parenthood. Millennials are becoming parents at a rapid rate. Already, nearly one in four millennials are parents, and that number is growing every day. According to research collected and shared by Wells Fargo, the average age of American’s having their first child is 26. That means that the generation we thought we had finally figured out just changed the game—again. It goes without question that having children affects the purchasing decisions of every parent. Like generations before them, we are seeing a major shift among millennial shopping habits after having children. Before becoming parents, millennials were significantly more likely to overindex on quality of products over price. However, with parenthood comes major responsibilities that carry hefty financial weight. This has fueled a shift from a focus on quality to a focus on price and convenience among millennial parents. This shift has turned millennial parents into active seekers. These are the consumers we see most often using deal sites like Zulilly and Groupon and utilizing their online networks to get the most bang-for-their-buck. Millennials are typically associated with brands like Apple and Whole Foods. However, after having kids their priorities shift as these new parents become more price conscious shoppers. Millennial parents now trend higher compared to the general population for shopping at places like Dollar General, Home Depot, Kmart, and Kohl’s—hardly brands typically associated with the ultra-hip young millennial generation. On the other hand, millennial parents underindex compared to the rest of the population at places like H&M, J. Crew and Sephora—places that once were almost second homes for them. What does this mean for brands targeting this demographic? Millennial parents may be loyal to brands, but when price and convenience desires are filled by a competing business, they are quick to move on. According to research from my firm Millennial Marketing Powered by FutureCast, before having children, one in six millennial respondents were significantly more likely to make a purchase decision for dining and entertainment based on quality rather than price. After having children that number drops to one in 11. Furthermore, on an aggregate basis—combining all categories—our respondents bought on quality over price by a 57 to 43 margin before they became parents. After parenthood, the ratio shifts to 52 to 48 as focus on quality decreases and the value of price increases. Although studying the millennial generation may be a practice in contradictions, we know one thing to be inherently true: They are tech-savvy, digital natives. This is the first generation to have grown up almost entirely with the Internet at their fingertips, and they are utilizing that accessibility to brands in their daily lives—especially millennial parents who value all the help they can get. Through social media, this generation is changing the way information is shared—influencing the way in which product and marketplace information is exchanged. Checking a product’s reviews is the number one reason millennial dads use their smartphones while shopping followed by using their phone to check prices (No. 2 reason) or to find nearby store locations (No. 3). On the other hand, millennial moms use their smartphones to search for coupons and deals and to compare prices. Overall, 85 percent of millennial parents use their smartphones to help them shop at brick-and-mortar retail locations and a majority of both moms (76 percent) and dads (64 percent) are likely to make a purchase with a coupon or deal they receive to their smartphone while in or near a retail location. Amazon has quickly become the leader in the marketing to millennial parents space by connecting through a digital platform and fulfilling the low price point and convenience desires of young parents. While on the site, millennial parents can compare products and prices and search for the exact product they are looking for (everything moms and dads were using their phones for while in the brick-and-mortar store), then have it delivered directly to their door. The release of the Amazon Dash button for Prime members made process even easier. With a simple click of the button, users can quickly and conveniently order new products like baby formula, cleaning supplies and even diapers from their preset shopping carts to be delivered the next day. The company has also created an environment in which people don’t go to shop—they go to buy. One might argue that there is a loss of impulse opportunity when your customers are only buying and not shopping, but Amazon combats that with a sophisticated recommendation system (how do they always know what I need before I need it?), as well as suggestions for items that enhance or work with the product already in the shopping cart. Again, price and convenience are the winning factors here. Without a doubt, brands need to recognize not just the emerging numbers of millennial parents, but also their shifting consumer behaviors, if they hope to win with this new generation of parents. While quality will always play a significant role in the path to purchase, for a generation that is just learning the ropes of their new responsibilities, price and convenience will be the determining factors that fuel brand love and loyalty.

Can a two-sided nation improve its ranking in the world? And why should it care? By Tom Lincoln Do nations, like products, have brands? Yes, says Wharton Professor David J. Reibstein. He teamed with U.S. News & World Report and WPP’s BAV Consulting on the “Best Countries” study to help the world understand why nations brand—and how nations’ brands can be improved. On October 28, 2016, Professor Reibstein will present his conclusions when he hosts the Wharton Nation Brand Conference in Philadelphia. The conference will gather policymakers, executives, and academics to discuss what nations do that affects their brands and how that affects their economies. With the 2016 Summer Olympic Games to be hosted in Rio de Janiero, Reibstein and his team apply the lessons of the Best Countries study to Brazil, one of the most dynamic and confounding brands in the Western Hemisphere. 1. Brazil’s Brand Perceptions Brazil is a study in extremes. Boasting a population of almost 207 million and the sixth-largest economy in the world, the nation drew 3.5 million attendees to the 2014 World Cup. However, one in four Brazilians lives below the poverty line. Brazil’s brand holds two identities in conflict: beautiful, sexy, and fun vs. poor, corrupt, and out-of-control. More than 16 million people—8.5 percent of the population—subsist on less than $1.30 per day. Former president Luiz Inácio Lula da Silva has been indicted on corruption charges. Brazil lost an estimated average of 17,000 square kilometers of rainforest per year in the 1990s and 2000s. How do these contrasts affect Brazil’s ranking among the Best Countries? An answer comes from the Best Countries survey. Wharton and Huntsman alum Anna Blender W07 took a leading role. A Senior Vice President of BAV, Blender teamed with Professor Reibstein in 2015 to apply BAV’s “BrandAsset Valuator” Model of Brand Building to nations. Together with Jeffrey Cai GRW15 and Wharton SEI Center Senior Fellow Bruce Brownstein W80, they studied the financial return that nations can expect from nation branding efforts. Next, Reibstein and Blender joined forces with BAV’s CEO John Gerzema, in consultation with U.S. News, to create the Best Countries study. The criteria the team chose included GDP, tourist arrivals, foreign direct investment inflows, and human development. For the 60 top-scoring nations, the team surveyed more than 16,000 global participants, asking about 65 core brand attributes—such as bureaucracy, strength of international alliances, sexiness, economic stability, religious freedom, gender equality, and richness of history. The team grouped the 65 attributes into nine general subrankings that reflect how the nations were perceived in terms of (1) Adventure, (2) Citizenship, (3) Cultural Influence, (4) Entrepreneurship, (5) Heritage, (6) Movers (up-and-coming economies), (7) Open for Business, (8) Power, and (9) Quality of Life. The overall Best Countries rankings were derived from nations’ scores in the nine subrankings. The team released the results at a well-branded conference: the 2016 World Economic Forum in Davos, Switzerland. To the consternation of many Americans, including late-night television host Jimmy Kimmel in an opening monologue, the U.S. ranked only fourth. Brazil ranked No. 20. Why should Brazil care? Because, according to Reibstein, it affects their economy just as brands for companies affect their sales and profits. Why did Brazil end up so far down? After all, it ranked highest in fun, sexiness, and beauty, as well as No. 1 in Adventure. What’s more, only New Zealand and Australia ranked higher than Brazil for happiness. In the subranking of Cultural Influence, Brazil was behind only France, Italy, the U.S., Spain, the U.K. and Japan. What perceptions brought down Brazil’s overall score? Citizenship, for one thing. Brazil ranked No. 25 in that category. It came in close to last for caring about the environment. Brazil ranked No. 29 for Entrepreneurship, No. 37 for Open for Business and No. 43 for Quality of Life; and close to last for the attributes of well-developed public education and health systems, transparent government practices, and income equality. Brazil’s average per capita GDP ($11,600 in 2011) ranks it 100th in the world. As Naercio Menezes, professor of economics at the University of Sao Paulo, told the BBC, “Brazil is one of the most unequal countries on the planet. . . . If you are born into a poor family it is very difficult for you to eventually become rich.” BRASILIA, BRAZIL - JUNE 15: David Luiz of Brazil celebrates after Neymar scored his team's opening goal during the FIFA Confederations Cup Brazil 2013 Group A match between Brazil and Japan at National Stadium on June 15, 2013 in Brasilia, Brazil. (Photo by Dean Mouhtaropoulos/Getty Images) 2. Rebuilding Brazil’s Brand Brazil’s efforts to strengthen its brand might include a two-pronged approach: (1) solving its complex problems; and (2) publicizing its repertoire of strengths. The nation could see an immediate brand upside by raising its global perceptions for caring about the environment. Among the nine subrankings, Citizenship (of which caring about the environment is a component) has a significant correlation to Gross Domestic Product purchasing power parity per capita: 16.94%. Some of Brazil’s efforts to improve its environmental reputation are showcased in a book by John Gerzema and Professor Reibstein about the Best Countries study, Best Countries: Defining Success and Leadership in the Twenty-First Century. In an interview published in the book, Luis Alberto Figueiredo Machado, Brazilian ambassador to the U.S., asserted that although deforestation remains a problem, this is an area in which Brazil has been making remarkable progress. Figueiredo said that Amazonian deforestation fell by 82 percent between 2004 and 2014. However, improving Brazil’s environmental reputation is just one piece of its brand puzzle. Unfortunately, its reputation for Adventure only has a 3.24% correlation to GDP purchasing power parity per capita. More important would be to raise Brazil’s low scores for Entrepreneurship (17.42% correlation), Open for Business (11.99% correlation), and Quality of Life (16.89% correlation). Still, Brazil has reason for optimism. Among those countries with more than half the population living in nonurban areas, Brazil trails only Argentina in the attributes of connectivity, access to capital, and developed infrastructure. In addition, Brazil launched a multi-billion dollar social welfare program called “Brazil Without Misery” to eradicate extreme poverty. Brazil’s brand can also capitalize on the nation’s many perceived strengths. The country has long been included in the BRICS bloc of nations, comprising 42 percent of the world’s population. The BRICS alliance helps the member countries develop and bolster their economies. Brazil’s continued bid on the world stage is recognized in the Best Countries rankings. Brazil was ranked No. 11 for political influence, behind such countries as India and South Korea but above Indonesia and Sweden. Brazil also ranked No. 6 in the Movers subranking—evidence of Brazil’s perceived opportunity to prosper. 3. Lessons to Learn at the Wharton Nation Brand Conference As Rio prepares to host the Olympics—while fending off the mosquito-borne Zika virus and fishing garbage from the venue’s still-befouled waterways—it’s anyone’s guess whether lightning will strike twice and deliver another mega-event to rival the World Cup. Skeptics refer to the long-running joke, “Brazil is a country of the future, and it always will be.” What holds true for Brazil holds true for every country: It is vitally important from an economic standpoint how others perceive our nations.

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Tom Lincoln is a consultant and attorney in Philadelphia.

Wharton grads formed the core of a team that revolutionized Microsoft Windows. By Jim Collins In January 2014, a handful of Microsoft’s smartest engineers slipped away for a three-day off-site at a lodge in Woodinville, Washington, a few miles north of the company’s sprawling Redmond campus. On the table was the future—some were saying the survival—of Microsoft’s faltering flagship product, the Windows operating system. The most recent release of the operating system, Windows 8, two years earlier, had—to put it politely—not met expectations. The disappointing reception from users coincided worryingly with plunging PC sales as consumers, developers, and mindshare flocked to mobile computing platforms such as Apple’s iOS and Google’s Android. Windows still powered more than 90 percent of the world’s personal computers, but the world was becoming a different place. Personal computers had lost their dominance. Windows was found on just 14 percent of all computing devices, and its traditional market was shrinking. In the ZDNet blog “Between the Lines,” a few months before the meeting in Woodinville, Steven Vaughan-Nichols wrote, “Most people in our recent debate over the future of Windows thought that the operating system could be saved. I’m sure many people in 1491 thought that the Earth was flat, too.” Suddenly, almost unthinkably, industry observers were talking about the end of an era that had defined the tech giant for nearly three decades. There were other dark clouds. Microsoft CEO Steve Ballmer, who had made Windows a top priority, was on the way out, and the organization faced uncertain change. Some of the people in the room at Woodinville were leaders of Ballmer’s ill-fated foray into the mobile-phone market through the purchase of Nokia, an investment that was turning out disastrously. Windows Phones, coming late to the mobile bandwagon, had sold poorly, following the Kin, a much-hyped phone designed for social networking that was on sale for all of 48 days before Microsoft and Verizon killed it. Never mind that the Windows Phone had impressed reviewers with its brilliant design, and had tanked chiefly because it came with so few apps. The phones had repeated the kind of copycat, late-to-market pattern that critics said had characterized the company’s new offerings in recent years. The Zune MP3 player had chased the iPod into the music space and flopped. The Surface tablet had chased the iPad. The search engine Bing was still playing catch-up to Google, and lagging far behind. The company was struggling with what Wharton Adjunct Associate Professor of Management Saikat Chaudhuri called “the incumbent challenge.” In an industry where growth and opportunity demanded nimbleness and innovation, Microsoft had become a mature business built around a dominant business model. Now the model was in danger of losing relevancy. Wharton Associate Professor of Legal Studies Kevin Werbach, quoted as far back as 2011 in the business school’s Knowledge@Wharton, said, “Microsoft’s great fear was always that it would turn into IBM, which it viewed as a bureaucratic organization living off of past glories...” Bill Gates’s legendary vision of powering a computer on every desk in every home had essentially been accomplished years before. From the outside, the prospects of any real success in Woodinville seemed slight. It had been a long time since anyone had called the company “visionary.” [su_pullquote]It wasn't just a set of skills that the phone managers brought. It was an orientation.[/su_pullquote] Inside the room was a different story. The makeup of the group was not Microsoft personnel-as-usual. The company’s business and product development had historically, and famously, been driven by developers. (A common phrase around Redmond captured the company’s engineer-first approach: “We could build it, not we should build it.”) Indeed, here in Woodinville, leading the meeting was a brash 40-year-old engineer named Terry Myerson. But Myerson—in charge of the recently consolidated Phone/Windows/ Xbox platforms—wasn’t all about the code. He was an evangelist for a consumer-first approach who wasn’t afraid to shake things up. He’d invited Jeremy Korst WG03 to the table, a 40-year-old Wharton MBA who had just taken the helm for Windows brand and product marketing. Another key voice belonged to fellow Wharton grad Bernardo Caldas WG01, a veteran general manager with expertise in pricing and business modeling. “Bernardo and I were part of the early strategy conversations,” said Korst later, “only because of the shifting organization. We were at a table we normally wouldn’t be.” Their roles turned out to be crucial. Industry analysts had identified two possible courses for Windows to thrive in an increasingly mobile world. Paul Thurrott put it this way on the website IT Pro: Microsoft could follow the Apple model and continue to develop iterations of its traditional desktop operating system while creating a separate mobile platform on the side. Or it could protect Windows at all costs and simply build mobile platform features into it. The course that Myerson’s team mapped out bet on a third way. It was bold to the point of being visionary. Four fundamental but risky objectives underpinned the plan. On the development side, the new operating system would be designed to work seamlessly across all of Microsoft’s platforms, from the miniature Raspberry Pi 2 to smartphones and phablets and tablets and Xboxes and laptops and 2 in 1s and PCs and mainframes, all the way up to the 84-inch video conference/touchscreen of Microsoft’s “Surface Hub,” which was still in development. There would be none of the usual Microsoft walls around product lines. Consumers switching from one device to a second to a third would work with a comfortable, familiar system across all three, whether using a keyboard or mouse or swipe or voice control or game controller. Developers around the world, attracted by the size of the combined market, would respond with a flood of innovative applications. First, though, Microsoft engineers would need to write all those lines of code. Ensuring quality would be difficult, given the number of different devices in the world, each with its own screen size and configuration, and given the dizzying number of applications they supported. The thousands of distinct end products needed to look and feel “similar and familiar,” no matter where they appeared or how they were accessed. The scaling challenge of such a plan, alone, was monumental. The second objective was to get the operating system as quickly as possible onto as many devices as possible. Bernardo Caldas was tasked with designing the models on pricing and licensing. He would also run the analytics of a strategy that was completely foreign in Redmond: giving away the new upgrade, for free, to the massive market of users already operating earlier versions of Windows. What was the payback on the hundreds of millions in revenue the company stood to forgo? What would happen to the partnerships with Intel and the OEMs whose customers would be given incentive to stay on the machines they already owned, rather than buy new? And how would the manufacturers provide technical support in the meantime? How could Microsoft shift its business model that had sustained it for nearly 30 years toward a new model that combined new device sales with post-sale monetization? Third, the new operating system wouldn’t be guarded like a state secret until coming out in a customary, splashy, over-the-top unveiling. Rather, the company’s developers would share the evolving code with users, to beta-test and help work out the bugs. For Microsoft, which had long prided itself on being in complete control of everything it touched, the strategy contained anxious amounts of uncertainty. What if opinion leaders such Mary Jo Foley or Tom Warren didn’t like the direction? What if the blogosphere blew up with criticism from impatient users who thought they were seeing a product more fully baked than it actually was? Wouldn’t this open the door to reverse engineering in Cupertino and Mountain View? Finally, in a shift that was every bit as symbolic as strategic, Jeremy Korst and the marketing team would work in tandem with the engineers from the outset, to make sure the programmers were actually creating something that customers wanted and that would fly in the fast-changing marketplace. At the same time, the marketing team would build campaigns that aligned with what the engineers were creating. As Korst noted, that collaboration was a radical break from the typical Microsoft process. “There’s an old saying here,” he said, “that engineers build what they want, then hand it off to sales and marketing to go and sell. Windows 8 was a pinnacle of that model. Which is a big reason it wasn’t successful.” Taken together, the risks looked almost entrepreneurial. But far more was at stake than the prospects of venture capital and growing up out of the garage. Microsoft’s core business supported a company with some 110,000 employees worldwide—more than 20,000 in the Windows division alone—with ripple effects into every corner of the global economy. The plan for the new operating system was a departure on so many levels from the core Windows business that the team in Woodinville adopted an internal code name for the upgrade. They would call it “Threshold.” In important ways, the timing of the new plan was fortuitous. Microsoft’s stock had dropped nearly 12 percent during Steve Ballmer’s tenure, and the drying up of the PC market was sobering. But in February, less than a month after the off-site in Woodinville, Satya Nadella was named CEO. A well-respected consensus-builder from within Microsoft, Nadella believed in the power of Windows and vowed his support—and challenged Myerson’s group to turn Windows into a dynamic ecosystem built for the new “mobile first, cloud first” environment. Nadella was willing to sacrifice any momentum the Windows Phone had in favor of building the ecosystem—he immediately went about shedding jobs in the Phone division, and eventually wrote off the $7.6 billion investment, more than Microsoft had paid for Nokia in the first place. He encouraged collaboration across divisions and the cross-pollination of the best minds, wherever they came from. A bunch of senior people who had been used to managing silos left around the same time that the Windows/Xbox/Phone platforms were brought together. It felt like an older generation stepping aside as a new breed stepped up. Jeremy Korst was one of the new breed. From the working-class town of Hoquiam out on the Olympic Peninsula, Korst had gotten his undergraduate degree at the University of Puget Sound in Tacoma before his MBA at Wharton. He was down to earth, not impressed by reputation or pedigree, a good listener, comfortable yielding in the face of a better idea. He was in his second stint with Microsoft. Initially frustrated by the company’s insular approach to getting products to market, he had left to work for T-Mobile. He had been lured back by Myerson’s fresh, customer-centric approach working on Windows Phone. Now, with the Woodinville plan blessed by Nadella and approved by the board and set into motion, it fell mainly to Korst to sell the new brand vision to the engineers. He not only represented marketing and the go-to-market strategy in the big regular engineer meetings called “Director Reviews,” he and his team kicked off the meetings. Korst brought in senior product manager Karen Wong-Duncan WG06 to help him pivot the entire culture toward the consumer. Like Korst, “KWD” was a Wharton alum who had come out of the Phone division. They shared the same “challenger” mindset that Meyerson and many managers in that division had—they’d been attracted to the phone business because it was a new frontier, a huge and challenging market with powerful brands already controlling the space. It wasn’t just a set of skills that the Phone managers brought to the Windows project, it was an orientation. They immediately engaged the engineers. They worked up mock ads “to show them the North Star,” said KWD, “to show them where we wanted to go.” They put a storyboard together, and shared it with groups of 50 and 100 at a time, brought it around the company and on the road, and got feedback. They did market research, ran focus groups, came up with new ads and tweaked the storyboards, and kept bringing them back in front of the developers. “Keep these in mind as you build out the software,” KWD told them. They found the engineers surprisingly responsive, happy to be engaged in the wider conversation and excited to see how their work would be pitched to customers. Time and again, Wong-Duncan returned to things she remembered from the marketing class she’d taken at Wharton with Adjunct Associate Professor of Marketing Keith Niedermeier. She had internalized the importance of things like quantifying consumer trends and market segmentation—but she kept coming back to Niedermeier’s focus on consumer behavior, on how brands shape perception, on how the most successful brands create an emotional connection with their customers. “At the end of the day,” she said, “data are just data. You have to use them and then find something bigger. Consumer feedback can take you only so far—every focus group hears the same things.” She gave herself a playful, unofficial job description. “I do Consumer Strategery and Seismology,” she’d tell people. She listened for faint and loud signals. She put her ear to the market and tried to hear what was going on beneath it. She talked with users and studied the evolving operating system, listening for a beating heart. Over time, Korst and Wong-Duncan refined the storyboard and narrowed on a message that had been part of the Windows operating system all along. The Windows legacy had been the democratization of technology—the software made for anyone, anywhere. It was difficult to market that idea, though, to any individual customer, to make the product feel special. What was needed was new language. The right language— aspirational, emotional, identity-forming—would help create the process and then drive decisions. The unspoken purpose of Windows, they finally determined, had always been to enable people to build, to create, to explore, to discover. To do. Do Great Things. They tested Do Great Things against other tag lines, against messages from outside agencies, and it kept winning. The message felt authentic and aspirational. It inspired the engineers. The timing felt right. The millennial culture was a start-up culture, the makers movement well underway. Someone noticed that DO was part of the word WINDOWS, and some graphic storytelling was born. The message resonated. Korst and Wong-Duncan and the rest of their team set about articulating it and then ensuring the product was built to bring it to life. “We had more than a billion customers already using our product,” said Korst, “probably by default more than choice. We wanted them to choose it. We wanted to put a choice in front of them, and give permission for other brands to offer a competing choice as well. For example, to Apple customers: “Do you want to consume beautiful things, be artistic, be a part of the ‘in’ crowd? Or do you want to make a difference, to do great things?” Myerson and Korst brought in another Wharton grad, Stella Chernyak WG99, to lead product strategy for Microsoft’s business and education customers. Chernyak had a master’s in solid state physics from the Moscow Institute of Physics and Technology, a comfort with data, and a history with Microsoft dating back to when Bill Gates was still CEO. She was responsible for reaching out to the Gartners and Forresters, the banks, the health care systems, the defense industry, the airlines, the manufacturers of PCs and consumer electronics, the largest and most important of Microsoft’s customers, and persuading them that the Microsoft that she and they both knew was truly in the process of reinventing itself. She invited them—many of whom were miffed at Microsoft’s history of arrogance and secrecy, especially during the Windows 8 period—to be not just customers, but partners. She let them know what was in development and asked for their feedback and ideas. She created a process for communicating—asking thousands of customers about their wants and needs, their thoughts on the emerging operating system, then tabulating and analyzing the responses to see which were unique, which formed patterns across categories. She met with customers across the country and abroad, and invited the most important of them to meet on site in Redmond, to be an ongoing part of the dialogue. She knew that Microsoft couldn’t possibly satisfy every request, but she looked for pieces that were useful, for ideas and concerns that were consistently brought up. She discovered that simply asking for feedback changed the dynamic with customers. She told customers to think about their end games, and that Microsoft would creatively try and help them get there. Perceptions shifted. “It was not about a single aha! moment,” she recalled. “But with the outreach, we gradually got to the outcome we were working toward. And we were developing long-term relationships in the process.” On the Redmond campus, the culture was shifting, too. Satya Nadella reinforced a kinder and gentler atmosphere—collaborative more than combative, integrated rather than insulated. He still encouraged vigorous debate, but trusted the most reasoned and thoughtful voices in the room, not the loudest. He encouraged team building. On the new Windows team, collaboration went beyond the meeting rooms. Korst, KWD, Chernyak, Caldas, and Jeremiah Marble G11 WG11—yet another Wharton grad on Korst’s team, in charge of designing the beta-testing program—worked from the second floor of Building 37 on Redmond’s east campus. Knowing that team culture would be critical during the intense period ahead, they instituted a Thursday end-of-the-day snacks and drinks ritual, right there in the office. They worked out at the same fitness club. On weekends, they often hiked together, Tiger Mountain, Mount Si. They ran together in a St. Paddy’s Day fun run. Someone put up a sheet of butcher paper in the hallway and people scrawled—by hand, skipping the synced electronic calendars—what they had going on outside of work and invited others to join. They took cooking classes, competed against each other in chili cook-offs and holiday drink contests. (“We’re a competitive group,” said Korst.) And they traveled together, spreading the new Microsoft gospel, to Vegas and Barcelona and Tokyo and Australia, feeling more like a rock band on tour than techies on a business trip. Jeremiah Marble’s beta-testing program turned out to be even more transformative than expected. He brought a world view to his work that was broader than most. He had been consulting for an investment bank on Floor 62 of the World Trade Center’s south tower on September 11, 2001, survived the attacks, and reconsidered his career. He quit and joined the Peace Corps, did service work in the Dominican Republic, lived in Cambodia, Laos, and Vietnam. He focused on climate change issues. He developed educational software for UNESCO. Along the way, he grew to believe in pragmatic idealism and in the power of tools—and that the smart phone, in the developing world, was the center of a better future. At Wharton he got his MBA/MA from the Lauder Institute and joined Microsoft’s Windows Phone division. He launched the new operating system’s brand new “flighting program,” which provided beta versions to select customers to see what was working and what was crashing. Early on, he realized how much more the program could do beyond fixing bugs. The beta-users who were willing to take a chance on minimally tested software, knowing full well it could blow up their devices, turned out to be super technical and super big fans of Microsoft. For a company struggling with the monumental challenge of building out the new operating system for such a colossal number of platforms and configurations, the crowd-sourced feedback was a godsend. Maybe a savior. Marble formalized and re-imagined the flighting program as the Windows Insider Program, and openly invited the company’s most passionate users to become co-creators of the new operating system. The engagement and interest spread like grass roots. By the time of the launch, more than seven million users would be part of the Insider Program, from every country in the world, including Antarctica and the Vatican City. Marble analyzed the massive data—collecting, formatting, and passing along the feedback from millions of users so it could be useful to the engineers. He managed the Insiders’ expectations and responded positively to negative feedback. [su_pullquote]The team bet on a third way. It was bold to the point of being visionary.[/su_pullquote] The initial concerns that the tastemakers might object or that frustrated users would complain never materialized. The positive spirit of the Insider Program was overwhelming and infectious. Nobody seemed to notice or care if engineers in Cupertino were taking part. The pre-release program designed to help the engineers turned into a public relations and marketing coup. Bloggers and journalists began writing about the new culture brewing at Microsoft, about the monolithic ship starting to turn. Before the new brand was even launched, it had a real live community behind it. Bernardo Caldas ran the pricing models and analytics. He managed a team of 25 or 30 people, who marveled at how cool and rational Caldas remained when the conversations around him grew heated and tense. They were talking huge numbers and high stakes, but Caldas trusted what his numbers told him. The adoption models he developed with his Finance counterparts were based on concepts he learned from Professor Jehoshua Eliashberg. (He could still recall the class number and name, MKTG 771: Models for Marketing Strategy.) From that course, he took the case studies relating to the motion picture industry and applied the concepts to Microsoft customers. He based his pricing and licensing recommendations on the discrete choice modeling research, statistical models, and other techniques he’d gleaned from Wharton’s Pricing Policy course and the school’s highly regarded quantitative marketing curriculum. He determined that the free upgrade was a good risk. The fundamental pillars of the plan were holding. At the lightly produced, almost casual, announcement of the new operating system, in San Francisco in October of 2014, nine months before the free upgrade would become available to the general public, one symbolic moment stood out. Following months of internal debate, the name announced in San Francisco was a surprise: familiar but not routine. Windows 10 was bigger than a standard upgrade (skipping straight over 9.0), and it promised to do great things—even as it remained a familiar brand to its existing customers around the world. There would be no major upgrade again. From here on, the operating system was a service, not a product. It would be continually updated and supported for the lifetime of the device, at no cost. Windows 10 was the end game, and would keep getting better over time. The Wharton pieces in all of this were unplanned, but they fit. Doug Smith, himself a graduate of Wharton’s Executive Education program, said, “I’ve helped lead Microsoft’s MBA recruiting process for years, and it doesn’t surprise me that so many Wharton folks ended up driving Windows 10. More so than from other schools, Wharton MBAs are strategic and data-oriented. They bring clarity to marketing.” Aaron Woodman, a senior director who led brand and consumer strategy for Korst, said the Wharton group reminded him of passages in Zen and the Art of Motorcycle Maintenance. “People understand motorcycles differently,” he explained. “Some understand the motors. Some understand the experience of going fast and free. It’s rare to find those two kinds of understanding in the same person. But every one in the Wharton group has it.” Wharton’s Saikat Chaudhuri confessed that he enjoyed watching the Windows 10 project unfold. “Satya wanted to play in all the key markets, but do it on Microsoft’s terms, using Microsoft’s strengths,” he said. “In a way, that’s exactly what Wharton does. It teaches its students, for instance, that innovation is important not just for start-ups, but for established businesses.” The Windows 10 upgrade was officially released at the end of July 2015. Reviews were instant, and raving. Within 24 hours, the new Windows was already helping people create and make and do things on 14 million computers—the fastest-ever adoption of an operating system. The incumbent tech giant announced that within two years, that number would be an almost mind-boggling one billion. For the first time in recent memory, nobody doubted that Microsoft could do it.

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Jim Collins is a freelance writer from New Hampshire and Seattle. He’s the author of The Last Best League, an exploration of the most competitive amateur baseball league in the country.

Who are millennials? The answer depends on whom you are talking to. Statisticians will tell you millennials are young adults born after 1980 and that there are more than 80 million of them living in the United States today with a direct spending power of $200 billion. However, I have a found a more evolved story to be true. Millennials are digital natives at their core and their desire to change the world is impacting the way companies are doing business.   Top five millennial trends 1. Millennials are content creators and curators 2. Millennials seek peer affirmation 3. Millennials fuel the experience economy 4. Millennials are redefining affluence and luxury in the United States 5. Millennials are the biggest instigators and influencers on new market trends   No surprise that as the majority generation in the United States millennials have the greatest influence on market trends and behaviors. Today, millennials are 2.5 times more likely to be early adopters of digital, social and mobile trends. As a result, millennial behaviors permeate older and younger generations creating an overarching mindset that is determining brand health and financial performance. Marketers and business leaders are already well aware of all that has been written on the millennial generation. I have certainly written my fair share of reports and articles. But beyond just the facts, the question truly is how can brands begin to navigate and, more importantly, prioritize and quantify that coveted millennial influence? In the latest research we have conducted at FutureCast, we found that the answer to this question lies in what we call the Millennial Mindset. This year, millennials became the largest generation of consumers living in the U.S. Beyond just the sheer size of this generation, their impact lies in their ability to influence an entire market of consumers who may or may not be their millennial peers. Whether your brand wants to connect with boomers or gen Z, it is important to recognize that many of the behaviors these non-millennial consumers are carrying out stem from millennial trends and mindsets. For example, a 50-year-old man is not a millennial as defined by his age, but he is just as dedicated to wearing his Nike FuelBand every day as his 23-year-old son. Similarly, we are already seeing the impact millennial parents are having on their gen Z children.   Defining the Millennial Mindset Social Circle When brand marketers hear the word “social” they instantly turn to social media. This is not always the case. Yes, social media is a powerful tool but the real value of a social circle is so much more than just activity on social media. The Social Circle refers to the team of advisors modern consumers have built for themselves and it is without question the most influential and impactful pillar within the Millennial Mindset. The more brand fans who advocate for the brand, the bigger the social circle. This will directly impact future profits. Self It is no secret that the key to great brand performance is to build an emotional connection with your audience. Consumers who feel that a brand understands them on a personal level and provides opportunities for greater self-exploration develop the kind of loyalty that leads to brand dominance. This pillar also mirrors current trends we are seeing take shape across the board. Utility has become the new currency and the brands that help consumers have more fulfilling lives through customized experiences are winning big. Innovation Millennial Mindset consumers want the novelty, efficiency, and effectiveness that come with product innovation and identify innovative brands as ones that are constantly improving and reinventing themselves. More than that, they are looking for brands that streamline utility and are constantly re-inventing and re-creating new ways that make consumer’s lives easier, more efficient, better, etc. Brands that are constantly in beta will drive interest and engagement across generations that absolutely prefer increased usefulness. Trust Building trust is the first step to any great relationship. The same is true for brands aiming to connect with Millennial Mindset consumers. The most trusted brands are the ones that put consumer needs first and follow through with their promises. Consumers today have more access to brands than ever before with the Internet and social media, so keeping secrets and important information hidden behind red tape is no longer an option. Access Accessibility is key. Consumers today are looking for access to brands across both physical and digital channels and for brands to create a seamless transition between hose two worlds. This all boils down into one big idea: Useful is the New Cool®. Consumers today are looking to brands to create more ways to make their lives easier and that comes from greater accessibility to the products and services they use every day. Purpose Millennial Mindset consumers are looking to brands that add good to the world and are committed to making our planet a better place. Today, brands must acknowledge the triple bottom line that exists – people, planet and profit. Businesses cannot exist in a modern market if they are only focused on the numbers in their P&L. Consumers look to their favorite brands to help them make their communities better and provide them with the tools they need to impact their world.   What mindsets matter most? Which Millennial Mindsets matter most? It depends: what respondents said was important was quite different than what was actually important. Respondents in our survey said that “Accessible” and “Trusted” were the mindsets that mattered most to them when making a purchase decision.   However when we mapped the mindsets against actual spending data we found a different story. “Social Circle,” the lowest-rated attribute in stated importance, was the factor that most drove spending behavior when looking at derived importance. “Self” and “Innovative” were both ranked relatively low in stated importance but were the next most important factors in spending behaviors when considering actual consumer spending.   Clearly, what consumers say tends to be different than what they actually do. Brands that can identify what their consumers are doing and what is influencing that action will be the disruptor brands that guide the future. Connecting with consumers based on this new market paradigm is essential for brands aiming to win big. Remember, we are living in a new consumer market where a target audience does not exist. Rather, a group of likeminded consumers who may range in demographics and backgrounds but are within the same mindset will be what drives brand performance across industry verticals.   Editor’s Note: Leah Swartz, Content Specialist at FutureCast, contributed to this article.  

  When it comes to generating fitness hype, perhaps no brand has done it better than SoulCycle.   It’s nearly impossible to scroll through social media or make a trip to the gym without catching a glimpse of the renowned golden wheel, thanks to its impressive 180,000 Instagram subscribers, 85,273 Facebook likes, 87,600 Twitter followers, and nearly 440,000 active riders (with approximately 20,000 serving as weekly regulars). This “cult” following, as some have dubbed it, has permeated the entirety of the fitness realm—and beyond it.   Yet the most interesting part of the brand’s hype isn’t how great it is, but rather how it started—with a single dream focused on bringing the joy and empowerment of being together to a workout.   “We were looking for an exercise experience that was going to be fun, exciting, challenging,” SoulCycle co-founder Julie Rice told Business Insider. “There were a lot of workouts, but there was really nothing out there that was efficient, that was joyful, that was about community, that was something that you really looked forward to.”   Rice and her partner, Elizabeth Culter, introduced 45-minute full-body group cycling sessions to a market that was primarily funded by individual gym memberships. Instead of labeling the brand as a quick, fix-all workout, they referred to it as a journey to all-encompassing personal health, with the tagline of “Find Your Soul.” On this journey, they presented consumers with everything they might need to live a better life than they lived yesterday: a tough workout for the physique, decompression for the mind, and togetherness for the heart.   It’s no surprise that millennials can’t get enough of it.   After all, millennials consider themselves to be dedicated to holistic health. This means that health is more than just physical, but also mental and spiritual. Specifically, 53 percent of millennials agree that health and wellness is important in their lives, with only family ranking higher, according to a Yahoo report. This report also found that 84 percent of millennials exercise at least once per week (with half of those respondents claiming exercise is their passion), they are twice as likely to do yoga weekly or turn to meditation than Generation X and Baby Boomers, and nine out of 10 will pursue good health to be successful in other aspects of their lives.   In addition, millennials are the driving force of health and fitness apps’ 88 percent growth since 2014. Nearly 35 percent of fitness tracker owners and 69 percent of smartwatch wearers are millennials, according to the NPD Group, and one-in-three millennials share health and fitness-related content online at least once per week.   This tendency to share information about wellness activities also supports the generation’s desire for peer affirmation. Millennials constantly seek guidance and affirmation from their social circles, with 70 percent stating they feel more excited about doing things when their friends support them. Millennials are also highly motivated by what others think of their image, with 73 percent saying they exercise to improve their appearance, as their physique is very important to them.   Based on these insights, SoulCycle would have managed well enough if it simply offered a group cycling workout. It instead found astronomical success because it took the insights and went above-and-beyond, offering millennial consumers a ready-made, packaged lifestyle. This lifestyle is centered on the ideals they want to promote, simultaneously contributing to their social lives and equipping them with a sense of belonging. Ultimately, the lifestyle cements consumer brand loyalty because it proves that the brand sells more than products.   It’s the perfect analogy for what’s currently happening in the saturated athleisure market. Every brand in the category answers basic consumer needs when it comes to look, fit and comfort-level. The majority of brands are managing to stay afloat based on this basic product offering, but some are drowning. And both floaters and drowners would likely prefer a life raft.   To reach that raft (and perhaps even upgrade to a boat), it’s important that athleisure brands follow SoulCycle’s lead and differentiate themselves in the market. They need to determine what they stand for and then exhibit that to the world. The best way to do this is through the creation of their very own lifestyle offering- one that contains experiences, builds communities and exudes meaningful ideals. This will be the key to creating and keeping brand equity, even among a crowded group of competitors.   Editor’s Note: Skyler Huff, Content Specialist at FutureCast, contributed to this post  

What’s in store for global consumer markets? While geography will always matter, consumer segments tell a more insightful story.

  At the whiteboard with Mauro Guillén (Photograph by Colin Lenton)   [su_tabs active="1"][su_tab title="1. Population Shifts"]Fewer births and more people 60 and older—not just in wealthy nations, but everywhere—will lead to changes in health care and other industries.[/su_tab] [su_tab title="2. Older Consumers"]An aging population around the world will affect financial services and especially the equity markets.[/su_tab] [su_tab title="3. Middle Class Today"]Today, the U.S. and E.U. comprise about 45% of the world's middle class purchasing power.[/su_tab] [su_tab title="4. Growth of Emerging Markets"]By 2022, there will be massive middle class growth in emerging markets, including sub-Saharan Africa.[/su_tab] [su_tab title="5. China and India Take Over"]By 2030, only 20% of the world's middle class consumer spending will come from the U.S. and E.U., with 40% in China and India.[/su_tab] [su_tab title="6. Game-Changing Impact"]The largest markets get to write the rules of the game; until 10 years ago, that was the U.S. By 2030, electronic devices will meet Indian and Chinese regulations, too.[/su_tab] [su_tab title="7. Power of the Rich and Female"]There are some 15 million individuals with at least $1 million in assets, up from 9 million in 2008. More women millionaires means changes in spending patterns.[/su_tab][/su_tabs] We typically think about global consumer markets in terms of geography—of emerging markets in nations such as China, India and Turkey. But according to international management professor Mauro Guillén, the Anthony L. Davis Director of the Lauder Institute at Penn, “From today’s standpoint, the nature of global consumer markets will change so much that by the year 2030, you won’t be able to recognize them.” The markets will continue to grow, he says, but not necessarily by geography. Several trends will drive this shift. Guillén outlined a few in a condensed lecture from his International Political Economy of Business Environments course. For one thing, the number of births per woman is declining in both emerging markets and wealthy nations. Also, we’re living longer: On average, according to Guillén, “Most of us will live seven or eight years longer than our parents and 12 or 13 years longer than our grandparents.” Those factors—fewer babies and more elderly people—will change industries such as health care, financial services, pharma, leisure entertainment, and anything offering mobility to the world’s growing population of those aged 60 and up. Another key driver of change in consumer markets around the globe: the massive movement toward cities. Every seven days, Guillén says, the number of people living in cities grows by some 1.5 million. Today, worldwide, there are 25 cities with more than 10 million residents. By 2030 there will be 51, according to Guillén, and 20 with more than 20 million people. This will affect a range of businesses, from transportation and real estate to leisure and entertainment. Rapid urbanization around the world will also change the way consumers get their food and water. “If you’re thinking about the future, you can think about geographies,” Guillén said. “China and India will be important, but that’s just one part of the story. It’s more interesting to look at it from the point of view of different consumer segments. That’s what will reshape the global consumer markets.”—Louis Greenstein

Jim Rowbotham WG69 and Tom Hadlock WG66 (Illustrations by Riccardo Vecchio) In this episode of the Knowledge@Wharton program, (originally aired on Sirius XM Channel 111, Business Radio Powered by The Wharton School), marketing consultant Jim Rowbotham WG69 and advertising executive Tom Hadlock WG66, two members of the Wharton Emeritus Society featured in Wharton Magazine's "The Power of Age" feature, join host Dan Loney to discuss the growing push for people to continue working past the age of 70. Both Rowbotham and Hadlock feel that they are currently doing some of the best work of their lives, and that working past the age of retirement has helped keep their minds sharp and allowed their creativity to reach its peak. “It’s sort of a health/therapy thing to continue working,” says Hadlock. “I believe the busier you are and the more you’re challenged, the more the mind [and] the body responds in a positive way. It sort of keeps you going and keeps you in a very proactive, type-A kind of setting.” Rowbotham and Hadlock also explore the advantages of being senior members of their respective industries, noting the essential perspective older people bring to media; the benefits of working with and learning from millennials; and the importance of taking classes and watching webinars to exercise their brains and stay in the know.   [soundcloud url="https://api.soundcloud.com/tracks/303491768" params="auto_play=false&hide_related=false&show_comments=true&show_user=true&show_reposts=false&visual=true" width="100%" height="450" iframe="true" /]    

Photo: Thinkstock   In a highly connected, activist-charged world, commercial marketing matters more than ever before. If leveraged correctly, social media can be a powerful corporate tool. It allows companies to connect with customers directly and provides them with feedback and information to better understand customers and to formulate specific messaging strategies accordingly. Despite this potential, public perception is increasingly mismanaged — and the effects can be detrimental. Incomplete commercial marketing research leads to misinterpreted public sentiment, mangled messaging and cringe-worthy marketing flops, with serious losses even for industry leaders. As companies rush to solve the question of public perception, their first inclination may be to implement social media monitoring software — more than 60 percent of companies already use some form of social media for market research. This traditional software produces aggregate reports that exploit public platforms (e.g. Facebook, Twitter, Instagram, Pinterest, Tumblr, Reddit, YouTube) to detail what exactly online users are saying. However, this approach often produces an incomplete analysis—it captures “what” users are saying, but fails to answer “why.” Many companies have lost millions of dollars due to incomplete marketing research and consequent advertising failures. In April, Pepsi debuted a commercial imitating #blacklivesmatter protests, thinking it would be popular amongst millennials, a majority of whom support the movement. The advertisement featured one of the most popular models in the world, Kendall Jenner, who, after spontaneously joining a protest, hands a police officer a Pepsi as a peace offering. The ad was met with immediate, harsh feedback on social media sites, including the hashtags #tonedeaf and #socialinjustice. By 7 p.m. on the evening of the commercial’s release, online discourse had exploded with more than 62,000 tweets, and “Pepsi” and “Kendall” were the top two trending topics on Twitter. Many posts featured memes mocking the commercial. Martin Luther King Jr.’s daughter sarcastically tweeted “If only Daddy would have known the power of #Pepsi.” Another popular meme shows Jenner attempting to quell the violence at Selma by bringing a six-pack. In this case, Pepsi failed to fully understand public sentiment. They had polled “what” millennials connected with, but not “why” or “how” they connected with it—and as a result, the commercial was perceived as superficial and exploitative. Its negative reception resulted in a $5 million loss from production costs. In addition to the monetary losses, the company was left with a damaged reputation and the need of serious crisis management. Controlling corporate public image extends far beyond traditional marketing and advertising. Large companies have to monitor public sentiment online constantly to ensure their actions continue to align with customer ideals. Failing to control public discourse leads to reputational, financial and operational challenges, such as those Uber experienced first-hand last February. When President Donald Trump signed a temporary travel ban on several majority-Muslim countries, the New York Taxi Workers Alliance went on strike, refusing to provide rides to and from the JFK airport. Lyft, Uber’s main competitor, refused to give rides in solidarity with the taxi alliance and in protest of the ban. Uber, however, continued to provide rides and even charged higher “surge” prices due to increased demand. This was a significant misstep for the company because millennials, who represent 70 percent of their consumer base, overwhelmingly opposed the travel ban. Customers immediately perceived Uber’s actions as supportive of the ban and a viral #deleteuber campaign commenced on Twitter, which spurred more than 500,000 customers to delete their accounts. Failing to address public grievances can have detrimental repercussions for companies. Customer complaints can go viral, spurring boycotts and damaging company reputation, morale and overall operations. Now, even employees have the ability to air internal company grievances. A former Uber employee recently described a poor workplace environment, claiming that she and other female employees regularly faced sexual harassment and discrimination and that Uber’s human resources department consistently failed to act on the issue. After the post went viral, the hashtags #deleteuber and #boycottuber began trending as customers vowed to switch from Uber to its competitors. Ultimately, 20 senior leaders were fired from the company and major investors forced Travis Kalanick, co-founder and CEO, to resign. In the age of unfettered access to social media platforms and the potential for unlimited data, companies stand to gain only if they can accurately understand and control public perception. This will require companies to move away from traditional marketing methods and begin conducting more complete assessments that focus not only on “what” customers are saying, but “why” they are saying it. Without understanding the “why,” important factors will be missed, advertisement strategies will flop and companies will be unable to effectively manage online discourse.   Editor's note: This post was co-authored by James R. Sisco, the founder and President of ENODO Global, Inc. a risk advisory firm that conducts population-centric analysis to solve complex social problems in dynamic cultural environments. James draws upon a distinguished 23-year military career in Marine Corps and Naval Intelligence to lead ENODO Global. View the original post here.       

Insights into the evolving world of modern retail from academics and industry leaders at the Baker Retailing Center’s recent conference.

(Left to right): Wharton marketing professor Barbara Kahn moderating a discussion with Jessica White W12 (Executive Director of Customer, Glossier), Neil Blumenthal WG10 (Co-Founder/Co-CEO, Warby Parker), and Rachel Shechtman (Founder/CEO, Story). Photo: Tommy Leonardi    New technologies and ways to communicate and buy have vastly changed the shopping experience and opportunities for retailers—think smart phones, online customer reviews, emojis in marketing messages, store pick-up of online orders, augmented reality apps, and pop-up stores, just to name a few. To shed light on questions emerging from this new retail world, Wharton’s Baker Retailing Center held a conference on June 22-23 on “Consumer Response to the Evolving Retailing Landscape” in collaboration with the Marketing Science Institute and the American Marketing Association’s Consumer Behavior Special Interest Group. Academic and industry participants from 16 countries shared their research and perspectives. Here are some highlights of the conference program:  

Customer Focus

Retailers on the Baker Retailing Center’s Director’s Council, a group of innovators with a mostly digital focus, explained that their business strategies are driven by customer preferences and needs rather than the channels of the moment or the latest tech. Neil Blumenthal WG10 (Co-Founder/Co-CEO, Warby Parker), Rachel Shechtman (Founder/CEO, Story), and Jessica White W12 (Executive Director of Customer, Glossier) said their companies prioritize meaningful customer interaction and engagement. Given their control over most of their value chain due to their vertical integration, these retailers are able to implement changes quickly—an advantage in a world of constant change. Plus, their digital focus and data mindset help them leverage analytics (e.g., analyze product return patterns to modify merchandise).  

Dissecting the Customer Experience

Marketing professor Katherine N. Lemon (Boston College) proposed a novel framework to deconstruct the customer journey that gives companies a scheme to analyze and improve brand interactions. Adding real-world examples for illustration, Frank Grillo (CMO, Harte Hanks) suggested leveraging data and analytics to better consider the personal and situational context of a customer’s decision-making. For example, messages of moving-related promotions could be tailored by figuring out likely reasons for someone’s move based on the old and new addresses (e.g., divorce, promotion, new baby).  

Intricacies of Gift Giving

While gift registries serve gift recipients, some gift givers don’t like using them, especially for closer contacts, because they make it difficult to convey one’s relationship with the recipient, as marketing professor Susan Broniarczyk (University of Texas at Austin) explained. Gift givers might also be faced with buying a gift that conflicts with their own tastes, inducing post-purchase identity reconciliation—for example, by acquiring items that match their identity.  

Too Beautiful to Consume

Paradoxically, beautiful products aren’t always a blessing for brands and consumers, according to marketing professor Andrea Morales GRW02 (Arizona State University). Consumers may limit their usage of pretty products in order to preserve an item’s beauty, which causes them to enjoy consumption less. One reason for this is the notion that aesthetic products require greater design and production effort, which people don’t want to destroy. This has been shown in studies involving plain versus decorative toilet paper, napkins, and cupcakes.  

Touching Products

Some shoppers like to touch products to check out their physical qualities or simply because they enjoy the sensory experience. Marketing professor Joann Peck (University of Wisconsin) has found that shoppers’ need for touch varies by person, country, product category, and situation, and that touching a product can increase both purchase likelihood and willingness to pay. This could be due to a sense of psychological ownership derived from knowing and controlling an object and the endowment effect caused by emotional attachment and loss aversion.  

Customer Journey Archetypes

Professor of marketing Leonard Lee (National University of Singapore), Wharton marketing professor Barbara Kahn, and other colleagues developed a typology of 12 shopper journey archetypes (e.g., classic, impulsive, retail therapy) based on whether shoppers have purchase goals or not and whether they are affectively or cognitively-oriented. This classification can help companies find ways to improve customers’ experience throughout the customer journey.  

Luxury Pop-ups

Wharton marketing professor and former Dean Tom Robertson—along with marketing professor Hubert Gatignon (INSEAD) and Wharton Postdoctoral Fellow in Marketing Ludovica Cesareo—is investigating pop-up stores by luxury brands such as Louis Vuitton, Chanel, Hermès, Prada, and Gucci. The research team examines shoppers’ motivation to visit luxury pop-ups and their response to the experience, ultimately connecting these variables to success metrics for brands.  

Online Reviews

Marketing professors Tamar Avnet (Yeshiva University), Anne-Laure Sellier (HEC Paris), and Shiri Melumad (Wharton) found that people’s preferred scheduling style—organizing tasks based on a certain time (clock-time schedulers) versus creating to-do lists without times based on order (event-time schedulers)—correlates with the kinds of aspects they focus on when both writing and reading reviews. Clock-time schedulers focus more on competency features (e.g., price, wait time, check-out efficiency) while event-time schedulers tend to focus on emotional/sensory aspects (e.g., ambiance, views, colors, scent).  

Referral Coupons

Why do customers share referral coupons with their family, friends, or co-workers? Marketing professors Sara Hanson (University of Richmond), Monika Kukar-Kinney (University of Richmond), and Hong Yuan (University of Oregon) found that experts in a product category are more likely than non-experts to share a referral coupon. Sharing is also more likely when the referral coupon is for a family member as opposed to a co-worker, but the likelihood is similar to when no type of coupon recipient is specified.   Editor's Note: Visit the Baker Retailing Center’s conference publications website for more content from the conference. An upcoming issue of the Journal of the Association for Consumer Research will publish select research projects on the conference topic.      

Photo: Getty Images   If you’re a recent Wharton graduate–or even if you got your MBA years ago–you likely took a job in banking or consulting right out of school, but it’s never too late to shift gears. If you know someone at Wharton currently, this advice is for them, too: seriously consider becoming a brand manager in the Consumer Packaged Goods (CPG) industry. Regardless of how they get there, more MBAs should pursue a career in CPG. Why? Because it provides corporate leaders the chance to become the best they can be. For all of CPG’s success creating renowned brands, the industry has trouble attracting today’s best MBA talent. Yet CPG –and the work of its marketers, or “brand managers”–is ever-present: when we rip open a breakfast bar while commuting to work, throw a detergent pod in the washing machine, or crack open a can of seltzer when trying to quit soda (though brand managers of flagship cola brands are trying to lure us back). The irony is that there is a strong case for a brand management career right out of business school. One distinction is the speed with which assistant brand managers (ABMs) are given responsibility; an ABM is essentially the CEO of their brand from day one. In the first two years, companies train ABMs to become a general manager of a business. They learn how to manage profit and loss; take the panoramic measure of a business quickly; combine analytical rigor with creative panache; and safeguard, stretch, and revitalize celebrated brands that fulfill their promise to consumers. If leadership potential doesn’t inspire you, what about the outsized effect brand managers have? Anytime your favorite brand makes a major change–your aftershave no longer has parabens, there’s a new flavor of your guilty-pleasure chocolate bar, your detergent removed a chemical known to hurt fish, or your yogurt is now supporting Breast Cancer Awareness Month—that’s the work of brand managers. They shape everything about how our favorite products are sourced, produced, feel, smell, taste, and work. Of course, brand managers can’t do it all alone. They rely on a team of experts from every department–operations, finance, sales, research, quality assurance, manufacturing, and design. Because ABMs lead such diverse project teams, they must exercise four key pillars of leadership consistently: vision, strategy, execution, and reflection. ABMs have to elucidate a crystal-clear vision, something akin to: Through market research, we found over 30 percent of our target consumers are shifting to low-sugar, multigrain alternatives, all of which are currently made by small, upstart brands. We should launch a wholegrain cereal line to better serve core consumers and regain lost market share. How the team accomplishes that vision—the scope, scale, process, and effect—is the strategy. Execution includes the product’s testing, mass production, and ad campaign. After the campaign launches, there will be an after-action report on things that could have gone more smoothly; that’s reflection. Naturally, CPG is not without its downsides. Many CPG products are not necessarily good for the environment or us: sugary cereal (hence the wholegrain cereal example above), high-sodium soup (which two famous brands fought about in public view), antibacterial soap (on which the FDA had to weigh in). That said, consumers have become judicious label readers and some heritage brands are ahead of the curve, re-designing products to fit emerging research. Still, brand managers often navigate situations where doing the “right” thing (e.g., using better ingredients) meets enormous cost, sourcing, or even senior leadership roadblocks. To be fair, such dilemmas exist in many professions, and how we handle them sometimes shows us what we’re made of. The industry tends to be hierarchical. After joining a blue chip CPG company, ABMs usually face a four- to five-year wait for promotion to the coveted brand manager role. This leap is the Holy Grail for most ABMs but, once attained, it will be another four- to five years before advancement to the director level. This phase is a time of high attrition; ABMs commonly switch companies or leave CPG altogether. But since ABMs are learning an incredible amount at breakneck speed, it’s plausible for them to jump ship to a CPG company that’s a better fit. In one crucial regard, an ABM is much like an associate at a large investment bank: after spending a couple years with a firm, they are well positioned for nearly any marketing role in any industry, CPG or otherwise. Obviously, how much any MBA values salary and growth depends on personal and professional goals, but these are serious considerations for young graduates (or anyone with crushing student loan debt). Those caveats aside, no two days are alike for a brand manager and, with a clear vision for where they want to go, they have no shortage of opportunities. Choosing the CPG industry means more than becoming just a marketer–it means thriving on inspiring a team, understanding (and ideally believing in) a brand’s promise, and finding creative ways to deliver it. Picture this: You’re in the chips section of a grocery store. You pick up a bag with a beautifully backlit picture of a bowl of chips in different shades of orange and red. Below the logo, it says, “Contains 10 essential nutrients and 40 percent less fat than regular chips!” Intrigued, you turn the bag over and read: “From the beginning, we at Sierra believed in crafting a better chip. Because you deserve it. Using only the finest root vegetables like organic parsnips, beet, turnips, and carrots, we lovingly ensure that each and every bag of Sierra is packed with flavor, crunch, and goodness. From our home to yours, we hope Sierra takes you on a journey of enlightened snacking.” How can you disagree with anything on that package? You put it in your cart and continue shopping, feeling pleased that you’ve embraced a superior snack experience. Somewhere in Sierra’s corporate offices, a brand manager just got their wings.    

The unique variables to consider when determining what an online company is worth.

(Photo: Getty Images) Where would you begin if you had to value an online business? How would you account for the unique factors that aren't considered when valuing brick and mortar companies? At FE International, we realized there is no industry standard for valuing online businesses, so we created a proprietary model seeking to fill this need, which we have used to access and sell over 500 online businesses. Let’s begin by exploring the five types of online businesses.

The Five (Main) Types of Online Businesses

Most online companies fit into one of these five categories:

1. Lead generation: A business that supplies leads to a partner business.
2. Content and media: An entertainment or affiliate website, such as Forbes or Entrepreneur.
3. Membership and subscription: A site that pay-gates educational content, such as Lynda.
4. E-commerce: An online store where various goods are sold, like Amazon.
5. SaaS and software products: A subscription to a tool that makes your life or business easier, such as Hootsuite.

  Amazon is the world’s largest e-commerce business.

 

How to Value a Website or Online Business

While e-commerce and SaaS businesses generally tend to be more highly valued, each business model carries unique variables that can affect its overall value. There are several methods commonly used to determine the value of an online business. In some cases, multiple methods are used for accuracy and due diligence purposes.

• Discounted Cash-flow Analysis: This method involves determining the value of the business today based on the cash it could make available to investors in the future.
• Precedent Transactions: This method is used to determine the value of a business based on similar acquisitions in the past.
• Earnings-Multiple: Earnings-multiple involves multiplying the discretionary cash-flow of the seller by a multiple that is determined on a case-by-case basis, calculated by analyzing several variables: financials, traffic, operations, niche, customer base, and other relevant factors.

Unique Factors to Consider

A majority of online businesses are evaluated using the earnings-multiple method. This isn’t to suggest there aren’t other unique factors that can affect the value of a business, but those largely depend on the type of business being sold. Lead Generation Since a lead generation business is built on supplying leads to a partner, the quality of that partner relationship is a critical factor in ascertaining the value of the business. Additionally, lead generation sites’ reliance on organic traffic means the risk of having your ranking lowered by search engines may also need to be factored in. E-Commerce Critical aspects of e-commerce businesses include: order fulfillment and inventory, reliable product source, product uniqueness, branding, organic traffic, and product concentration. Look for passive order fulfillment, whether the business has any stored inventory (this can be added on to the sale price), and whether the business has multiple products that make up a large part of the revenue. If the business is entirely reliant on one product for most of its revenue, it should be considered a riskier business. SaaS and Software The earnings multiple of a SaaS business is often affected by: its age, owner involvement (i.e. how much time is required of them to run the business), whether the business is consistently trending moderately upward, churn, and customer lifetime value.   Hootsuite is an example of a popular SaaS platform.

Due Diligence

Gathering the right information is key to valuing an online business. The better you understand how the business works, the ups and downs, the hours required to run it, how much money it’s making, and so on, the better you can assess its worth. The three most important areas to focus on during the due diligence process are financials, traffic and operations.

• Financials: Look at monthly reports to spot any emerging trends. Are there any peaks and valleys? If so, what caused them? Does the business suffer from seasonality in its revenue?
• Traffic: Where is the traffic coming from? Is it coming from many sources, or just one? Organic versus paid? Does the website have a healthy number of backlinks pointing to it? Is the site search engine optimized? Have the traffic numbers dipped at any point? If so, why?
• Operations: Are you capable of running the site? Can the majority of operational tasks be outsourced? Are procedures well-documented?

Final Thoughts

The key areas listed above are a good starting point, but should not be considered a comprehensive guide to valuing an online business. Each business comes with its own intricacies and complexities, which is part of what inspired us to develop a comprehensive valuation process for the companies whose sale we advise.    

At the Wharton Behavioral Insights in Text Conference, researchers shared best practices for deriving hidden meaning from language

Associate marketing professor Jonah Berger presenting at Behavioral Insights in Text Conference.   What’s in a word? Consider the last email you sent. How many “I” words (I, me, my, mine) did you use? How many “we” words (we, us, ours)? Count your pronouns, your articles, your prepositions. What if I told you that within the text of that email you dashed off in the few minutes before lunchtime exists information about your social status, your emotional state, your gender, even whether you’re being deceitful or telling the truth—and all of it possible to decode through the simple act of tallying different types of words? This is the power of text analysis, a burgeoning discipline in which researchers mine language for information to make sense of and even predict human behavior. On Friday, January 12, leading social science scholars from as far away as London Business School packed into a Huntsman Hall lecture room to attend the first annual Behavioral Insights in Text Conference, an all-day interdisciplinary event for researchers interested in using textual analysis and natural language processing to extract behavioral insight from textual data. The event was hosted by the Wharton Risk Management and Decision Processes Center in conjunction with the Technology and Behavioral Science Initiative, a program which seeks to use advanced computational tools to deepen the understanding of technology’s behavioral impact. The conference consisted of four sessions, each divided into four 30-minute lectures in which researchers provided insights into how words influence our world, from the ways we generate ideas to our opinions and judgments. In her talk on gender bias in language, assistant professor of organizational behavior at London Business School Selin Kesebir demonstrated how our tendency to order social groups by relevance serves to reinforce harmful stereotypes; (think about it: When was the last time you said “female and male” versus “male and female”?). During the language and social media session, Wharton professor of operations, information, and decisions Kartik Hosanagar discussed findings that language which relates to brand personality tends to increase user engagement with Facebook advertisements. In his own presentation, Wharton associate marketing professor Jonah Berger—who organized the conference along with Robert Meyer, marketing professor and co-director of the Risk Management and Decision Processes Center—described how analyzing the emotional language within movies can predict how well they’ll be received. Closing out the conference was Jamie Pennebaker, Regents Centennial Chair of Psychology at the University of Texas at Austin, who ranks among the most cited researchers in the social sciences and helped establish the field of textual analysis with the creation of his Linguistic Inquiry and Word Count software, or LIWC (pronounced “Luke”), a computer program that calculates the degree to which people use different categories of words across bodies of text. “I would not be here today if it were not for Jamie and his work,” said Berger, a renowned social influence expert and the bestselling author of two books on consumer behavior. Early in his career, Berger conducted a study on why certain articles make the New York Times Most Emailed list—a study that later factored into his first bestseller, Contagious. After months of torturing research assistants with the task of coding thousands of articles according to a host of different dimensions by hand, a colleague introduced him to LIWC, which not only streamlined the research process, but opened Berger up to the world of language data processing. “I really owe Jamie a debt of gratitude.” During his keynote address, Pennebaker stood in the basin of the tiered lecture hall, looking up and around at the diverse body of researchers who, like Berger, were all there, in some way, because of him. They were all pioneers, he explained, each of them laying the groundwork for a new way of thinking that will continue to evolve over time. “We are at the beginning of the language world,” said Pennebaker. “None of us know what we’re doing. And I think that’s why it’s so exciting. Because we are the first people on earth to really be able to parse language like nobody else has.”        

Alumni from the Wharton Club of Spain joined faculty and industry professionals at the "New Frontiers of Retail and Consumer Behavior Research" conference in Madrid.

Photo: Getty Images   Imagine the year 2028. What do you envision the share of rented versus bought clothes to be in Spain? And how about the shares of online sales, digital payments, and Amazon’s apparel business? This is how professor Tom Robertson, Wharton’s former dean and current academic director of the Baker Retailing Center, kicked off our “New Frontiers of Retail and Consumer Behavior Research” conference in Madrid in May, challenging an audience of about 250 industry and academic participants to consider future retail developments. Featuring three Wharton faculty speakers and Spanish faculty moderators, this conference was part of the new collaboration between Baker and Penn’s Lauder Institute with Spain’s Ramón Areces Foundation. The foundation, established by the founder of Spanish department store El Corte Inglés, also has partnerships with MIT, the London School of Economics, and the Nobel organization. Professor Robertson also shared his insights on pop-up stores, describing them as part of an omnichannel strategy focused on enhancing brands by creating buzz through social media, and not necessarily as an initiative with sales goals. Pop-ups are specifically designed to be ephemeral—transitory, like fashion—and their success is precisely based on the novelty effect. Marketing professor Barbara Kahn, the previous director of the Baker Retailing Center, shared content from her new book, The Shopping Revolution. She presented the “Kahn Retailing Success Matrix” to analyze and map retailers’ positioning on two dimensions: retail proposition (product benefits or customer experience) and superior competitive advantage (increase pleasure or eliminate pain points). Her analysis of the developments in retail showed how various historically successful retailers and brands, such as Macy’s and Gap, have been challenged by newer types of retailers and retail formats. She explained Amazon’s success with its relentless customer focus, positioning of convenience and low price, and emphasis on collecting and leveraging data. For more on Kahn's success matrix and the four best retail business strategies, read this excerpt from her book in Wharton Magazine.   Leadership of the Ramón Areces Foundation, including Baker Retailing Center and Foundation board member Jorge Pont (El Corte Inglés; 4th from left) and Raimundo Pérez-Hernández, director of the Foundation (far left) with faculty speakers and organizers from Wharton and Spanish universities. (Photo: Alejandro Amador)   Legal Studies and Business Ethics professor Diana Robertson described neuromarketing measurement techniques as a way to gauge consumers’ responses, including emotions such as pleasure, desire, and even confusion, to all kinds of stimuli in retail settings—from store shelves to product packaging to commercials to websites. Key methods for industry applications are eye tracking, measuring electrical energy in the brain through scalp-attached electrodes (EEG), and fMRI brain scans. They capture physical responses to stimuli and tend to be more accurate than surveys or focus groups since most of our actions happen subconsciously and people often don’t know the answer or want to give a socially acceptable one. These techniques can thus complement traditional measurement methods. In Madrid, we also met with alumni for an evening of conversation about retail topics and beyond, spearheaded by leaders of the Wharton Club of Spain, including Paula Almansa, Beltrán Álvarez de Estrada, Alberto Lisnier, and Patricia Enriquez. In addition to the above faculty, marketing professor Keith Niedermeier, who was in Spain leading a Baker Retailing Center-supported undergrad retail course, joined the dinner.   Back row, left to right: Patricia Enriquez WEV07, Pedro Palma Carrillo WG71 GR76, Maria Martinez Verdu WAM05, Paula Almansa WG01, Agustin Gomez de Segura W12, Enrique Peña WG07, Alyssa Meyer, Juan Urdaneta WG02, Denise Dahlhoff LPS08 LPS10, Beltran Alvarez de Estrada W96, Silke Lampka W11, Alexander Mandl G01 WG01, and Maria Teresa Aranzabal WG89. Front row: Wharton professors Diana Robertson, Barbara Kahn, Tom Robertson, and Keith Niedermeier. (Photo: Denise Dahlhoff)   We covered a range of topics such as the fast fashion model, including differences between Zara and H&M; how voice assistants may influence our future lives, shopping included, and raise new privacy and ethics questions; and online shopping, including the double challenge of last-mile delivery, which shoppers expect for free when it’s increasingly costly operationally. Like in many countries, Amazon is the leading online retailer in Spain, and the shopping experience it offers has set the bar high for other retailers’ online operations, including those of El Corte Inglés, which has the third-largest online sales in Spain, after Amazon and AliExpress. Although online and multi-channel shopping are firmly established in Spain, physical stores are still very important, like elsewhere. Certainly, Spain’s many global fashion brands such as Zara, Mango, Loewe, and Desigual are fixtures of the physical landscape, but so is ubiquitous department store El Corte Inglés, which operates 17 stores in the Madrid area alone. It’s a key channel in Spain for international brands and carries a wider range of products and services than department stores in other countries. It offers not only fashion, beauty, toys, electronics, groceries, and in-store dining, but also travel, ticket, and insurance services—businesses that not even Amazon is in (at least not yet).     Author's note: Spain’s leading fashion business publication Modaes.es also wrote about the conference. The partnership, initiated by Jorge Pont, an El Corte Inglés C-level executive and board member of both the Baker Retailing Center and Ramón Areces Foundation, also incorporates recent talks on new technological trends in global consumer markets by Wharton professor and Lauder Institute director Mauro Guillen.        

The controversy brewing in Asia over shark fins has pulled Starbucks into an environmental protest campaign.

Photo: Getty Images   For those in the world of Corporate Social Responsibility (CSR) and Environmental and Social Governance reporting (ESG), there is an interesting dynamic at play in Hong Kong, with a large multinational brand being drawn into the domestic “dirty laundry” of its licensee.  The question is whether or not that local partner, and flagbearer of that brand, is able to find solutions that will not pull the value of the international brand down with its own domestic reputation. In short, the licensee of Starbucks in Hong Kong, Macau, Singapore, and Vietnam—Maxim’s, with over 180 stores—is also the largest restaurant chain in Hong Kong, and it continues to serve shark fin on its menus. This is akin to having a menu option for elephant or rhino. There are no proven sustainable shark fin fisheries, and most laws to protect endangered species are woefully late in coming to the rescue of sharks. That's because it takes so long for science in the ocean to be undertaken, and for the global consensus of peer groups to finally approved "endangered status." In the meantime, sharks—and the entire health of the ocean, as sharks are the main balancing factor in the ocean ecosystem—have been put at serious risk.  This is all in the name of culture, a so-called “tradition" for serving shark fin soup, which was mainly commercialized in the 1970s as a money-making opportunity, and which has nothing to do with medicinal or sexual performance. Instead, it is simply used to show wealth and status to the host's peers at the dining table. The illegal wildlife trade is also often related to the transnational crime syndicates that traffic dangerous drugs, weapons, and humans. Times have changed, and just as slavery, smoking on airplanes, and foot-binding have all been banned due to social norms, it is time for companies to show responsibility to the communities they serve. Of course Starbucks does not sell shark fin at its restaurants, but it is benefiting from the business that Maxim's, its licensee, brings to the brand as the de facto representative of Starbucks in these Asian countries. It is unconscionable that Starbucks would buy coffee from suppliers or partners who also engage in human trafficking, as its brand would be quickly implicated. Maxim's—and by association, Starbucks—is under fire from environmental activists for selling shark fin. (Photo by Alex Hofford/WildAid Hong Kong) This case of shark fins is exactly the same, however, with the implication coming from its partner, which continues to undertake this cruel, unsustainable business with a murky supply chain more often than not linked to illegal, unreported and unregulated (IUU) fishing. The revenues from shark fin soup sales are also likely to be less than 0.001 percent of Maxim’s’ total revenue. Yet the chain seems unwilling to drop shark fin from the menu for fear of losing face, or maybe a few customers. On the contrary, it can be easily argued that Maxim’s would actually gain customers if it stopped selling shark fin permanently and rode on the good press that this decision would bring. This is an expensive brand maneuver and risk for any company, particularly with such a hot environmental topic and the visibility that social media provides. The Hong Kong and Chinese governments have both already banned this item from all official functions. In fact, this story is now global in the environmental community, and it shows that multinational brands should exercise caution in whom they work with, or license to, just as they would with supply-chain transparency and ESG requirements for those partners. “The unethical actions of Maxim's undermine Starbucks' admirable contribution to the United Nations Sustainable Development Goals (SDG), especially SDG #14, which sets out to ‘conserve and sustainably use the oceans, seas and marine resources for sustainable development,’” says Alex Hofford, Wildlife Campaigner with WildAid in Hong Kong. This implied liability is now one that sits on Starbucks’ doorstep, and is an issue that is easy to solve—by simply stopping all shark fin sales via its partner Maxim's. Such a solution would bring great publicity for both companies involved.  To the contrary, failure to act on this topic in an engaged way can bring negative publicity, exposing a brand liability that no one seemed to expect just two weeks ago. This is where investors such as Larry Fink, the CEO of BlackRock, or Goldman Sachs, with their new environmental investment policies, will begin to make a difference in who they chose to invest in. It is not worth their time, or investors’ money, to be caught out on a limb on such a large-scale, obvious "hot topic" that has the potential to ignite outrage—regardless of what “tradition” says.