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Business Report

New Technologies, New Marketing

The Internet and social media have profoundly changed how brands are built, customers wooed, and products marketed.

Pat Wechsler serves as an editorial consultant to corporations on the production of digital and social branded content and contributes freelance journalism to several media websites, including Fortune.com. None of the companies mentioned in this story are clients or potential clients.

Amy Pearl was shopping in the Washington Square mall in suburban Portland, Oregon, in the summer of 2012 when she happened by a recently opened Tesla showroom. Her husband, Kurt Alameda, had been a fan of the all-electric car, avidly following its development on the Internet long before vehicles were available. The store had Tesla T-shirts and key chains; Pearl walked in to buy a trinket.

She walked out with something slightly bigger. The company was letting people put $5,000 down to reserve one of the first Model Ss that would arrive in early 2013, and Pearl, who had just received some inheritance money, decided, “Why not?” That Christmas Alameda was given an envelope with an 8x10 picture of the Model S inside. He was elated—he thought it was for a test drive. “He turned the picture over and saw I had written, ‘You can’t take it back,’” Pearl recalls. “He started to cry.”

This story is part of our May/June 2015 Issue
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Like a lot of Tesla owners, Alameda and Pearl love to talk about their car. Online and off, owners have become the biggest cheerleaders for the brand.

That word-of-mouth support is, in a nutshell, how the company markets its cars: no ad agency, no ad campaign, no big dealerships with rows and rows of Teslas to ogle. Potential buyers can see them at the mall or read about them on the Internet; many don’t even test-drive the vehicle until after they decide to purchase. Yet this new vision of how to sell cars made Tesla’s Model S California’s third-best-selling luxury car in 2013 and a formidable contender in several other major markets globally.

None of the buzz would produce the volume of sales necessary for a new car company to survive in the 21st century were it not for the Internet and, more important, were it not for social media. “Without social media, the big car companies would have squashed Tesla,” says Anne Swan, global director for consumer brands at the New York–based international branding firm Siegel + Gale. “The company would never have been able to get its story out there. Social let them cut through the initial negativity about electric cars and get folks excited and talking about the technology’s potential.”

Where marketing was once a one-way street of information flowing from the brand to the consumer, it has become a conversation—and as in a conversation, brands now have to actually listen and respond to what the public says.

In a sense, social media has democratized the ability to persuade: consumers today have the access and information to help shape the way the public views products, companies, and issues. Social media is also leveling the playing field between larger established brands and upstarts. Where a Procter & Gamble or General Motors could swamp the finite number of media outlets a couple of decades ago with disproportionately large marketing budgets, social media now allows new brands like Tesla—or Uber, Seamless.com, GoPro, or Fitbit—to amplify their message quickly and efficiently, and often on a limited budget.

Tesla’s approach has shaken up competitors, causing the biggest car makers to rethink the retail experience of buying a car, says Jim Stengel, former global marketing chief for Procter & Gamble and a consultant to major auto manufacturers.

There is almost no company today that doesn’t concede the need to invest in social media—either by outsourcing the work to an agency or by building an internal capability. Over the next five years, corporate budgets for this work are expected to increase by 128 percent, suggest the responses to the CMO Survey, a project led by Duke University’s Fuqua School of Business in Durham, North Carolina. Currently, social media represents, on average, a little less than 10 percent of the total marketing budgets of the 350 companies that responded to the survey. By 2020, that percentage is expected to grow to just short of 22 percent.

In addition to helping brands gain a following, social media also serves as an early warning system for looming crises, says Christine Moorman, a professor of business administration at Fuqua. “If companies are paying attention, they can catch small things before they become big things,” she says.

Last November, a Victoria’s Secret ad campaign featuring the tag line “The Perfect Body” over a lineup of models fomented a firestorm: close to 30,000 people, mostly women, protested it as promoting unhealthy body image.

Without issuing a statement, the company modified the line to the less contentious “A Body for Every Body.” In 2013, PepsiCo changed its formula for Gatorade after a 15-year-old girl attracted more than 200,000 signatures on a Change.org petition demanding the removal of the additive brominated vegetable oil, which had been banned in Japan and the European Union. 

In February, Nationwide Mutual Insurance led the pack in social posts about its 45-second Super Bowl commercial publicizing the number of household accidents that kill children. Unfortunately for the company, only 12 percent of the more than 238,000 posts referring to the advertisement were positive, according to Amobee Brand Intelligence.

So far Nationwide is standing by the commercial and the decision to run it during the Super Bowl, an otherwise happy, family-oriented event. On its Facebook page, the company posted videos and commentary that said the spot was meant to be jarring.

“It’s a good commercial that really grabs your attention,” says Siegel + Gale’s Swan. “Maybe it wasn’t the best time to air it, but maybe it was. It got a lot more attention from social and media than it ever would have if it ran at another time.”

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