FIVE TRENDS FOR 2005

What will be the hot branding trends in 2005? Here are five developments that will affect clients, customers and budgets:

1. Performance-based compensation: In 2000, Procter & Gamble, the world's largest advertiser, rocked the advertising world by no longer paying media commissions. Instead, agencies were paid based on actual sales. Compensation increased if sales went up, and down if sales fell. Despite predictions, performance-based compensation has not advanced very far, partly due to fierce resistance by agencies ("what if the client can't deliver what is promised") and partly because of the difficulties in measurement. But advances in activity-tracking, especially on the Web, and new demands for accountability will result in increased demands for performance-based compensation for both advertising and PR agencies. It's a trend that agencies should welcome, not fear. Leading consulting firm Accenture increased the number of employees by 25% last year after adding some type of performance measures to 30% of its contracts.
   
   
2. Enhanced customer connectivity: With consumers being bombarded with 60% more ads than they were a decade ago, companies are turning to more innovative ways to connect with customers. Canadian shoe company John Fluevog gets its customers to design shoes they would like to see made. Other customers then rate the designs online. Six designs have "won," and sales exceeded expectations in each case. Jones Soda in Seattle prints customer photos on its beverages. Apple, Heinz and other firms have established online communities where customers interact with each other. The Ogilvy Loyalty Index found that such customers are worth six times the value of a "typical" customer while a McKinsey study found that these customers accounted for two-thirds of online sales.
   
   
3. Social branding: The success of Naomi Klein and the no-logo movement are making companies understand that brands have social as well as economic value. This is a lesson that companies such as the Body Shop have long recognized. As a result, companies are increasing sponsorships of a wider variety of social movements, ranging from the anti-fur movement to micro-loans in third-world countries. Companies are also paying greater attention to corporate governance, recognizing the strong effect that transgressions can have on their brands.
   
   
4. Universe is the brand: As advertising becomes less effective due to proliferation and such consumer tactics as TiVo, do-not-call lists and spam filters, companies are exploring alternative methods to get their products in front of consumers. Look for an expanded emphasis on product placement, not only in TV and movies but also in songs. As anyone who has seen Agent Cody Banks, Matrix or especially Charlie's Angels knows, mobile phone manufacturers have made tie-ins a major part of their promotional budgets. A paid-for song placement and excellent video - "Pass the Courvoisier" - helped transform the liquor from a dusty fuddy-duddy to a bling-bling accessory.
   
   
5. Blogs, wikis and RSS: Blogs are the online tool powerful enough to bring down U.S. politicians and TV anchors and make 20-year-olds international superstars. While they are just beginning their rise as a method for internal or community communications. RSS - essentially a syndication technology - will become as important to a Web site as metatags. A primary branding driver is the recognition of the power that blogs and wikis have in fueling word word-of-mouth, which accounts for 30-50% of all brand switching.

Fast-forward to the future: Keep an eye on podcasting, mososo and immersive communications. These won't have much of an impact in 2005, but could drive branding in 2006 and beyond. Podcasting involves using the iPod as a personal or group "radio station;" Mososo stands for mobile social software that connects people through mobile phones using location-based services; and immersive communications will leverage 64-bit processing, high-definition displays and such emerging technologies as Blu-ray that will make virtual reality less virtual and more real.