The Prof G Pod with Scott Galloway - Future of Marketing: Part Two

Episode Date: September 25, 2024

Today, we finish off our special two-part series answering your questions about all things marketing.  Scott answers your questions surrounding Nike’s value destruction, the power of rebranding, and how to build brand awareness outside of advertising.  Music: https://www.davidcuttermusic.com / @dcuttermusic Subscribe to No Mercy / No Malice Buy "The Algebra of Wealth," out now. Follow the podcast across socials @profgpod: Instagram Threads X Reddit Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Ready, set, grow. Go to ConstantContact.ca and start your free trial today. Go to ConstantContact.ca for your free trial. ConstantContact.ca Welcome to the second and final episode of the Prof G's podcast special series, Future of Marketing, where we answer questions about all things marketing. Hey, Prof G. Hey, Scott and team. Hey, Scott.

Hi, Prof G. Hey, Prof G. Hey, Prof G. Hi, Professor G. In last week's episode, we answered questions surrounding common marketing misconceptions, the power of community-driven marketing, and what the future holds for the industry. I think the CMO is kind of already dead. They just don't know it. Our first three clients have to be just fanatical about us. We have to over-serve them. I don't care if we lose money. I don't care if you have to go on vacation with them. I don't care what it is. They have to be evangelists. How do I produce something of 80% of the quality that I have

produced in the past for 20% of the price. That should be your goal. Today, we'll answer your questions surrounding Nike's value destruction, the power of rebranding, and how to build brand awareness outside of advertising. So with that, first question. I wanted to get your thoughts on an article that was written by a former Nike CMO where he talks about Nike's value destruction and the decisions that led up to their recent quarterly earnings. I'm curious what your thoughts are on the author's take and how a leader in any organization can avoid making similar mistakes. Thanks for your time and I hope you have a great summer. Go Arsenal. That's right, the Gunners. So former

Nike branding executive Massimo Giunco, I believe his name is, Giunco, published a viral article back in July that focused on Nike's significant losses in market value following the release of its Q2 2024 financial results, which saw the company lose $25 billion in a single day in market cap and $70 billion over nine months, hitting its lowest stock price since 2018. So think about this. It's at a six-year low, and I think the stock's been cut in half in the last three years. Here's what Mossimo had to say about Nike. CEO John Donahoe's tenure has been an epic saga of value destruction that might take years to undo. That's hard to argue with. From a shareholder perspective, the CEO has been a disaster. Nike's losing its cool factor that came from limited edition releases by retreating from

independent retailers and focusing on its online stores. Nike has reorganized its product by gender rather than sport, making it feel more like generic fashion brands, including Zara, H&M. This has contributed to a lack of innovation and energy in product creation. Nike's decision to scale back its wholesale business and focus on its direct-to-consumer model has distanced it from its niche boutiques and skate shops that helped build its cultural credibility. And although the swoosh remains a market leader, Nike's brand has suffered culturally with more consumers turning to competitors for cool footwear. So I love Nike. I've worked with a lot of people there. Some of the brightest people at l2 that

we worked with now work there and i'm part of the shift away from nike i wear on running shoes and i love them they're on brand for me i like the way they feel are my feet that smart can i tell any difference probably not i just like what it says about me i think your shoes your watch your car and your smartphone are kind of the ultimate self-expressive benefit they say something or you think they say something about them so let me let me be clear. I would have done the same thing. I would have doubled down on the direct-to-consumer. As a matter of fact, I preached that to Nike, that they needed to get from 10% to 50% of their sales in direct-to-consumer, and they bought that. And I think, quite frankly, I think that was the right move.

They have suffered because what we didn't anticipate coming out of COVID was that there would be such an aggressive, violent return to shopping in stores. And Nike was not well-prepared or well-positioned to capture those gains. And a lot of the cooler stores felt a little bit, I guess, overlooked or ignored because they had basically totally focused their priorities on direct-to-consumer. And I will say that going into a Nike town, it does feel not as fresh or as cool as it used to, the Nike-controlled or vertically-controlled, vertically-integrated stores. But I don't fault them for that. I think that given the information they had at the time about the future of online, I think that was the right decision. And also, the market trumps individual performance, and Nike was on the wrong end of China. And that is, if you look at the S&P 500 companies that have really gotten kicked in the nuts, Estee Lauder, Starbucks, Nike, quite frankly, it's exposure to China. China was the gift that kept on giving. Just as everyone says AI, every other word in the earnings call, go back seven, eight years, it was the same thing where everyone just said China over and over. And these companies

really massively invested in China, including I think at one point Starbucks was opening a store every two hours. And guess what? They are now paying the price for what appears now to be overinvestment that hasn't been justified by the growth. And anyone with a large presence or made a big bet on China is getting absolutely killed. I think they're probably going to need to and I don't know this I don't know the revenue per employee I think they're probably going to need to use this as cloud cover to do some cost cutting I know they've already started this but for me it comes down to merchandising and I think the brand is still super cool I think they did a good job with the Olympics but I don't think there is anything wrong with the Nike brand that can't be fixed with what is right with a Nike brand. Thanks so much for the question.

Question number two. Hey, Scott. It's been a hot minute since Facebook rebranded to Meta and Square rebranded to Block. I thought it would be nice to do a then and now retro on your thoughts at the time of those rebrands and how those rebrands have aged over time? Thanks for the question. I don't know much about the block rebranding. I thought the rebranded meta, typically speaking, rebrands don't work very well. Because when you say there's so many problems here, we need to change the name of the company. And granted, they didn't change the name of the core products. They just changed the name of the corporate

entity. So it didn't really matter that much. But I would call it sort of indifferent or nothing. Not that big a deal. It does kind of mark the age. And that is, keep in mind, Mark Zuckerberg rebranded the whole company Meta thinking that the metaverse was the future and began shifting the business model towards the future. And the wonderful thing about sitting on literally cash volcanoes is even when you make a mistake, which the metaverse was, makes no fucking sense. No one wants to put that thing on their head. Come on, enough already. When can we declare headsets dead, right? I'm going to get on my Segway and head down to the town square, and I'm going to jump on MySpace and let everyone know that headsets are dead. Anyways, and if I need to relax, I'll go home and spend time with my pet rocks.

Okay, that was pretty good. Some pretty good cultural references there on the fly. Facebook hoped to become more than just a social network and that the rebrand would move the company away from the negative attention it was getting for issues including misinformation. So this just, quite frankly, has not worked, said Captain fucking obvious here. According to the 2024 Axios Harris Poll of 100 reputation rankings, Meta ranks number 97 in overall reputation with a very poor score of 59.6. I think I've played a role in that. That's just three spots above the Trump organization.

I love that. The Trump organization and Facebook or Meta are neck and neck. Two spots above X and one spot above Spirit Airlines. Spirit, the Trump organization, Twitter, I refuse to call it X, and Meta. That's literally the shittiest neighborhood in the world. That's your parents come to visit you in that neighborhood and they're like, okay, we fucked up. Something's gone wrong. Just in case you're curious, NVIDIA is ranked number one, followed by 3M and Fidelity. Hmm. I would have not guessed any of that. That's fucking fascinating. Anyways, this made no sense, but it didn't really hurt them that much. And to Meta and Mark Zuckerberg's credit, it doesn't seem to have distracted them for very long. The stock, I think,

dove to about 80 or 90 bucks when everyone said this makes no sense and he refuses to acknowledge it. But meanwhile, they're incorporating AI into their ad stack such that if you're spending money trying to reach people, there's just very few ways to spend it better than on a meta platform. And as a result, the stock, and Aswath Damodaran, my colleague at NYU said, don't be ridiculous, this stock's wildly undervalued. I think it's gone from a low of 80 or 90 to where it is now, which is somewhere between, I think, let's look this up real quick. The stock is at 537 and just literally it was at 90 bucks. Oh my God. It was a 90 bucks less than three years ago.

So in the last three years, it's up. It's basically tripled. So what do I think? I don't know anything about the block rebrand. I think the meta rebrand was a distraction. I don't think it helped them. It obviously didn't help them. It'll mark the age of what was one of the stupidest decisions around technology. But the incredible management, adoption of technology, and Cash

Volcanoes, this company, sits on overwhelmed or basically gave them a free get out of jail card that no other company could probably survive spending this kind of money and this kind of lack of focus. So what was it? It's kind of a big nothing burger. We have one quick break before our final question. Stay with us. Welcome back. Question number three. G'day, Prof G.

It's Rob from Australia here. I recently co-founded and launched a new automotive website, thebeep.com.au. And whilst our growth has been rapid, we still face the challenge of increasing our brand visibility in the market. You previously mentioned, if your product is strong enough, you don't need to rely on advertising. So I'd like to ask, what are your top tips to build brand awareness in the digital space if you don't advertise? If you think about the marketing funnel, it's awareness, then it becomes intent,

then it becomes purchase, and then post-purchase kind of loyalty. And without awareness, it used to be if you had a great product and you weren't advertising, you might as well have a product on Mars. People needed to hear about it. And as a result, advertising kind of ruled the day. People spent less money on the product itself because manufacturing was pretty easy to reverse engineer. So it got harder and harder to differentiate on manufacturing. And then the digital world just unlocked all sorts of product innovation and also unlocked all sorts of different means of communicating or sharing great products such that you became less reliant on broadcast advertising, which concurrently was getting less and less effective with the fragmentation of media. The result was what was an incredible means and a more important means of communicating

the top of the funnel became not only less effective, but more expensive. And you've just seen basically this giant sucking sound of oxygen out of the room from all broadcast and ad-supported media to a small number of ad-supported media companies that are direct to consumers, specifically Alphabet, Meta, TikTok, and also actually Amazon, which is one of the biggest media companies in the world. People just don't talk about it because they've done a great job of basically shopper marketing. When you go in and you see an end cap, a cardboard cutout of Tom Brady selling you Bud Light or whatever, more money is spent on that type of marketing than actual advertising. And the mother of all shopper marketing is Amazon, Amazon Media Group, that says, that senses if you put Huggies in your

shopping cart, hey loves, or Kimberly Clark, or whoever makes loves, would you like to advertise to that new mom? And they say, yeah, we'd really like that. So the targeting is unbelievable. Anyways, how do you get awareness? I think it depends in the digital media space. I think a limited amount of testing on these platforms is really important. I would embrace new mediums. I think, unfortunately, in digital media, if you don't have a command of social media platforms, you're kind of fucked. And a lot of people say, oh, I don't like social media and we don't do it that way. Well, okay. Good luck with that. Some tricks that I tried that worked actually really well. L2, I wanted a reverse inquiry model. I used to go out and sell consulting when I was in the

90s. My first firm was a firm called Profit Brand Strategy. And my job was to go out every dinner, every meeting where there might be important and powerful people, introduce myself to them, follow up with an email, get them out to dinner, get them out to the golf course, and then establish all these proxy kind of father-son relationships with the CMO and CEO of all these great brands. I found it fucking exhausting. And the next time I started what was essentially a strategy consulting firm called L2, I said, I'm just done. I just don't have the skills, the patience to go and make a lot of new friends any longer. So I said, I need a reverse inquiry model. One, I need to go to subscription, but that's another talk show. We did membership as opposed

to consulting fees. And so some of the things we did was the following. We created our own distinct IP with a ranking. I figured out consumers and the press, especially the press, loves rankings. So we started something called the L2 Digital IQ Index, where I came up with 1,200 data points across social, mobile, digital marketing, segmented it into five categories, genius, gifted, average, challenged, and feeble. I'm especially fond of the term feeble. And the press just went apeshit with these rankings, you know, to see some huge iconic companies ranked as feeble digitally. And then they call me and I kind of had the receipts. I just had so much data that they said, wow, this firm, Ford Motor really does have a weak website

or whatever it was. And that got a ton of attention and a ton of press. And the reason why comms executives have gone up sixfold in the last 30 years, and while journalists have decreased, is that a really good comms person who can get you ink is obviously very, very important. The other thing I did is I tried to weaponize these mediums, not in addition to social, but I started doing weekly videos called winners and losers. And if one got 40, 50, 100,000 views on its own organically, I'd pour a little bit of fuel on it, a little bit of juice, a little bit of secret sauce, a little bit of Tabasco, a little bit all sauce and no chip. And you can do that on YouTube. And that would get it to three, four, 500,000 views. And then I would release that in conjunction with these rankings I put out would create a reverse inquiry model where somewhere between three and 10 emails a day of people inquiring about membership.

That changes the conversation. It changes the tone of the negotiation. It increases your margin because, hey, boss, you bought us. Anyways, I would say try to come up with interesting IP, thought leadership, weaponize the platforms. You've got to be good on social media and see if there's something interesting you can do that leverages your strengths around creativity. Because the stuff that doesn't work or that's just really fucking expensive is conferences, B2B marketing, advertising for a small company. That shit is just really hard. And at the end of the day, you have seen a reallocation of resources out of marketing into the actual product itself.

Because at the end of the day, if you can figure out a way to have a 10x better product, we're just going to get out. So it sounds passe. It sounds like table stakes. But the brightest people in the company need to be focused on making a better widget, whereas before the brightest people in the company were just hiring Don Draper. Appreciate the question. That's all for this episode. If you'd like to submit a question, please email a voice recording to officehoursatpropertymedia.com. Again, that's officehoursatproptimedia.com. This episode was produced by Caroline Shagrin. Jennifer Sanchez is our associate producer,

and Drew Burrows is our technical director. Thank you for listening to the Prop G Pod from the Fox Media Podcast Network. We will catch you on Saturday for No Mercy, No Malice, as read by George Hahn. And please follow our Prop G Markets Pod wherever you get your pods for new episodes and every Monday and Thursday. And by the way, our new brand extension, Raging Moderates, oh my God, 000 views 200 000 downloads that's right that's right spreading the word the dog is everywhere the dog is paying on everything