The New Mad Men
IBM’s digital agency iX is changing the way corporations engage and market to consumers
In 2016, digital advertising spending surpassed television advertising spending. According to Interactive Agency Bureau, digital accounted for $72.5 billion, up 22% from 2015.[1] With the pervasiveness of mobile technology, consumers are no longer captive audiences and firms must do more than just “be seen”. However, traditional marketing solutions may fall short especially given that 84% of millennials dislike and distrust traditional advertising.[2] As such, this fight for relevancy requires real-time and customized content. According to Medium, “the days of hijacking consumers’ content experiences are giving way to thoughtful and innovative strategies that deliver value and foster long-term relationships with the target audiences.”[3] Given these shifts, companies are searching for new ways to engage consumers and to keep their brands relevant.
Increasingly, corporations are looking to digital agencies rather than traditional advertising agencies to help them navigate this rapidly changing consumer environment. IBM’s Interactive Experience (“iX”) division has been able to take advantage of this disruption to become the largest digital agency network in the world. Paul Papas, head of iX states that it is “the only player that has that end-to-end capability that cuts across digital agency, management consultancy, and systems integrator.”[4] Unlike traditional agencies, iX has access to IBM’s capabilities across various industries as well as its extensive product portfolio to help develop digital and creative solutions for its clients. For example, iX has unique access to Watson and IBM’s portfolio of cognitive software capabilities that provide further analytical and learning based insights to better target and engage consumers. Additionally, iX integrates technology across a corporation by working with the entire c-suite as opposed to collaborating with just CMOs, creating greater buy-in and stickiness from clients.
For example, global food brand Knorr enlisted iX to create a digital experience to attract millennials and artisanal food consumers (a segment Knorr has difficulty reaching). In 2016, iX helped Knorr develop the Flavor Profiler, a Watson-powered tool that assigns users a flavor profile and recommends customized recipes to each user. The tool inspired a subsequent ad campaign that ultimately led to 1.3 million visits to the Knorr Flavor Profiler, and increased purchase intent among millennial consumers by 12%.[5]
Although Knorr collaborated with advertising agency MullenLowe on its “Love at First Taste” ad, iX recognized the need for a comprehensive creative offering. As a result, iX acquired three creative agencies Exc.io, Resource Ammirati, and Aperto in 2016. According to Alison Clark, associate partner at iX, the technology “shift ends up being a big benefit for clients, because any creative work is also connected to the other parts of their business and can be managed by a single external partner.”[6] By vertically integrating its digital offering, IBM iX becomes more of a one-stop-shop for corporations, leaving many traditional agencies unable to compete with the firm’s extensive capabilities and product portfolio. Through integrating technology and creative needs, iX will continue to increase client stickiness across its platform. This unique positioning will allow iX to continue to be a heavy player in the digital space and chip away at the market share and dominance of the traditional agencies.
[1]http://adage.com/article/digital/digital-ad-revenue-surpasses-tv-desktop-iab/308808/
[2] https://www.clickz.com/84-percent-of-millennials-dont-trust-traditional-advertising/27030/
[3]https://medium.com/@Unlockd/how-mobile-technology-is-redefining-the-consumer-experience-4f33b55d4e08
[4] http://www.businessinsider.com/ibm-quietly-built-the-worlds-largest-digital-agency-heres-how-it-got-there-2016-3?r=UK&IR=T
[5] https://www-935.ibm.com/services/ibmix/case-studies/knorr.html
[6] http://www.businessinsider.com/ibm-ix-is-cutting-out-ad-agencies-by-bringing-clients-in-through-consultancy-2017-4
Thank you for sharing this M. As a consumer, I definitely prefer more personalised ads and no, that does not mean having items I just looked at while shopping online pop up on every subsequent website I visit. IBMs integrated approach therefore really resonates as a strategy to stand out from the pack in marketing to consumers. Out of curiosity, I just took the Flavor Profiler test and definitely found myself more inclined to trust the subsequent recipe recommendations. As I think back to our conversation on GE today, IBM’s strategy almost seems to be the reverse. In GE’s case, to remain competitive as the hardware market was becoming increasingly commoditised, they faced the mammoth task of developing and integrating software as a new source of competitive advantage. In contrast, IBM already owns the part of the digital advertising value chain that delivers competitive advantage and so its relatively easier to complete an LBM-type acquisition to get the creative resources required to provide an integrated offering. Nonetheless, kudos to them for identifying a relevant market to apply their expertise. #winning