Reciprocity theory 110716f

RECIPROCITY THEORY
MARKETING IN THE POST-CAPITALIST SOCIETY
Presented at University of Texas
Monday, November 7, 2016

THIS STORY STARTS WITH A TECTONIC SHIFT IN MEDIA
2
2006 - 2007

NEWTON’S THIRD LAW OF PHYSICS
3
The skaters’ forces on each other are equal in magnitude, but act in opposite directions.

THE RECIPROCITY THEORY – A MOTIVATIONAL MODEL
4
individual community

5
purpose

6
purpose
+
influence

TODAY’S JOURNEY
• Foundational human behavior
• Technological revolutions
• Socio-economic evolutions
• The future of marketing
7

FOUNDATIONAL HUMAN BEHAVIOR
ACCELERATED AND SCALED

MASLOW’S HIERARCHY OF NEEDS
9
realizing personal
potential, self-
fulfillment, seeking
personal growth
and peak
experiences
achievement, mastery,
independence, status,
dominance, prestige,
self-respect, respect from
others
love and belongingness, friendship,
intimacy, affection and love – from
work group, family, friends, romantic
relationships
protection from elements, security, order, law,
stability, freedom from fear
air, food, drink, shelter, warmth, sex, sleep
Physiological
Safety
Social
Esteem
Self-Actualization

10
helping
others to
achieve self-
actualization
realizing personal
potential, self-
personal growth and
peak experiences
appreciation and search for
beauty, balance, form
knowledge, meaning
self-esteem, achievement, mastery, independence,
status, dominance, prestige, managerial responsibility
love and belongingness, friendship, intimacy, affection and love
– from work group, family, friends, romantic relationships
protection from elements, security, order, law, stability, freedom from fear
Physiological
Safety
Social
Esteem
Cognitive
Aesthetic
Self-Actualization
Transcendence
DeficiencyNeeds
(coping)
GrowthNeeds
(happiness)

11
helping
others to
achieve self-
actualization
realizing personal
potential, self-
personal growth and
peak experiences
knowledge, meaning
Physiological
Safety
Social
Esteem
Cognitive
Aesthetic
Self-Actualization
Transcendence
DeficiencyNeeds
(coping)
GrowthNeeds
(happiness)
85%

12
helping
others to
achieve self-
actualization
realizing personal
potential, self-
personal growth and
peak experiences
knowledge, meaning
Physiological
Safety
Social
Esteem
Cognitive
Aesthetic
Self-Actualization
Transcendence
DeficiencyNeeds
(coping)
GrowthNeeds
(happiness)
85%
75%

13
helping
others to
achieve self-
actualization
realizing personal
potential, self-
personal growth and
peak experiences
knowledge, meaning
Physiological
Safety
Social
Esteem
Cognitive
Aesthetic
Self-Actualization
Transcendence
DeficiencyNeeds
(coping)
GrowthNeeds
(happiness)
85%
75%
50%

14
helping
others to
achieve self-
actualization
realizing personal
potential, self-
personal growth and
peak experiences
knowledge, meaning
Physiological
Safety
Social
Esteem
Cognitive
Aesthetic
Self-Actualization
Transcendence
DeficiencyNeeds
(coping)
GrowthNeeds
(happiness)
85%
75%
50%
40%

15
helping
others to
achieve self-
actualization
realizing personal
potential, self-
personal growth and
peak experiences
knowledge, meaning
Physiological
Safety
Social
Esteem
Cognitive
Aesthetic
Self-Actualization
Transcendence
DeficiencyNeeds
(coping)
GrowthNeeds
(happiness)
85%
75%
50%
40%
10% : 2 %

THE CEO’S TECHNOLOGY PARADOX

17
CEOs expect technology to drive the most change in
their organizations over the next 3 – 5 years

18
“Technology can accelerate a transformation, but it
cannot cause a transformation.”
-- Jim Collins

19
Social technologies
disrupting industries and
structure of the workforce
Organizations reacting
with technology
solutions, not human
solutions
TECHNOLOGY-
CENTERED SOLUTIONS
TECHNOLOGY-
ENABLED BEHAVIOR

TECHNOLOGICAL REVOLUTIONS
WE’VE BEEN HERE BEFORE

5 SUCCESSIVE TECHNOLOGICAL REVOLUTIONS
OF THE LAST 250 YEARS
21
1ST: The ‘Industrial Revolution’ | Big Bang Moment: Arkwright’s mill opens in Cromford – 1771

22
2ND: Age of Steam & Railways | Big Bang Moment: Test of the ‘Rocket’ steam engine for the
Liverpool-Manchester railway – 1829

23
3RD: Age of Steal, Electricity & Heavy Engineering | Big Bang Moment: The
Carnegie Bessemer steel plant opens in Pittsburgh, PA – 1875

24
4TH: Age of Oil, the Automobile & Mass Production | Big Bang
Moment: First Model-T comes out of the Ford plant in Detroit, MI –
1908

25
1908
5TH: Age of Information & Telecommunications |
Big Bang Moment: The Intel microprocessor is
announced in Santa Clara, CA – 1971

REVOLUTIONS FOLLOW A REOCCURRING SEQUENCE
26
Technological
Revolution
Financial
Bubble
CollapseGolden Age
Political
Unrest

27
“A technological revolution can be defined as a
powerful and highly visible cluster of new and dynamic
technologies, products and industries, capable of
bringing about an upheaval in the whole fabric of the
economy and of propelling long-term upsurge of
development.”
-- Carlotta Perez

28
“Each time around, what can be considered a ‘new
economy’ takes root where the old economy has been
faltering. But it is all achieved in a violent, wasteful and
painful manner...”
-- Carlotta Perez

29
“…The new wealth that accumulates at one end is
often more than counterbalanced by the poverty that
spreads at the other end…It is certainly a broken
society, a two-faced world.”
-- Carlota Perez

30
1908
The reoccurring revolutionary sequence
Technological
Revolution
Financial
Bubble
CollapseGolden Age
Political Unrest

AND, THE 6TH IS AROUND THE CORNER
31
1908
Technological
Revolution
Financial
Bubble
CollapseGolden Age
Political Unrest
6TH: Age of ? | Big Bang
Moment: TBD – 2021

AND, THE 6TH IS AROUND THE CORNER
32
1908
Technological
Revolution
Financial
Bubble
CollapseGolden Age
Political Unrest

THE LIFECYCLE OF A TECHNOLOGICAL REVOLUTION
33
Gestation
period
Paradigm
configuration
Introduction of successive new products, industries and
technology systems, plus modernization of existing ones
Constriction
of potential
Early new products
and industries.
Explosive growth
and fast innovations
Full constellation
(new industries,
technology systems
and infrastructure)
Full expansion of
innovation and
market potential
Last new products
and industries.
Earlier ones
approaching maturity
and market
saturation
Degreeoftechnologicalmaturity
andmarketsaturation
Around half a century
today

PRE-INTERNET SOCIAL NETWORKING
34

THE 6 C’S OF SOCIAL NETWORKING
• Communications
• Connectedness
• Common Experience
• Content
• Commerce
• Cool Experiences (entertainment)
35

• Communications
• Connectedness
• Content
• Commerce
36

• Communications
• Connectedness
• Content
• Commerce
37

AOL BRIDGED THE GAP BETWEEN PRE-INTERNET AND
INTERNET
38

WEB 1.0 PERSONAL PAGES ON “THE WEB” MADE EASIER
39

WEB 2.0 ACCELERATED USER CONTRIBUTION
40
Blogging Photos Videos Networks

42
Gestation
period
Paradigm
configuration
Constriction
of potential
Early new products
and industries.
Explosive growth
Full constellation
(new industries,
technology systems
and infrastructure)
Full expansion of
innovation and
market potential
Last new products
and industries.
Earlier ones
and market
saturation
big bang
andmarketsaturation

43
Gestation
period
Paradigm
configuration
Constriction
of potential
Early new products
and industries.
Explosive growth
Full constellation
(new industries,
technology systems
and infrastructure)
Full expansion of
innovation and
market potential
Last new products
and industries.
Earlier ones
and market
saturation
big bang
andmarketsaturation
pre-Internet

44
Gestation
period
Paradigm
configuration
Constriction
of potential
Early new products
and industries.
Explosive growth
Full constellation
(new industries,
technology systems
and infrastructure)
Full expansion of
innovation and
market potential
Last new products
and industries.
Earlier ones
and market
saturation
big bang
andmarketsaturation
pre-Internet
web 1.0

45
Gestation
period
Paradigm
configuration
Constriction
of potential
Early new products
and industries.
Explosive growth
Full constellation
(new industries,
technology systems
and infrastructure)
Full expansion of
innovation and
market potential
Last new products
and industries.
Earlier ones
and market
saturation
big bang
andmarketsaturation
pre-Internet
web 1.0
web 2.0

46
Gestation
period
Paradigm
configuration
Constriction
of potential
Early new products
and industries.
Explosive growth
Full constellation
(new industries,
technology systems
and infrastructure)
Full expansion of
innovation and
market potential
Last new products
and industries.
Earlier ones
and market
saturation
big bang
andmarketsaturation
pre-Internet
web 1.0
web 2.0
today

NEW PRODUCTS, INDUSTRIES AND TECHNOLOGY SYSTEMS
47

48

49

50

>70% OF AMERICAN ADULTS NOW HAVE HIGH SPEED
BROADBAND
51
-16% CAGR +25% CAGR

STATIC, DUMB DEVICES STAGNANT.
SMART, MOBILE DEVICES GROWING
52

GLOBAL VIEW
• Internet Users
– <10% Y/Y growth and slowing
– Fastest growth in developing markets like India, Indonesia and Nigeria
• Smartphone Subscribers
– +20% strong growth though slowing
– Fastest growth in underpenetrated markets like China, India Brazil, Indonesia
– *Smartphones – +52% early stage rapid
unit growth
• Mobile Data Traffic
– +81% accelerating growth
– Video is a key, strong driver
53

SOCIAL NETWORKING GROWTH SLOWING
54

FULL EXPANSION OF INNOVATION AND MARKET POTENTIAL
55

56

57

58

59

60

61

2/3 OF DIGITAL UNIVERSE IS CONTENT CREATED BY
CONSUMERS
62

CHARLIE…IT SEEMS…WAS ONTO SOMETHING
64

So, now that we’re on slide #65…
you may be wondering…
So what???
65

SOCIO-ECONOMIC EVOLUTION
THE BUSINESS IMPLICATIONS

THE TROUBLE WITH MILLENNIALS…
…is that their behavior and consumption habits may not be
“just a phase”
67

YOUNG ADULTS ARE INCREASINGLY LIKELY TO HAVE
LOWER INCOMES
• ~2.1M more twenty-somethings, and
• ~300K more thirty-somethings
• Lived with their parents in 2013 than did in
2007 – Even though many now employed
• Real median household incomes among 25
– 34 year olds dropped 8% between 2007 to
2012 (-7% for 35-44 year olds)
68
Young Adults Are Increasingly Likely to Have
Low Incomes
Change in 20-29 Year Old Population, 2003-13 (Millions)

STUDENT LOANS HAVE DRIVEN UP CONSUMER DEBT BURDENS
• Share of households aged 25-34 with
student loan debt increased 13% between
2001 to 2010 (from 26% to 39%)
– 16% of these have $50K+ student debt (more
than tripled from 5%)
• Average credit score for Fannie Mae-backed
mortgages rose from 694 to 751 between
2007 to 2013
– Scores for FHA loans rose from 640 to 693,
respectively
69
Student Loans Have Driven Up Consumer Debt
Burdens
Non-Housing Debt Balances (Trillions)

MASLOW’S HIERARCHY IN ACTION
70

MASLOW’S HIERARCHY IN ACTION
71

So, how is this generation coping?
72

73
Gestation
period
Paradigm
configuration
Constriction
of potential
Early new products
and industries.
Explosive growth
Full constellation
(new industries,
technology systems
and infrastructure)
Full expansion of
innovation and
market potential
Last new products
and industries.
Earlier ones
and market
saturation
big bang
andmarketsaturation
pre-Internet
web 1.0
web 2.0
today

74
Gestation
period
Paradigm
configuration
Constriction
of potential
Early new products
and industries.
Explosive growth
Full constellation
(new industries,
technology systems
and infrastructure)
Full expansion of
innovation and
market potential
Last new products
and industries.
Earlier ones
and market
saturation
big bang
andmarketsaturation
pre-Internet
web 1.0
web 2.0
today
tech disruption

75
Gestation
period
Paradigm
configuration
Constriction
of potential
Early new products
and industries.
Explosive growth
Full constellation
(new industries,
technology systems
and infrastructure)
Full expansion of
innovation and
market potential
Last new products
and industries.
Earlier ones
and market
saturation
big bang
andmarketsaturation
pre-Internet
web 1.0
web 2.0
today
non-tech disruptiontech disruption

DISRUPTING NON-TECHNOLOGY INDUSTRIES
76

THERE’S A NEW DEFINITION OF FREEDOM AND STATUS
• Millennials are buying 2 million less cars per year – down 10% since 1985
• Global trend: “The percentage of young drivers was inversely related to the
availability of the Internet” – U. of Michigan Transportation Research Institute
77

THE GREAT SHIFT TO THE POST-CAPITALIST SOCIETY
• 1959 book Landmarks of Tomorrow described the rise of “knowledge work”
• Three decades later, Drucker became convinced that knowledge is a more
crucial economic resource than land, labor or financial assets, and that
• We were headed into a “post-capitalist society”
Knowledge > Value than Land, Labor or Financial Assets
78

EDUCATION DISRUPTED; KNOWLEDGE DEMOCRATIZED
79
Ad hoc information

80
Online learning

81
On the job education

82
On the job education
“…individual excellence
and collective progress”

THE FUTURE OF MARKETING
A ROADMAP FOR ADVERTISING AND PR

84
“Because the purpose of business is to create a
customer, the business enterprise has two–and only
two–basic functions: marketing and innovation.”
-- Peter Drucker

TODAY’S BRANDS ARE SHARED
85
The brand’s passion and
reason for being. The shared
contribution to its community
The shared values, beliefs
and behaviors of the brand
and its stakeholders
PURPOSE
EXPERIENCE CULTURE
The touch points,
interactions and
moments shared
between the brand
and its stakeholders

C-SUITE IS SHIFTING FOCUS
86
Realize mobile devices, social networks and collaborative economy is creating new business models
Believe customers wield more influence on enterprise than the board; 2nd only to C-Suite
Biggest barrier to integrated digital and physical strategy is struggling to understand social media
Now 2nd only to CFO in terms of influence on the CEO
Moving from social monitoring + monetization to integrated customer experience + engagement
To get there: (1) Building data analytics to gain deep understanding of customers (2) Designing
rewarding customer experiences (3) Leveraging new technologies to deliver those experiences
Expects to play a critical role in enabling their organizations’ strategic vision
Customer insights and intelligence + customer experience management are top priorities
When partner with CMOs, enterprise is 76% more likely to outperform in revenue and profitability
ceo
cmo
cio

CRITICAL DISCIPLINES FOR ADVERTISING AND PR
87
Purpose
Data
Analytics
Technology
Storytelling
Design
Thinking

88
Purpose
Data
Analytics
Technology
Storytelling
Design
Thinking

PURPOSE-DRIVEN COMPANIES
89
Eliciting
Joy
Impacting
Society
Inspiring
Exploration
Enabling
Connection
Evoking
Pride
• Rooted in one of five fundamental human values
• Grow 3x faster than the competition
• Investment in The Stengel 50 would have been 400x more profitable than
investing in the S&P 500

90
Eliciting
Joy
Impacting
Society
Inspiring
Exploration
Enabling
Connection
Evoking
Pride

91
Eliciting
Joy
Impacting
Society
Inspiring
Exploration
Enabling
Connection
Evoking
Pride

92
Eliciting
Joy
Impacting
Society
Inspiring
Exploration
Enabling
Connection
Evoking
Pride

93
Eliciting
Joy
Impacting
Society
Inspiring
Exploration
Enabling
Connection
Evoking
Pride

94
Eliciting
Joy
Impacting
Society
Inspiring
Exploration
Enabling
Connection
Evoking
Pride

95
Purpose
Data
Analytics
Technology
Storytelling
Design
Thinking

THE VALUE OF DESIGN
96
• 15 publicly traded companies
• Grew 299% since 2003 vs. 75% S&P
The Design Index
The Design Management Institute / Motiv Strategies
1. Apple
2. Coca-Cola
3. Ford
4. Herman-Miller
5. IBM
6. Intuit
7. Newell-Rubbermaid
8. Nike
9. Procter & Gamble
10. Starbucks
11. Starwood
12. Steelcase
13. Target
14. Walt Disney
15. Whirlpool

EIGHT WAYS THAT DESIGN IS HELPING THESE BRANDS WIN BIG
1. The Wow Factor
2. Brand Expression
3. Solving Unmet User Needs
4. Developing Better Customer Experiences
5. Rethinking Strategy
6. Hardware/Software Interaction
7. Market Expansion Through Persona Development and User Understanding
8. Cost Reduction
97

WELCOME TO THE EXPERIENCE ECONOMY
• Joseph Pine and James Gilmore introduced The
Experience Economy in 1998
• History of economic progress through the four
stage evolution of the birthday cake
1. Agrarian Economy  mothers made cakes from
scratch
2. Industrial Economy  moms paid for Betty
Crocker
3. Service Economy  parents order the cake from
a bakery
4. Experience Economy  parents “outsource” the
birthday event
98

FOUR REALMS OF AN EXPERIENCE
• Two Dimensions
– Participation (Passive/Active)
– Connection (Absorption/Immersion)
• Four Realms
– Entertainment
– Educational
– Escapist
– Esthetic
• Generally, the richest experiences find a sweet
spot incorporating aspects of all four realms
99
sweet
spot

5 DESIGN PRINCIPLES OF THE EXPERIENCE ECONOMY
1. Theme the experience
2. Harmonize impressions with positive cues
3. Eliminate negative cues
4. Mix in memorabilia
5. Engage all five senses
100
sweet
spot

101
Purpose
Data
Analytics
Technology
Storytelling
Design
Thinking

STORYTELLING: THE SCIENCE BEHIND THE ART
• Neuroeconomist, Paul Zak’s research
discovered “The Moral Molecule”, and
that
• Storytelling enables us to direct human
behavior by changing brain chemistry
through well-structured narratives
Tension synthesizes Cortisol
(focuses our attention)
+
Narrative synthesizes Oxytocin
(sense of empathy)
102
Act 3
CLIMAX
(turning point)
Act 2
COMPLICATION
(rising action)
Act 1
EXPOSITION
(inciting moment)
Act 4
REVERSAL
(falling action)
Act 5
DENOUEMENT
(moment of release)
FREYTAG’S PYRAMID
A simple storytelling structure that has worked for thousands of years

103
“If business is about service to others, then business
itself is a virtue. You’re engaging in a virtuous activity
by serving the needs of somebody else. When you do
that, you’re serving the needs of your employees, of
your customers, you will induce oxytocin release and
they will want to reciprocate…”
-- Paul Zak

104
“…In the old model: greed is good, the management
technique is lead with fear. In the new model: empower
individuals to be the best that they can be in an
organization with purpose, you’re going to lead with
love.”
-- Paul Zak

THE GOLDEN CIRCLE
105
WHY
HOW
WHAT

STORYTELLING AND THE VALUE OF CREATIVE CAMPAIGNS
The data tell us…
1. Creatively awarded campaigns are 12x more efficient
2. The greater level of creativity, the greater level of effectiveness
3. Creative campaigns are more reliable investments
4. Increasing the emotional response to a brand reduces its price sensitivity
106

107
Purpose
Data
Analytics
Technology
Storytelling
Design
Thinking

BIG DATA AND ANALYTICS
2/3 OF DIGITAL UNIVERSE IS CONTENT CREATED BY CONSUMERS
108

FROM ACCOUNT PLANNING TO AUDIENCE PLANNING
109
Finds…
• Segmentation
• Media Consumption
• Consumer Preference
• Group Opinion
weeks — months
Finds…
• Audiences (Tribes)
• Engagement Behavior
• Affinities
• Sentiment & Reviews
days — weeksspeed to insight
Planning 1.0
PowellRule:
40<>70
Social
Quantitative
Qualitative
Qualitative
Quantitative
Social
resources Planning 2.0
resources

ARISTOTLE AND THE SECOND ROAD OF THOUGHT
112
ANALYTICS
“Where things cannot
be other than they are.”
Diagnoses the past
LOGIC

ARISTOTLE AND THE SECOND ROAD OF THOUGHT
113
ANALYTICS
“Where things cannot
Diagnoses the past
LOGIC
RHETORIC
“Where things can
Designs the future
INTUITION

BIG BANG MOMENTS AND DISCONTINUOUS INNOVATION
114
1908

THE INTUITIVE LEAP OF FAITH
115
Incremental
Discontinuous
Intuitive Leap
P = 40<>70

A FRAMEWORK TO GUIDE YOU
118
COMPANY
What is the customer’s
empathetic need?
What drives their behavior?
What are the competitors in the
category doing?
What are the gaps that no one is
filling?
What can the brand deliver that
uniquely meets the customer
and category needs and
achieves the brand’s purpose?
The Opportunity
“The Big Idea”
The Story

119
Purpose
Data
Analytics
Technology
Storytelling
Design
Thinking

I think we covered this point enough…
...except to say that...
120

MARKETING TECHNOLOGY AND SOLUTIONS GROWTH
121
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1 2 3 4 5
August, 2011 September, 2012 January, 2014 January, 2015 March, 2016
92% CAGR
in ~5 years

Over HALF of
these solutions
didn’t exist just
one year ago

IN CONCLUSION
I’LL LEAVE YOU WITH THIS THOUGHT…

124
“Every few hundred years throughout Western history, a sharp
transformation has occurred…In a matter of decades, society
altogether rearranges itself – its worldview, its basic values, its
social and political structures, its arts, its key institutions. Fifty
years later a new world exists. And the people born into that
world cannot even imagine the world in which their grandparents
lived and into which their own parents were born. Our age is such
a period of transformation”
-- Peter Drucker

125
Post-Capitalist Society
2020
-- Peter Drucker

126
Next Technological Revolution
2021
Post-Capitalist Society
2020
-- Peter Drucker -- Carlotta Perez

DAVID FOSSAS
Twitter: @dfossas
Email: david@thereciprocity.co
THANK YOU

Reciprocity theory 110716f

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