The inverted funnel: how blockchain changes marketing
The inverted funnel: how blockchain changes marketing
Blockchain

The inverted funnel: how blockchain changes marketing

By Guest post - 23 Mar 2022

Chevron down
Listen this article
download

Blockchain in marketing: introduction

The use of blockchains will become mainstream in a few years from now, so say consultancies and pundits, who look at penetration curves across the globe (1). 

Crypto is on the rise and powerhouses like Starbucks and Nike are merging blockchain into the fabric of business, reinventing the dialogue with their fans. 

In this short piece, we double click on how the efficiencies, tracking and reconciliation capabilities of blockchains will revolutionize the famous 4 P model (2). 

We will do that with a slightly activist tone. The future scenarios are, indeed and on purpose, exaggerated, to highlight the disruption vs. today’s status quo

How is the world of marketing looking like five to ten years from now? We will go from product to meta-product dominance; from standardized pricing to personalized and dynamic fees; from property exchange to rent and fluid trading between brands-to-fans-to-fans; and, from storytelling to the co-creation of social capital, in a user and brand mutually interested narrative. The Marketing mix will not be the same: it will be turned upside down.    

And blockchain for all

We are not going to discuss the relevance of blockchain for business (that is for another, as interesting, post). What is happening with blockchains is that we are about to solve for two of its commonly cited weaknesses: 

  • high gas fees and energy intensity, thanks to features like proof of stake; 
  • capacity, namely its ability to process mass transactions, without impairing security and decentralization (3). 

The turnkey is that blockchains will allow us to execute, finally, what marketing has always wanted to do: efficiently give people what they want, as if the brand proposition, or the full marketing mix to say it with a better-known formula, was crafted only for them, one by one, and at that very moment. This is now possible, and it should become the dominant business model. All we must do is revert the traditional consumer journey, which traditionally has been designed as a linear cavalcade from awareness, to consideration, to purchase, almost like going down an irresistible spiral, where consumers are trapped into a centralized distribution and communication oligopoly, maintained by TV and brick & mortar distribution (4). 

Mad Men made you hear their message and buy their product, sharing their profit mainly with distribution, with trade mark-up swinging from 30% to 50%, depending on the industry. That illusion used to be called brand ‘love’ (5). It was, as a matter of fact, a lockdown. In that equation, product has always been the weak link: produced linearly (manufacture, sell, waste), and with externalities pushed through towards governments (taxes) and future generations. The inverted funnel will redistribute the P&L resources to fans first – We, The People, and will especially flip the linear model, producing physical stuff only when and where needed, and with an exponential and positive impact on the environment. Most importantly, the final purchase of a physical brand product will not be the destination of a straight line, and sometimes it will not even happen, even though brands and fans would interact continuously. Welcome to a new world: 

blockchain marketing
The inverted funnel

Meta-product

It’s all about the word ‘meta’ these days. No, this is not anther rant on the metaverse. The big change is the advent of NFTs. Innovation is traditionally a risky gamble. Heavy market research protocols help design product and services’ propositions that can appeal to a sizeable and defined target audience, and they help sweeten decisions on the Capex needed to bring novelties to the market. 

So far, so good. The only problem here is that innovation centers are failing against their promise (6). Reality is complex, and generational shifts are taking place in parallel with massive transformations of media and commerce. The only solution to hedge against uncertainty, which has become so thick after a couple of years of Covid-19 roller coaster, is to produce digitally first, and deliver innovation via NFTs, directly into fans’ wallets. 

Progress in 3D design and the opportunity to use the virtues of chains are the drivers of one-to-one and inexpensive dialogues with each fan. Product innovation must start as an NFT, containing all specs of a brand’s proposition, plus perks and rights to ultra-customize anything, with blockchain being the infrastructure of choice to build trust and track commitment between brands and fans. 

The physical product will always follow the meta-product features, read digital renditions and rights, which brands and fans will share at the beginning of their courting. You heard it right. If I am Audemars Piguet and don’t know how many Royal Oaks 2.0 I need to produce, I can drop them as an NFT, read demand digitally, give my fans a sneak peek into the design, use them to get feedback, customize all of them like an old world bottega, and ship them to door individually, against a payment that was done a long time ago, zeroing any risk of bad inventory. If a product sticks, then it will become new core, always accompanied by its digital twin, on the blockchain. By the way, NFTs should also contain the recount of the end-to-end supply chain, by law. This will make our world sustainable and dissolve counterfeit and grey markets, finally. Blockchain’s deterministic nature will make our manufacturing and suppliers’ management more efficient, as smart contracts can zero all mistakes and human interventions. This is the beauty of automation and chains. Welcome to Disneyland! Question: how much do I pay for all of this? Answer: it depends.       

Me pricing

It depends, indeed, because a super-fan who helps brands innovate should get additional perks and financial stimuli, which can be swapped into personalized discounts, for example. Blockchains maintain a network of ambassadors, who can be rewarded for their social capital via the same tangible resources, which traditionally would go to discounts and trade mark-up. 

Innovation via NFTs should flow into fanatics first, who shouldn’t stand in line to get their gear. The community will work hard to help the brand get their innovation out, and should be compensated for that. NFTs will contain perks linked to engagement, which is now and finally trackable individually and à la minute. Kiss goodbye to standardized pricing: it will become fluid, as if any product or service was a financial security. We have the right tech stack for that. NFTs will all have a different price, once released, especially if they change hands, carrying with them all their rights and benefits. The fan is at the center of it all, and they will not wait for the brand to grant them private discounts on Easter Sunday. 

Fans will trade and share the pricing options they earned, in full security and privacy. Blockchains will finally peg pricing to the heat of the various brand propositions. The most ‘freaking’ creative gigs will even see their price explode, with brands continuously reaping the benefits of an infinite loop brand – fans – fans vortex. The number one business goal for the year will not be to move more units across before Christmas. Topline growth will be the natural result of another rising imperative, which is creating shared value for the community, in the broadest sense. Topline growth will be finally detached from COGS and production, making this world more sustainable. Most NFTs will remain digital, as they are being designed solely for a digital world, where my avatar can enjoy 3D shoes or virtual events. My own pricing will be a function of my willingness to play, first digitally and then in the real world. I will wait to grab my thing only when the price is right for me. Get ready to stop asking the sales associate: ‘how much is it?’ As a matter of fact, you won’t see one at all in the future.   

Merchant for a day, merchant everyday

Whether you sell chocolate or dental insurance, the big riddle to solve, every calendar year, is sell-in, namely a purchasing plan and a commitment on inventory. Companies need to move units, ideally more than last year if they want to eat turkey for Thanksgiving, and are happy to share proceeds with a distribution network, both online and offline. Sales promotions come to the rescue, when numbers need to be made fast, at every month and year end closure. 

Now, flip it. Blockchains kill the middleman. Novelties will be dropped into fans’ wallets directly as an NFT, while manufacturing and shipment will happen on demand, and via a fractioned universe of players who will offer 3D printing, storage, rent, take back and delivery services, all of them with fluid costs or subscription services. One of the things that traditional retail used to do well is the experience. There are tons of articles talking about in store theater and omnichannel. I wrote some myself in the glory days of marketing. 

Going through Oxford Street was rewarding as an experience per se, on top of the satisfaction of a consumer need solved via the classic shopping ritual. If that experience is now moved completely on the digital turf, call it web3 or metaverse, and if NFTs are already bought there, what’s left is a physical infrastructure that needs to flirt with fans, via blockchains, to get them what they need, if they need it, and only on demand. Brands and distribution used to be a trade cartel, squeezing value out of people. Fans are now in charge, with distribution waiting on their signal to unlock their ten minutes’ delivery magic. It’s me time. Or, better, me and you, baby.     

Me & You

Mad Men had one mission. They had the vested interest to convince you to have them in your consideration set for summer vacations or holiday gift lists, in order to to buy them. Once purchase was done, it was always your problem, which was another way to say ‘F*** You’, to quote Paul Kemp-Robertson from Contagious. But, in the gold era of marketing we would call it, as already mentioned, ‘brand love’. 

Blockchains create a holy alliance between brands and super-fans, who now have a mutual and self-interested mission to spread the word around goods and services. The rewards can be immense, if we think of NFTs floating at high multiples vs. the initial release price. Marketing is no longer a unilateral game, targeted at people’s hearts. Minds and wallets win over love. Marketing is now a tight, secure, and private relationship between creators, no matter on which side, brand or fans. 

According to Morgan Stanley, NFTs will become a staple for any company, and especially for fashion & luxury brands (7). Digital will be created first and disseminated through communities, which will become the true marketing departments, for both innovation and communication, capturing the 10% to 15% of net sales now dedicated to the fourth P of the mix model. It doesn’t take a village to raise a brand. It’s just the two of us, me & you. What’s new here? 

Blockchains can accurately track all transactions brands/fans/fans, thus creating the highways where the most creative duos will thrive, for eternity, as blockchains will never stop recording the success of a great idea. It’s the dream of any marketeer coming true, plus it’s certified in an encrypted block of digital units. Mad Men can finally leave an eternal mark on the world. But, they owe it to the true brand managers, their fans. Both sides have now the same interest to boost their social capital. Karl Marx could be proud, maybe. We did not kill Das Kapital (8). We decentralized it.      

Conclusion: invert the funnel

Blockchain goes at the heart of the marketing mix model, and it hits it, full frontal. The journey is today inverted and eternal. It’s a loop, where everything is digital and contains intangibles, like ideas, rights, and options. Brand equity becomes more liquid than good-will and working capital, and it needs to be managed via continuous trades, where creators and brand owners interact to boost added value, beyond what’s physical. Old world brand managers, distribution and media lost their war. Exchanges are fast and efficient. Everything is private and secure. 

Most importantly, we don’t start a consumer journey by saying ‘tell me about you, dear brand’. The new mantra is ‘give it to me, and we talk’. Flip the journey if you want to survive in a future run by blockchain. The 4 P-s will leave space for the 4 M-s (it sounds weird) or maybe just 2 M-s, namely 

  • meta-product bundles and 
  • me pricing, distributing, and marketing for you, my dear brand, just for my own interest. 

Blockchain will make us less romantic, and more efficient, more rent prone and more rational when it comes to consumption. It’s not a bad world to live in, after all.  

Notes:

  1. https://www.globenewswire.com/news-release/2022/02/11/2383531/0/en/Blockchain-Market-Size-Worth-227-99Bn-Globally-by-2028-at-72-9-CAGR-Exclusive-Report-by-The-Insight-Partners.html
  2. https://www.investopedia.com/terms/f/four-ps.asp
  3. A quick read through Paul Brody’s work (EY Global Blockchain Lead) gives a much better outlook into the dominant role of blockchains for our future world: https://www.coindesk.com/author/Paul%20Brody/
  4. https://innovationmanagement.se/2018/09/13/the-death-of-the-consumer-journey-and-the-rise-of-micro-marketing/
  5. https://en.wikipedia.org/wiki/Lovemark
  6. https://www.capgemini.com/news/despite-mass-investment-innovation-centers-are-not-making-organizations-more-innovative/
  7. https://finance.yahoo.com/news/metaverse-gaming-nft-could-account-125706792.html
  8. https://en.wikipedia.org/wiki/Das_Kapital

About the author:

Frank Pagano is an experienced Business Leader, with 20 years of Sales & Marketing in CPG, Fashion and Tech. He is based in Zurich, Switzerland. He founded Italytime, a non-profit (more precisely ‘loss’) company based in NYC and has been collaborating with Il Sole 24 Ore on the CEO Confidential project for the past two years.

https://italytime.org/

https://stream24.ilsole24ore.com/serie/ceo-confidential–la-nuova-serie/AE1QkJCB

https://stream24.ilsole24ore.com/serie/ceo-confidential/ADtHl52

 

We use cookies to make sure you can have the best experience on our site. If you continue to use this site we will assume that you are happy with it.