Is Amazon the next answer to declining US incomes?

There is an assumption in marketing and media planning that the social class scheme – ABC1C2DEF – is an adequate way to capture vast sections of the Irish population.

But there are serious problems with this scheme, from what is records (the occupation type of the head of household), to who it records (the head of household), to what it represents (a job title that may have little link to assumed income).

In marketing today, it’s clearly a mistake to assume that the much coveted ABC1 ‘audience’ is more affluent and has more disposable income than the deplorable C2DE’s. And anyway, most media planners plan for people like them.

In reality, age, lifestage, social capital, values, everyday experiences (and, yes, social class in a deeper sense) are just a few of the much better ways to understand media audiences. For example, a 38 year-old lawyer may be earning a packet, but he might be indebted up to his eyeballs with no money for a new suit. An electrician might be raking it in, with tonnes of money to spend on his expensive tastes.

This discussion relates to a much deeper story. A story of political economy. Of inequality, and its future.

Household coping strategies and the decline of the US class

It’s now uncontested that, since the 1970s, real incomes have been falling in the USA.

Tracing the sources of the US’s high levels of inequality, Robert Reich identified three coping mechanisms which American households resorted to in order to maintain their living standards.

The first was women entering the workforce, beginning in the 1970s and accelerating from the 1980s. Of course, this wasn’t a bad thing – it was a welcome outcome of the feminist movement and greater women’s access to higher education. However, the data shows this mechanism served to prop up stagnant or declining male incomes more than generating economic independence for women.

Once the first coping mechanism ran out of steam, the second coping mechanism that kicked in was employees working longer hours. Now that both men and women were breadwinners, the main way for most to compensate for falling wages from the late 1990s was to work more – often up to over 50 hours a week. Over time, though, this benefits of this mechanism were gradually eroded.

The third coping mechanism involved people dipping into savings and getting into debt to compensate for lower spending power, which really accelerated from the early 2000’s. During ‘The Great Prosperity’ in the 1950s-60s, households could save 9% of their income per year. As wages declined into the 2000’s, maintaining living standards meant exhausting savings, relying on credit cards and investing in property. Basically, getting into huge debt. By 2007, the average US home owed 138% of it after tax income.

Nothing has arrested this trend since Donald Trump was elected US president promising to bring jobs and wages back for his base.

Most credible economists agree that the jobs that went aren’t coming back. It’s a harsh lesson of economic history, but since the industrial revolution first started putting people out of work, most of those jobs never came back.

Amazon: the next coping mechanism

Reich’s story is one of one coping mechanism after another running out of road. The backstory is constant downward pressure on real household incomes.

The question for me has been, what will be the next coping mechanism?

It does appear that lessons have not been learned and the causes of the crisis have not been fixed. The recent IMF global stability report said as much. Thomas Piketty’s Capital presents economic evidence that inequality is destined to get much worse. Some have declared a new gilded age as the number of billionaires bloom.

These three coping mechanisms are not quite dead, but neither are they alive. The world is looking for a solution beyond where we’ve been.

I believe it’s very likely that fourth coping mechanism will be Amazon, in the USA at least.

Scott Galloway is one of the clearest voices in the world on what Amazon is doing. In a brilliant lecture, he puts it succinctly: Amazon and consumers have conspired to kill brands. Their model is built on eliminating the cost of branding and returning that to the consumer in lower prices and more money in their pockets.

This conspiracy is backed up by a titanic distribution system, use of big data and predictive logistics, the scale and cash pile to acquire and develop new technologies faster than the competition and determination to monopolise the future.

For example, their purchase of Whole Foods provided Amazon with a supply chain, which they could then forward integrate with their online shopping and delivery platforms and self-checkout technologies. Combined, this enabled Amazon to radically drop Whole Foods’ prices by up to 43%.

At the same time, Amazon is taking on everyday consumer goods like batteries and nappies with their own-brand versions. And their investment in voice technology short-circuits visual brand cues, making consumers more reliant on Alexa’s cheaper own-brand alternatives.

This is huge for cash-strapped households. Amazon literally delivers them the chance to maintain or even improve living standards by shopping with them.

OK, but how does this play out?

This seems great, but what does it look like in the long-term?

Kant’s moral philosophy may be instructive here. His categorical imperative  held that for an act to be ethical, you should be able to apply it universally without contradiction. If I want to kill someone, I must ask myself, ‘what if everyone killed everyone?’ This doesn’t work, therefore killing is wrong.

Similarly, what does it mean were Amazon to become the everything store, everywhere? If Amazon truly is out to kill all brands, monopolise all markets, where would we find ourselves?

If Amazon is the next coping mechanism for declining living standards, if the other three have run out of steam, why would this fourth mechanism be any different?

From a narrow marketer’s point of view, how do we understand the future of consumers needs and behaviours? From a economic point of view, how does it affect prices, wages and demand? And from a political point of view, how does it affect an already skewed distribution of power in the world today?

Media planners and marketing strategists need to keep an eye on these macro trends and consider how they are, mostly imperceptibly, affecting consumers’ decision-making now, and more explicitly in the future.

What can Corbyn teach brands about influencers?

It’s often said politics is the art of the possible, and advertising the art of persuasion.

Taken together, the UK general election has given us some useful fodder for thinking about the role of influencers in social media campaigns.

Since the wobbly launch of the Labour Party’s election manifesto last month, there has been a massive swing in support for them. This has in no small part been driven by their social media campaign, which has outspent and outperformed their rivals.

Recent episodes like PewDiePie being accused of anti-semitism, and the disastrous celebrity-endorsed Fyre festival have definitely forced marketers to ask how influence works, what influencers really are, and the benefits and risks working with them can bring.

So, what could brands learn from the apparent success of the Labour’s social media influencer campaign?

It seems their influencer campaign is working because it follows five key strategic principles, essential for any brand strategy or campaign.

Have a clear strategy and objective

Any social media influencer campaign needs to be built on a clear strategic objective. Political strategist Benedict Pringle believes Labour’s primary campaign goal is not to win the most seats in parliament, it’s to massively increase their overall share of the popular vote to strengthen the party and Jeremy Corbyn post-election. To do that, they need to get more people to register and vote for them – in effect, a penetration strategy. Everything else flows from this.

Identify who can help you achieve that

The next step is to clarify what role your audiences will play in achieving your objective. Much of Labour’s surge in appeal is coming from new voters under-25, so they have focused on seizing this growth opportunity. Since their campaign began, 1.5 million young people have signed up to vote, with 246,000 people under-25 signing-up to vote on the last day of registration, and polls suggest most of these new, young voters favour Labour. Any successful strategy, whether in business or politics, needs to be clear about whether their growth growth (votes, sales, etc.) will come from.

Understand your audience’s values, motivations and culture

Once you know who you are trying to reach, and why, you have to ask yourself: why should anyone listen? Are you saying something your audience wants to hear, in the way they want to hear it? In the case of the Labour Party’s social media campaign, they seem to have understood their young audience’s values, concerns and passions better than the other parties. By focusing on issues salient to younger people like scrapping end college fees, Labour’s messages have resonated strongly. Of course, it helps that Jeremy Corbyn is a ‘real person’ and not a ‘lizard‘ in the eyes of young voters – Jeremy Corbyn’s fashion sense has been a talking point, and Labour’s, association with the UK’s grime scene is well Brands must know their audience their audience inside-out if they are to stand any chance of creating a credible, and effective influencer campaign.

Find someone with a genuine connection to you and your audience

It’s only at this point should you identify who those influencers might be. Done well, influencers can generate talkability, credibility and deepen the connection with your audience in the hope that it influences people’s behaviour in your favour. It can be wasteful, or worse. Labour’s influencer campaign has been working because they have linked in with musical artists whose values closely overlap with Labour’s and their audiences, like JME, placing their messages in trusted media like like Fact magazine, and at gigs, generating relevance and conversation about the issues they raise.

But we need to dispel a myth at this point, that ‘influencers’ are those rare people with superhuman powers of persuasion. They’re not. Research has shown that word-of-mouth marketing really works at the level of small, primarily offline, social networks and is amplified by social media. Well-chosen, culturally influential celebrities can help generate talkability and shift brand perceptions, but persuasion, linked to behaviour, occurs most powerfully at the micro-level. So, any influencer strategy is really about leveraging credible celebrities to build an army of ‘influencers next-door’ – individuals who are looked to by their peers as passionate experts, whose opinions they value, and who sway their actions.

Slip into conversations, don’t dominate them

The aim of campaigns, and influencer campaigns, is to generate talkability, but people don’t talk to others about brands they way brands might think they do. People won’t tell a friend about the great ‘brand benefits’ or a party’s manifesto’s detailed expenditure plans – that’s boring. People want to talk about things that are important or interesting to them and worth sharing. It’s better to aim to have your party or brand come up in conversation when it’s relevant.

By connecting with culturally relevant influencers, Labour’s social media campaign seems to be succeeding in fitting their messages more organically in younger people’s conversations around politics and the general election. This is much better than attempting to barge into people’s conversations with bland, formulaic mantras, whether you’re a political party or a brand. As research has shown, in this way, word-of-mouth’s lower reach is more than made up for by its greater depth and impact.

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