Spark No. 9

? Strategy is dead. Long live strategy! What happens to business strategy when anyone can access the same knowledge and problem-solving power via AI? What used to work doesn’t, and a lot of old strategy breathes its last. Companies with moats built purely on IP or knowledge—Chegg or Getty Images—are the first to be affected. Google Search is looking a bit peaky, too. But it’s not just knowledge—it’s problem-solving, too. Customer service is mostly about problem-solving, and human customer service jobs are among the first victims of AI agents. A strategy of superlative customer service may no longer create lasting value. Writing code is problem-solving, too. When AI accelerates and simplifies coding, what happens to companies whose entire competitive advantage resides in lines of code? Could you, say, recreate Facebook using AI? Probably not. But could you create a new social media platform faster and cheaper than ever before? Sure, and someone probably will. So if knowledge and problem-solving fade away as sources of advantage, what’s left? 1 Proprietary data. Maybe you have years of data about a drug’s performance in clinical settings. Or maintenance records from decades of machine use. Or data about how finely honed customer segments respond to ways of positioning a product via email. You’re in luck! If you can keep that information under wraps, you just might be able to use it to build long-term advantage. 2 Execution. Azeem Azhar wrote in Bloomberg about how AI will shift companies’ focus: ‘from “Can we think of a solution?” to “How quickly can we implement and validate these ideas?”’ Speed of execution may be an advantage, and AI may amplify it for nimble companies. 3 Physical infrastructure. We’ve been in an era where the highest returns on invested capital accrue to businesses like software and healthcare that are built on intangibles. Is that about to change? As AI makes it harder to build moats in knowledge-intensive industries, will old-school physical assets—a car dealership network, a capital-intensive manufacturing facility—start to have a relative advantage? 4 Brand—maybe. I see this brought up all the time as a differentiator. But branding isn’t a declaration. It needs to be backed up with customer experience—great design or amazing customer service. AI may level the playing field on some brand-builders, making it harder for brands to differentiate. 5 Deals. I’m not a huge fan of deal-making to drive value—the hit rate is pretty low. But this might be a land-grab moment when companies should snap up assets that offer #1-4 above. None of these potential sources of competitive advantage is new. What *is* new is their relative importance if AI delivers on its promises. I’ve been a strategist my entire career, and I am pretty excited about this moment. AI is going to force a lot of strategy experimentation, maybe in line with #1-5 above. It’s going to be a fun time for developing, testing, and validating new strategies.

At Spark No. 9, we're grateful for the creativity and collaboration that drive innovation in every project. Wishing you all a joyful holiday season filled with inspiration and new possibilities in the year ahead! Cheers!

Window or aisle? Nope, we’re not talking about our choice of seating on an airplane. We’re talking about how we collect data about customer preferences. It's always tempting to make decisions based on a ‘window’ approach. Potential customers are shepherded into a room. Observers note their reaction to a limited number of new product offerings through a ‘window.’ The ‘room’ may be real or virtual—a focus group facility, an online panel, even an online survey—but it’s never a real-world setting, and the choices presented are always limited in number. Windows are the default. But an 'aisle' may be a better way to get us to our destination. In the real world, researchers can observe customer behavior in the aisles of a retail store or even a trade show. They can see how people navigate discovery, what catches an eye, what gets passed over. This is true with digital advertising, too: observing behavior via clicks, likes and comments on ads in a social media feed gives a rich view of the complexity of real-world customer journeys. Aisles give insight into real human behavior in a way that windows can’t. Windows often lead to decisions based on unrealistic expectations about how people will act when presented with something new. Aisles, on the other hand, offer an unvarnished view of customer preferences. When we're making a big decision about a new product, a rebranding, or a repositioning, we usually choose an aisle for a better view.

What makes a great holiday gift? Something that delights? Something useful or meaningful? Something that creates a bit of fanfare when opened? If you’re marketing a digital product, you have a shot at being both delightful and useful. Good luck with fanfare, though. Most gifts of digital products arrive via a staid email or a branded plastic gift card. Frankly, we’d rather open a box of Legos or fuzzy slippers. So we’re calling all marketers of digital products—streaming, gaming, cellular, and so on. We see an opportunity to bring the fanfare by making the intangible tangible—and opening up a whole new gifting revenue stream for digital products. Let’s start with Netflix. Were copywriters on strike when the landing page for a Netflix gift card was designed? “Access unlimited Netflix with one card,” reads the hero panel. Snore. Surely a company that is all about marketing drama could create a little when it comes to gifts. Why not send a fancy tin of tasty popcorn with a proprietary seasoning mix to announce your gift of a year of Netflix? Or at least some Junior Mints. A few years ago, we tested an intangible product: donations to a non-profit so well-known that it’s a household name. By testing different ways to position a donation, we found pockets of giving among brand die-hards. It was hard, though, to generate donations beyond the core. Then we introduced something tangible: a branded tote bag. Interest and conversion spiked. The holidays—and gifting—are just around the corner. A tangible companion to an intangible product can give shape to a gift that otherwise feels a bit cold. Of course, don’t rush into anything—test it first—but in a world of digital everything, thinginess stands out.

When was the last time you dined at an all-you-can-eat buffet? Aside from an over-the-top spread in Vegas or the like, most people prefer?a few dishes from a curated menu to an overwhelming array of chafing dishes. Too much is too much. A menu helps us see the story of a dining experience in a way that a picked-over chafing dish does not. Media brands face a similar problem. Consumers increasingly balk at digital subscriptions for an “all-you-can-eat content buffet.” Sure, AYCE sounds like a ton of value on paper: you get to consume content both deep and broad. The flip side? Indigestion—or maybe just consternation at paying for access to boatloads of content that has zero value to you. We’ve seen it up close and often. For one media client, subscription growth for AYCE was starting to slip. We tested multiple slices of their content trove with a few audience segments that seemed like a good match. The slices had lower customer acquisition costs with their corresponding audiences compared with marketing the entire trove of content to a general audience. Bottom line: in media, curation beats abundance—and curating the right slice is a service worth paying for. So skip the buffet and serve a meal catered to a specific audience's taste instead.

Print isn’t dead. It just requires the right strategy. The Onion made headlines recently with a return to print, offering it as an exclusive perk to online subscribers. Will it generate new subscriptions??Maybe in the short term, but we don’t believe it's a sustainable growth strategy. Not long ago, we developed and tested customer acquisition strategies with a client offering both print and digital subscriptions. To our surprise, we delivered a purchase rate for the print product 10x that of the digital product. But here’s the thing. The print product was not a paper version of the digital product. In fact, the print product was distinctively gorgeous, with striking visuals and saturated colors that would be hard to duplicate online. It was a completely different experience from the one online, one that took advantage of its medium. The advertising experience we created for the print product accentuated the benefits of print—even though every strategy we tested was online. So here’s our advice to The Onion: if you’re going to take Vienna, take Vienna. Make your print version a spectacular experience that people are willing to pay for in its own right. (How will you know? Test it first.) #ThisIsWhyWeTest

Your organization is rolling in innovative growth ideas. So how do you distinguish among good ideas, great ideas, and the truly extraordinary ones? You let the market tell you. While instincts and internal insights are valuable, the true measure of success is how well your growth strategy resonates with your audience. Fortunately, reaching your market has never been simpler—your audience is just a click away. By targeting specific audience segments with ads on platforms like Google, Facebook, or LinkedIn, you can gather meaningful insights on audience response to your growth strategy in as little as one week. When an idea hits the mark, you’ll see it in strong engagement and impressive conversion rates. Testing your ideas concurrently gives you real-time data to identify the true standouts. Choosing the strategic direction of your company is no small decision. Testing—and the behavioral data it generates—identifies which paths to pursue and which to leave behind. #ThisIsWhyWeTest

"CMOs today should be able to go to their CEO, CFO, or board and say: 'For this investment, on the basis of everything we know, we expect to get this return.'" The fastest way to build an investment case? Generate behavioral data that shows exactly how strategies perform with target customers. It used to be almost impossible to know whether a strategy was going to work or not. Focus groups, surveys, and conjoint analysis were a slow road to data, and the data wasn't very good. "If this existed, would you buy it?" leads to an opinion, not a prediction that a board will put money on. Using real-world data to test strategies is a game-changer. Both social listening and advertising-based heat-testing (our specialty!) draw on data generated by real behavior, not opinions. By testing multiple ideas in parallel, you get data—clicks, sign-ups, sales—about which strategies are worth pursuing and which don't merit investment. Real-world behavioral data: the evidence that anchors a bulletproof case for your growth strategy. #ThisIsWhyWeTest

?? When it comes to new strategy, think like an Olympic committee. Every four years, countries identify their best athletes to compete at the highest level. The selection process is grueling. Trial after trial, athletes compete on the public stage to show that they can win. The proof? Data, in the form of points, goals, times, and scores. No one makes the team based on hunches or word of mouth. Marketers and innovators, take note: to ‘win gold’ with a new product or strategy, test multiple options rigorously. Pick the winner based on hard data, not hunches. Rigorous testing of new products and growth strategies gives you a better shot at winning gold. Let's go Team USA! ???? #Paris2024 #strategy #testing #ThisIsWhyWeTest

New role? Those first months are when you see all the possibility for change--and often a lot of resistance. Plus, you're not alone. You probably have multiple stakeholders (read: multiple strategy ideas) at the table. One solution: data--the kind that's hard to argue with. Test strategies side by side with real people in the wild, not in contrived environments like focus groups. Choose a winner using real behavioral data like ad clicks or email sign-ups or sales. May the best strategy win.