The one with New Balance CMO and President of Brand Chris Davis about 50/30/20

Summary

Podcast Summary: The CEO’s Guide to Marketing – Episode with New Balance CMO Chris Davis on the 50/30/20 Model

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Introduction

In this episode of The CEO’s Guide to Marketing, hosted by Seth Matlins of Forbes, listeners delve into the intricate relationship between marketing and executive leadership. The episode features a candid conversation with Chris Davis, the Brand President and Chief Marketing Officer at New Balance Athletics. Released on December 3, 2024, this episode centers around the innovative 50/30/20 budget allocation model that Davis has implemented to foster growth and maintain cultural relevance in a competitive market.

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Guest Introduction: Chris Davis

Chris Davis has been instrumental in driving New Balance's product and demand creation initiatives since joining the company in 2008. As a member of the senior leadership team since 2016, Davis’s strategic vision has earned him recognition, including placements on Forbes’ Entrepreneurial CM50 list in 2022 and the World's Most Influential CMOs list in both 2023 and 2024. His dual role as a brand leader and commercial strategist offers a unique perspective on bridging marketing with overall business objectives.

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Key Discussion Points

1. Defining Marketing

Timestamp: [04:08]

Chris Davis emphasizes that marketing transcends mere promotion. He defines it as a strategic process focused on acquiring target consumers through connecting brand propositions, go-to-market operations, and engaging content.

“Marketing is how you connect your brand proposition, your go-to-market operations and your content to engage with the consumer... It’s all about driving consumer connectivity and the process and operations you take to get there.”
— Chris Davis [04:08]

2. Brand as a Person

Timestamp: [05:22]

Davis introduces a compelling metaphor by likening a brand to a person. He explains that a brand embodies personality, values, heritage, and future aspirations, differentiating it from competitors and fostering emotional connections with consumers.

“A brand is a person first and foremost. It’s a character, and it’s the identity and truth of an organization... what differentiates you in the marketplace.”
— Chris Davis [05:22]

Despite initial skepticism from Matlins, Davis clarifies that viewing a brand as a person helps maintain consistent dialogue and authentic representation, ensuring that the brand remains relatable and trustworthy.

3. Challenges of Being a CMO

Timestamp: [08:55]

When asked about the hardest part of being a CMO, Davis cites maintaining consistency and clarity in brand messaging. He likens inconsistent brand behavior to a friend acting out of character, which can damage brand integrity.

“The hardest part of a CMO is definitely driving consistency and clarity. Ensuring that our brand's personality and identity are clearly communicated uniformly and replicably.”
— Chris Davis [08:55]

4. Challenges of Being a CEO

Timestamp: [11:47]

Davis discusses the CEO’s toughest challenge: balancing immediate commercial returns with long-term brand vision. In global companies, this balancing act extends to aligning local commercial needs with overarching brand objectives.

“The hardest part about being a CEO is balancing the present and the future, the commercial return that's needed in the present, and establishing a brand foundation and brand vision into the future.”
— Chris Davis [11:47]

5. Misunderstandings About Marketing in the C-suite

Timestamp: [14:06]

Davis highlights a prevalent misconception: the expectation of immediate commercial return from marketing initiatives. He stresses that building brand identity and consumer connections is a gradual process that doesn’t yield instant results.

“The misunderstanding is that an immediate campaign will generate instant commercial return. It takes time to establish a brand cadence, identity, and proposition.”
— Chris Davis [14:06]

6. Growth Through New Consumers and Emotional Connection

Timestamp: [15:24]

Chris Davis underscores that brands grow by attracting new consumers who connect emotionally with the brand’s unique proposition. This connection drives awareness and loyalty, essential for sustained growth.

“Brands and businesses grow when new consumers are coming into the brand and they're understanding the brand's unique proposition and connecting with the brand on an emotional level.”
— Chris Davis [15:24]

He further explains that emotional engagement is crucial across all categories, whether the product is a necessity like motor oil or a luxury item like stylish shoes.

7. The Importance of Innovation and Avoiding Stagnation

Timestamp: [17:32]

Davis warns against stagnation, asserting that brands must innovate and evolve to avoid being disrupted. He cites examples like Uber disrupting the taxi industry to illustrate the consequences of complacency.

“Brands don’t grow when they don’t innovate, take risks, or evolve. Stagnation leads to disruption.”
— Chris Davis [17:32]

8. Relationship Between Product/Service and Brand

Timestamp: [31:31]

Davis advocates for an integrated approach where product and brand are inseparable. He argues that every consumer interaction with a product reflects back on the brand, emphasizing that quality and brand experience must align seamlessly.

“The relationship between product, service, and brand is one and the same. They are the consumer touchpoints, and the consumer judges the brand based on these experiences.”
— Chris Davis [31:31]

9. 50/30/20 Budget Allocation Model

Timestamp: [42:39]

A significant portion of the discussion revolves around the 50/30/20 model developed by New Balance under Davis’s leadership:

• 50% Proven Tactics: Allocated to strategies that have demonstrated success.
• 30% Calculated Risk Tactics: Invested in innovative approaches that have succeeded in other industries but are new to theirs.
• 20% Experimental Tactics: Reserved for high-risk initiatives with a high probability of failure but potential for substantial rewards.

“50% of our budget is rooted in proven tactics. 30% is calculated risk-based tactics that could work in a different industry. 20% is experimental with a high probability of failure.”
— Chris Davis [42:39]

Example: Davis cites the creation of themed pubs where customers can exchange Strava miles for pints as a 20% experimental tactic. This initiative fostered community engagement and was later scaled to 30% and incorporated into 50% of the budget after proving successful.

10. Brands, Businesses, and Culture

Timestamp: [37:55]

Davis elaborates on the symbiotic relationship between brands and culture. He explains that by staying culturally relevant and authentically representing the brand’s core values, companies can drive commercial success and foster long-term loyalty.

“Culture is a pillar of commercialization. Earned media and earned impressions are invaluable and stem from taking risks and innovating.”
— Chris Davis [38:32]

He emphasizes that aligning brand truth with cultural moments ensures that products remain relevant and resonate with contemporary audiences.

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Notable Quotes with Timestamps

• On Marketing’s Role:
  “Marketing is how you connect your brand proposition, your go-to-market operations and your content to engage with the consumer... It’s all about driving consumer connectivity and the process and operations you take to get there.”
  — Chris Davis [04:08]

• On Brand as a Person:
  “A brand is a person first and foremost. It’s a character, and it’s the identity and truth of an organization... what differentiates you in the marketplace.”
  — Chris Davis [05:22]

• On CMO Challenges:
  “The hardest part of a CMO is definitely driving consistency and clarity. Ensuring that our brand's personality and identity are clearly communicated uniformly and replicably.”
  — *Chris Davis [08:55]

• On CEO Challenges:
  “The hardest part about being a CEO is balancing the present and the future, the commercial return that's needed in the present, and establishing a brand foundation and brand vision into the future.”
  — *Chris Davis [11:47]

• On Misunderstood Marketing Expectations:
  “The misunderstanding is that an immediate campaign will generate instant commercial return. It takes time to establish a brand cadence, identity, and proposition.”
  — *Chris Davis [14:06]

• On Brand Growth:
  “Brands and businesses grow when new consumers are coming into the brand and they're understanding the brand's unique proposition and connecting with the brand on an emotional level.”
  — *Chris Davis [15:24]

• On Innovation:
  “Brands don’t grow when they don’t innovate, take risks, or evolve. Stagnation leads to disruption.”
  — *Chris Davis [17:32]

• On Product and Brand Integration:
  “The relationship between product, service, and brand is one and the same. They are the consumer touchpoints, and the consumer judges the brand based on these experiences.”
  — *Chris Davis [31:31]

• On the 50/30/20 Model:
  “50% of our budget is rooted in proven tactics. 30% is calculated risk-based tactics that could work in a different industry. 20% is experimental with a high probability of failure.”
  — *Chris Davis [42:39]

• On Cultural Relevance:
  “Culture is a pillar of commercialization. Earned media and earned impressions are invaluable and stem from taking risks and innovating.”
  — *Chris Davis [38:32]

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Conclusion

This episode offers profound insights into how executive leaders can harness marketing as a strategic tool for growth. Chris Davis’s experiences at New Balance elucidate the importance of strategic budget allocation, consistent brand messaging, and cultural relevance. By adopting models like 50/30/20, brands can navigate the delicate balance between proven strategies and innovative risks, ensuring sustained growth and competitive advantage. For CEOs and C-suite executives, the conversation underscores the necessity of elevating marketing literacy to optimize resource allocation and drive long-term stakeholder value.

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Key Takeaways

1. Marketing as Strategy: Marketing should be viewed as a strategic process that connects brand propositions with consumer engagement, rather than just a promotional tool.

2. Brand Consistency: Maintaining a consistent and clear brand identity is crucial for building trust and differentiating from competitors.

3. Balancing Short and Long-Term Goals: Executives must navigate the tension between immediate commercial returns and long-term brand vision.

4. Innovation is Essential: Brands must continuously innovate and take calculated risks to stay relevant and avoid stagnation.

5. Integrated Product and Brand Experience: Product quality and brand experience should be seamlessly integrated to ensure cohesive consumer perceptions.

6. Strategic Budget Allocation: The 50/30/20 model provides a balanced approach to budgeting, allowing for both stability and innovation.

7. Cultural Relevance Drives Growth: Aligning brand strategies with cultural trends and consumer behaviors fosters deeper emotional connections and drives commercial success.

By embracing these principles, leaders can enhance their organizations' marketing efficacy, ultimately driving sustainable growth and creating substantial stakeholder value.

Transcript

[Seth Matlins]

Today's show has been brought to you by rokt. Today's customers are overwhelmed by choice, and when people are overwhelmed, they freeze and you miss out on the opportunity to drive more revenue. That's where Rokt R O K T steps in. Trusted by over 17,000 of the world's leading brands and advertisers, Rokt enables companies to unlock value by transforming the e commerce experience, helping drive incremental sales and boosting profits up to 40%. ROKT makes each and every transaction relevant at the moment that matters most when customers are buying. Go to rokt.comforbes to learn more about Rokt where Relevance rules welcome to the CEO's Guide to Marketing. I'm Seth Matlins and I've spent a career in marketing both in and advising the C Suite, and I'm now the Managing Director of the Forbes CMO Network. So there's data showing that if I were taller, I'd have a much better shot at becoming CEO of a major company. Which makes me wonder how different things could be if my mom hadn't been 5:2. More relevantly, there's also data showing that if I were the CEO of a major company, I'd be one of only 10% with any marketing background whatsoever, as fully 90% of the CEOs of the world's largest companies have none. Which in turn makes me wonder how much more stakeholder value could be created and enterprise growth driven if more did. If more of them understood how marketing works, how it doesn't, what to expect and what not to, and on what timeline, but because they don't have the experience and often don't understand, despite sometimes thinking they do Too often, today's CEOs and CFOs are suboptimal stewards of the resources given to CMOs in order to help them drive sustainable, profitable growth. Obviously this serves no one and no company, but it does create the opportunity and obligation to increase the C Suite's marketing literacy. Which brings me to this podcast. In service of creating more growth and stakeholder value through a series of candid and connected conversations, we're hoping to raise the C Suite's marketing IQ and ensure CMOs are best positioned to do their jobs, which is to create and capture the demand that drives growth and value. With that, let's get into it. So the late, great Charlie Munger, long Warren Buffett's partner at Berkshire Hathaway, described a strong brand as a strategic moat protecting and defending a business from competition and change and serving as a huge driver of value creation in margin. Even if he hadn't been one of history's most successful investors, I couldn't agree more. And yet, still too many in the C suite don't understand brand's role in this and in driving performance. So today I'm talking with Chris Davis, Brand President and Chief Marketing Officer at New Balance Athletics. Chris started working at New Balance in 2008 and has been a member of the senior leadership team since 2016. Chris is responsible for New Balance's product and demand creation initiatives and commercial strategies around the world. In 2022, he was named to the Forbes Entrepreneurial CM50 list. And in both 2023 and 24, he was named to the Forbes World's most Influential CMOS list. I wanted to talk with him not just because Chris is likely to be the family owned private company CEO, but because as a marketer, he's acutely aware that he's not just a brand leader, but a commercial one. Welcome to the show, Chris.

[Chris Davis]

Thanks for having me, Seth. It's always a pleasure.

[Seth Matlins]

It is, isn't it? You and I talk about a lot of this with some frequency. But before we get into kind of your perspective, the CEO and the broader C suite may not understand about marketing, but absolutely needs to better understand about marketing to ensure that it is optimized as an engine of growth. As you know, we start each episode of the CEOs Guide asking everybody who joins us the same 10 questions. And it's 10 questions in five minutes or less. You get to fill in the blanks. And we do this because we're super interested in where there's commonality and where there's difference in the answers that we get. You ready?

[Chris Davis]

I'm ready.

[Seth Matlins]

All right, first question.

[Chris Davis]

Marketing is more than anything I would say marketing is all about the strategy. It's the operations and the mechanics of how you want to acquire your target consumer. It's more of a process than an art. And it's ultimately to me, marketing is how you connect your brand proposition, your go to market operations and your content to engage with the consumer, to start thinking about your brand, becoming aware of your brand or purchasing your brand through the eyes and the lens that you want to. It's all about driving consumer connectivity and the process and operations you take to get there.

[Seth Matlins]

All right, well, let me ask you a question. Just because I want to make sure those who may not understand understand you use the phrase go to market oper. What do you mean by that? For our C suite friends who may not understand the distinction and definition of.

[Chris Davis]

Same Connecting your product to your brand in a relevant way and driving a consumer experience that enables your product to be sold.

[Seth Matlins]

All right, with that second question, A brand is.

[Chris Davis]

A brand is a person. I think a brand is a person first and foremost. It's a character, and it's the identity and truth of an organization. It's why you exist. It's your promise. It's your personality, it's your history, it's your heritage. Heritage. It's your future. It's. It's what differentiate differentiates you in the marketplace from not only your competition, but from all the other brands in the world. It's visual, it's intrinsic. It's essentially the inspiration why you exist.

[Seth Matlins]

As when you say a brand is a person who's new balance, then new.

[Chris Davis]

Balance is new balance, meaning a brand has a personality. A brand has values, it has behaviors, it has aesthetics. And as marketers, as branders, it's our responsibility to bring that brand to life in a way that's authentic, true, and honest to what the brand represents. So you think of a brand as a person. It's the brand's character. It's not necessarily assigning a brand to a person in real life. It's making that brand become a person in real life.

[Seth Matlins]

And when you say person, is there a distinction in your mind between person and Persona? Which is because I've never heard a brand defined as a person before. I think it's interesting now, honestly, I'm not entirely sure I agree. Which is to say, I think you could walk down the street and look at different people and say they reflect the brand, and they do not. But a brand as a person is a curious point of view to me. Say a little bit more about it.

[Chris Davis]

And we talk about this a lot, Seth, but the way that we believe the best way to come to market for a brand is through an autobiographical approach. So we use every opportunity as a brand, through our content, through our activations, to communicate who we are, to introduce ourselves to new consumers and to reintroduce ourselves to existing consumers.

[Seth Matlins]

That's the marketing piece as much, right? Which is, say, that's the go to market. That's how you present your brand in the world as opposed to what the brand is.

[Chris Davis]

A brand has to have a personality, and your marketing has to bring that personality to life. So if you look at a brand as a person or as a character, you're communicating who you are, what you represent, how you're different, and what your personality is. So to me, every brand has a personality. Every brand is a person. And it's our responsibility as brand stewards to communicate what that is. And that can encapsulate product or encapsulate our identity, our image, our unique differentiation in the world. But we have to be able to communicate what we represent. And that's why I think if you say a brand's a person, it keeps it simple because you're maintaining consistent dialog and you're communicating how you're different from everybody else.

[Seth Matlins]

Yeah, yeah, it's interesting. We're going to get into this in a little bit, but brand seems to be so wildly misunderstood. The efficacy of brand, the value of brand seems to be so wildly misunderstood and underestimated in today's C suite. But we'll save that for. For later. All right. Third, the hardest part of being a.

[Chris Davis]

CMO is aside from people management and being a cultural caretaker of the brand, I would say the hardest part of a CMO is definitely driving consistency and clarity. Brand accretive consistency specifically. And if we go back to the idea of a brand being a person, it's our job to eliminate out of character, erratic behavior. I think that's what cripples a brand. Ensuring that our organization, our people, our consumer are bought into our unique proposition. And that takes an incredible amount of discipline. So if you have a friend and this friend is acting in a way that's inconsistent to how they usually act, it's kind of off brand for your friend. As a marketer, we have to make sure that our brand's personality and identity are clearly communicated uniformly and replicably in order to have that level of consistency.

[Seth Matlins]

All right, we're totally punching the five minute ethos in the face here. Some of that's my fault, so don't take it on yourself. But these are big questions.

[Chris Davis]

These are big questions. So.

[Seth Matlins]

What'S so hard about consistency?

[Chris Davis]

A few things. I think the harder so the larger a brand scales, the more initiatives, prerogatives, and objectives that brand has, primarily from a commercial standpoint. And oftentimes consistencies and goals can be eliminated or superseded by commercial needs. And it forces brands to act in ways that aren't necessarily consistent with the brand's values or proposition.

[Seth Matlins]

So wait, I'm sorry, rewind just a second. Just so I understand. What is it that forces brands to operate in ways that may not be consistent?

[Chris Davis]

The desire to attain commercial return.

[Seth Matlins]

Ah, I see, I see, I see. So, okay, okay. Interesting, right? It reminds me of that roomy quote that, that I shared with you recently, which is the art of knowing is knowing what not to do. And I'd actually offer that sometimes the hardest part of being a CMO is knowing where to focus on and how to focus on what matters most rather than what matters a lot. But let me ask you a question. Besides the fact that you're a brilliant marketer, one of the reasons we wanted you to be a part of these first episodes of the podcast is you've got a CEO's perspective and point of view. And even though your title isn't CEO, some responsibility to the business, because of course, yours is a family owned business. So let me ask you the fourth question, which is what's the hardest part of being a CEO?

[Chris Davis]

To me, the hardest part about being a CEO is balancing the present and the future, the commercial return that's needed in the present, and establishing a brand foundation and brand vision into the future. And I would take that one click down and I would say in global companies, the hardest part of a CEO is balancing local commercial needs with the global brand vision. And either way you look at it, both of these things are juxtapositions that don't seamlessly coexist.

[Seth Matlins]

Yeah.

[Chris Davis]

And as a CMO wearing a CEO brand President hat, CMOs have to understand that they need to build flexibility and urgency into their process without degrading a brand's mission. And I think that's oftentimes where the conflict between the CMO and the rest of the C suite occurs. The inability to understand immediate commercial return or local commercial needs with a global brand vision.

[Seth Matlins]

You know, it's interesting because I was going to go to a similar place, which is in your definition of the hardest part of being a CEO, which is balancing the commercial imperative of today and tomorrow, if you will. Short and long term is of course, I think one of the hardest challenges for today cmo, which is a CEO who doesn't understand the relationship between the short and long term. And that focusing singularly on this quarter and next quarter can do great harm to two quarters out from there. And that the long term efficacy does have near term, long term efforts do in fact lead to near term commercial returns. Okay, we got to go quicker because there's so much to get into and it's my fault. Again, it's going to happen. All right, question five. Speaking across the landscape and not just about new balance, not just about your category, but from your perspective, if you could wave the proverbial magic wand and wand and immediately address any one C suite misunderstanding about marketing and marketers, what would it be?

[Chris Davis]

That it takes time. It takes Time.

[Seth Matlins]

And if so, I'm sorry, but just to bring a little focus to the answer, the misunderstanding is what?

[Chris Davis]

The misunderstanding is that if an immediate campaign or initiative comes out that there will be commercial return instantaneously and it's establishing a dialogue. It's not just a short term influx of commercial return based on spend. It takes time to establish a brand cadence, brand identity and brand proposition. And I think that's the biggest misconception between commercial leaders and brand leaders is that an influx in spend will not always and very seldomly generate immediate commercial return. And that's when, that's when you get off of marketing because it doesn't work within a week, a month, or even a quarter, or even a year.

[Seth Matlins]

Which, which reminds me of the Friends theme song which I thought you were going to quote. But, but. All right, give me a few word answer to Brands and businesses grow when.

[Chris Davis]

When new consumers are coming into the brand. I'm sorry, Brandon. Brand and businesses grow when new consumers are coming into the brand and they're understanding the brand's unique proposition and connecting with the brand on an emotional level.

[Seth Matlins]

Is that true for, from your perspective, for a category like motor oil or toilet tissue or you know, does, does every category, does any category have the potential to avail itself of, of emotion as a commercial driver, as a commercial lover?

[Chris Davis]

Yes, I, I, I firmly believe that. And I think bringing new consumers into your brand is the only way that you can grow. And how you can bring new consumers into brand is how you bring your new unique brand proposition to life. And if you think about all the content that we consume on a daily basis, it's all stories, right? What would life be without narratives? What would it be without news? What would it be without updates? And communications from a brand is no different. Like, you watch shows, you watch the news. Like these are all stories I just put in Friends. Yep, exactly. Exactly. So a brand grows when you're bringing new consumers into the brand. And the only way that you can bring new consumers into the brand consistently and from a foundational standpoint is by communicating your brand proposition in a relevant way. And that can be, that could be through a need like toilet paper or motor oil, or it could be through a want, like a stylish pair of shoes. But you need to bring them into the brand and you need to communicate what that proposition is.

[Seth Matlins]

All right, so this question may seem like it just begs for the antithesis of what you said, but we've really gotten a variety of different answers, different structures to the answer for this. So if that's how brands and businesses grow. Brands and businesses don't grow. When, how do you fill in that blank?

[Chris Davis]

When they don't innovate, when they don't take risk, when they don't evolve. One of the core pillars that we use internally is that the death of all major brands in sports, retail and fashion lies in the notion of stagnation. So you can think of department store chains as a prime example. But if you aren't evolving your business model and you don't have the courage to take risk and disrupt yourself, you ultimately will become disrupted. You could look at Uber and taxis, but you have to be able to have the courage to move on and not be complacent with where you are today. And I think that's what fails growth within brands.

[Seth Matlins]

Do you think that the C Suite understands? And again, I'm painting the C suite with a broad brush. But do you think they understand broadly that innovation isn't just a technological innovation construct? Right. That innovation is in, you know, multi, in a multidisciplinary can, can express itself across the breadth and depth of an organization?

[Chris Davis]

I think it's hard to understand that. I think it's hard to understand that. But I think that's where a lot of marketers fall down by not creating clear KPIs and metrics to judge the effectiveness of the brand on. And I think that's where a lot of CEOs and CFOs fall down by not asking the right questions. So it's hard. But I think both functions or both roles need to take greater accountability on providing that clarity and understanding and defining what success looks like for a brand.

[Seth Matlins]

The following segment features paid content from Rokt. Doug From Rokt's perspective, what's the C Suite need to better understand about unlocking revenue?

[Doug]

Today, all businesses are under pressure to unlock more revenue opportunities, be it launching media networks or forming new partnerships, diversifying their product mixes. And some are doing this through some really creative one off campaigns. But the question is, is this enduring.

[Seth Matlins]

And is it enough?

[Doug]

Yeah. And one of the most impactful ways to unlock ongoing revenue is, is during the transaction moment.

[Seth Matlins]

What for our audience is the transaction moment.

[Doug]

It's from cart where you have upsells to payments, where you can drive different offers to confirmation, where you can unlock things that delight customers. And in E commerce, it's where we found that profits can be boosted by up to 40%. Imagine that amplifying not just revenue but profit up to 40%. And you unlock this by making each transaction Relevant at the moment that matters most when, when customers are buying.

[Seth Matlins]

To learn more, go to ROKT. That's R O-K-T.com backslash Forbes. That's ROKT. R O-K T.com backslash Forbes. Now back to our program.

You brought up something I think is super important, right? Which is CEOs, CFOs and others who either oversee the allocation of resources given to a marketing organization or collaborate with the marketing organization should be asking the right questions. But they don't in fact know what the right questions are because so few of them come from marketing. Right. How, how, how might we address that? Like, are there, are there central questions that you think a CEO, cfo, whomever should be asking of their CMO at the big picture level, I would reverse.

[Chris Davis]

That and I would put the accountability on the CMO to ensure that the metrics and the objectives of the brand are clear and demonstrate how the brand objectives directly correlate to commercial return into the future. A prime example that's, that's easy for everyone to understand is Google Search Index and Google Search. Google Search Index is the leading indicator for commercial return in B2C brands. And we've seen growth in Google Search.

[Seth Matlins]

Just for our audience. Chris, why is that?

[Chris Davis]

It demonstrates the first call to action in considering a brand and understanding if this content is connecting to me. Meaning I don't think there's any greater sign of effectiveness of content than a consumer pulling out their phone typing your brand's name into Google because a billboard, a commercial, a social clip ignited curiosity in what that brand represents. So typing New Balance into Google, first call to action, going to new balance.com second call to action. And what we've seen is spikes in Google search have an 18 month leading indication on commercial return. So if you.

[Seth Matlins]

So obviously it's, it's a. I'm assuming I shouldn't say obviously, I'm assuming it's a little different for B2B brands, professional service brands.

[Chris Davis]

I would, I would assume so as well. However, there's still that call to action. There's still that sense of awareness and then there's still that curiosity that's inspiring consideration. And what we can ask for consumers is action and engagement. And sometimes that action will be typing your brand name into Google. Sometimes we'll be going into a store, sometimes we'll be purchasing a product. But there's a red thread through all of that that needs to be understood. You're never going to go from not being aware to purchasing. You have to have a journey that has certain metrics and engagements along that journey that will ultimately lead to one purchase, then repeat purchase, then lifetime value.

[Seth Matlins]

I understand that of course academically, and of course academically you're right. But again, same question I asked about toilet tissue and motor oil and B2B, right? That funnel has collapsed, right? That kind of once linear awareness, understanding, familiarity, trial purchase, repeat purchase construct that really was the funnel for the CPG world forever has collapsed. And I'm wondering if we still market to that or use it as a construct to understand kind of the mental, conscious or subconscious journey that somebody has to take from never having heard of us to wanting to bring us into their lives, whether that's personal or professional.

[Chris Davis]

I think that's where the qualitative and the quantitative get married though, right? The art and the science. Because the construct that we were just talking about was science. The science only works if the art works as well. Meaning it has to. Your product has to be desirable, your brand has to be engaging. And those are, that's like, I, I.

[Seth Matlins]

Mean, as you know, I'm like, I literally have a brand tattoo on my arm, right. I, I have, I, I am a brand marketer through and through. But is that a threshold that every category needs to, to kind of asp. Aspiring to it is fine, but expect. Which is do I really need to find a massive consultancy or again, motor oil engaging and desirable or do I just need to know it works?

[Chris Davis]

It goes back to that. Some brands are a need, some brands are a want.

[Seth Matlins]

Right. And sometimes it's hard to differentiate between the two. Luxury being a perfect, perfect example.

[Chris Davis]

Exactly. But no matter what, in the brands that you need, there is going to be multiple of them that you can choose from. Why are you choosing them?

[Seth Matlins]

Yeah.

[Chris Davis]

Right. And that's.

[Seth Matlins]

Let me ask you, let me, let me ask. Drill down a little bit. And I'm sorry to interrupt, but in the products and service categories that you need, there will be multiple brands. Back to your. One of your first comments. A brand becomes a lever to differentiate between and decide between good enough options. Is that right?

[Chris Davis]

Absolutely. Yeah, absolutely. And like going back to motor oil, there is an emotional connectivity there. There is, there's an aspiration there. Because if I'm a motor oil company and I have a partnership with an F1 team or a NASCAR team, and I'm serving the best of the best on the world's biggest stages, that's a point of differentiation to me than a white label or house label motor oil brand that doesn't have a unique proposition. So it's combining the wants.

[Seth Matlins]

So funny. I do find myself, I don't know if I'm finding myself disagreeing with you, but certainly kind of trying to find the exceptions in the rules. Which is to say, and interestingly and to your very fair point, motor oil is probably a suboptimal example because it can be wrapped in a very rich emotional territory. And the differentiation is, as you point out, between kind of a. I don't know if there's a store brand motor oil or an F1 brand motor oil. But to your point. But that's really just about association, right? I don't know, maybe there are. I am not a gearhead, I'm not a car head, I'm not a motor oil head. But feels like for the casual user. And going back to your earlier point about brands and businesses grow and they bring in new users, I'm never going to know the difference between two motor oil products. I'm just not. But I need motor oil occasionally. What then is from your perspective, why I choose Valvoline over another? And by the way, Valvoline can reach out for sponsorship of the pot if they'd like. We seem to be, we seem to be giving the category a lot of play.

[Chris Davis]

Well, I think, look, you're either a price conscious consumer that's going to go with the lowest price and there's always going to be a lower price. That's a fact.

[Seth Matlins]

Yeah, it's the Jeff Bezos line. Right. Your margin is my opportunity.

[Chris Davis]

Exactly. And I do firmly believe that cultural relevance is the foundational pillar to commercialization.

[Seth Matlins]

I want to stick a pin in that because I really want to focus on it. But having now gone from 10 questions in 5 minutes to 10 questions and give or take 20, let's finish these and then I want to get right into where you were. Is that okay?

[Chris Davis]

Perfect.

[Seth Matlins]

All right. I'm actually going to. Since we've, since we've blown the construct, I'm going to skip number eight, which is a conversation about where competitive advantage comes from, because we're going to get into that in more depth. So I'm going to go to questions nine and ten. Super quick answers. I promise not to interrupt you measure.

[Chris Davis]

For true incrementality by incrementality is by engagement and sales.

[Seth Matlins]

How do you measure for the incremental sale rather than the sale that would have been there if you hadn't done anything?

[Chris Davis]

That's a great question. And I guess you won't know if the sale would have been there if you hadn't done anything. Anything. I think, I don't think that's something that you can bank on. Right. Like the reason why I think incrementality with engagement is important is because it's a two way conversation. Engagement is a two way conversation. It's a dialogue. And I don't think that you can increase your sales without increasing your dialogue. So if your dialogue diminishes, you may still have sales that you would have had, but, but you wouldn't be sure unless you had that conversation ongoing.

[Seth Matlins]

Have you ever gone media dark in a given market or done the marketing regression analysis, which is you remove variable X from market Y to see how it differs than market Z to see what really is triggering sales and kind of really driving commercial returns?

[Chris Davis]

Not so much. I mean we do during cultural moments where it's appropriate to go dark. But so much of what we do is driven globally and like acting globally, thinking locally, vice versa. So if what we're putting out in the world isn't globally connected, then we probably wouldn't do it. So we don't go dark in certain markets and we've never done a regression analysis. But that's a good point.

[Seth Matlins]

You know what, I want to ask the last question then with the time we have left, get into, you know, open the aperture on a few things you've already shared with us. So the last question is the relationship between product or service and brand.

[Chris Davis]

Is the relationship between product, service and brand is, is one in the same? I think it's one in the same.

[Seth Matlins]

Scrapable.

[Chris Davis]

It is, it's their, their consumer touch points. And however your brand or your product is out in the world, the consumer is going to judge you for that equally. So whether you have a poor product experience or a great brand experience, that's still part of your overarching brand. So I don't think they can be decoupled. I think they have to be looked at one in the same.

[Seth Matlins]

I completely agree with you and I think one of the things that's so interesting is that we have seen that decoupling of product and brand, service and brand over the last 20 odd years, right? They used to be inextricably linked. Now and this is a perfect segue into the question I wanted to ask you next. Now, a lot of organizations, enterprise wide, not marketing organ, not just marketing organizations, have become so disaggregated, right. Have become so specialized that they don't in fact connect. Right? And they aren't built, you know, bridges aren't built between expertise to ensure the integration and focus of that enterprise on growth. So let me, let me, having said that, let me ask from, from your, your perspective, what, and again, speaking broadly, what does the CEO, the cfo, the C suite need to understand about how marketing should fit, needs to fit, must fit into an organization's multidisciplinary assets? Because I don't think you're seeing, not you, I don't think we're seeing a lot of it done well from org design and it's getting in the way of growth.

[Chris Davis]

And I think I'm answering, I think I'm going to answer your question here. But branding and marketing have to be looked at horizontally and vertically. Vertically meaning driving specific categories, specific products or specific functions. Horizontally driving the entirety of what the brand represents to the consumer. And oftentimes from a P and L standpoint, we get overly fixated on the vertical component of marketing. However, I firmly believe that the vertical component of marketing can only exist and only be relevant if the horizontal strength of marketing uplifting the entirety of the brand is also strong. So there's certainly a balance there. But then I would bring it back to the brand leaders and back to the marketing leaders on unsure to ensure that these metrics of brand strength, brand engagement, brand sentiments, brand search are understood in order to ensure that the brand is top of mind as a brand, so that the categories can then be commercialized through vertical specific marketing tactics.

[Seth Matlins]

You know, it's interesting, I do agree with everything you've said, but one of the things I think is interesting, where I thought you were going when you first framed it, is the horizontality. And the verticality is the horizontality across an enterprise, which is I would offer, and I'm wondering what you think of this, that today's chief executive is in fact the brand manager. And too many a CEO, too many a cfo, too many a customer service representative or a sales associate at physical retail do not understand they are representing the brand with everything they do and don't do in the moment of interaction with a customer or potential customer.

[Chris Davis]

Exactly. It's holistic. Like the idea of a CEO being a general manager, a general brand manager has to be true. They're not a commercial leader, they're not an operational leader, they're not a brand leader. They're all of those things. And there needs to be a red thread between all of those things. And that's where the horizontal horizontality comes in.

[Seth Matlins]

Yeah, I was, I was worried for a second when you said they're not a commercial leader before. You said they're all of those things. Why do you think, like, do you have a point of view and opinion, a hypothesis about why? Speaking broadly, again, so much of marketing has been divorced from the commercial returns. It's always been intended to drive. Like what, what happened?

[Chris Davis]

I'm not quite sure. Marketing and branding needs to drive market share gains, it needs to drive sales. But that's the end of the equation. If you're telling the right stories, if you have the right product, it's a consequence, then it, then it, then it, then it comes to life. And I'm not really quite sure where that was lost or how it got lost, but I would say in the organizations that we deem most successful, there's a direct correlation and connectivity between the brand marketing teams and the sales outcomes.

[Seth Matlins]

You obviously at New Balance are. I shouldn't say obviously, but at New Balance you're in a category and in a category leadership position now, where there's a bit of an absolutely understandable, inextricable link between brand and commercial outcome in a way that other categories where the label may be less a statement, the trademark less a statement, and is less overt on the product. You know what, I kind of lost my own question. But you know, I guess I'm just going back to kind of the relationship between brand and commercial return. And as you look at kind of the transformation you've helped drive at New Balance over the last six, what, six or seven years, where the brand has gone from whatever it was, which is 100. How old is it now?

[Chris Davis]

116 years.

[Seth Matlins]

Okay, so it's at 110 years. The brand was not in the position that it is at 116 years. You've driven a remarkable elevation which has driven remarkable commercial returns. You talked earlier about the role of cultural resonance and relevance in that ascension and in those returns. What's your perspective on the relationship between brands, businesses and culture in today's world?

[Chris Davis]

So that's a loaded question. It's a big one. And the way that we did it was if you take the idea of transforming a great product company to a world class brand, that's a hard distinction. A company is an entity that sells things. A brand is a company with a personality, a point of differentiation, like a reason for being a unique proposition that has commercial return based on what the brand's differentiation is. And for us it was about creating these like very clear north stars that revealed the intrinsic brand truth of New Balance's proposition. So what were those things and how did everything come back to them? One of them was being the most premium boutique athletic brand in the world. The other one was.

[Seth Matlins]

Can I interrupt you? I'm so sorry. But it's so interesting, I think, for our listeners to hear a global brand define kind of maybe aspirations, not the right word, but as a. Define itself as a boutique. Right. Why didn't you want to be the biggest?

[Chris Davis]

It hasn't. It's never been part of our brand journey is not who we've ever been. Our goal has never been to be the biggest. It's always been to be the best. Even in the 70s, in the 60s, it was about revealing our brand truth and going back to a brand, being a person. Because I'll disagree with you here again, because I think a brand is a person. You can't fake it. You can't fake who you are or else you'll ultimately be found out. So our brand transformation was really rooted in revealing the brand truth of what enabled New Balance to be successful for the first 110 years of our existence. And these core attributes and these core characteristics were going to be the catalyst of what fueled growth next. And that can only be like embracing who you are. So it was being the best, not the biggest. It was being the most premium boutique athletic brand in the world. And it was being the ultimate challenger brand. And everything that we do has to drive back into that brand identity because if we have that inconsistency which we discussed before, then our, then our communications and our personality becomes erratic and people can see through that.

[Seth Matlins]

Right? Right. Let me just, because we're getting on to time, I want to lean into the challenger construct for a second, which is a lot of people think, a lot of marketers think being a challenger brand is challenging a who, which is sometimes correct, but also it can be, and more often than not challenging a what. Right. So it doesn't have to be focused on direct competition or even indirect competition within a category or an industry, but a mindset, a belief and attitude that you have to overcome. You have, since you took over marketing for the company, you have embraced that challenger mindset. And you know, I wouldn't let you go without talking about how you allocate demand gen resources. And you know, I'll just shorthand it so you know what I'm talking about. And then you can open it up for the audience, your 50, 30, 20 allocation model. And I'd love for you to explain that to the audience because I think it is both emblematic of a challenger mindset and at the same time a leadership stance and ties it Back to where we were, what we were talking about earlier with regard to innovation. So the audience now has no idea what I'm talking about. Will you make it clear for them?

[Chris Davis]

Sure. And it comes back to what you're saying about being inwardly focused. In order to be a challenger brand, you have to create a culture of calculated risk excellence. However, individuals are inherently risk averse. So you can't be a leader and just say we have to make ourselves feel uncomfortable, we have to be disruptive. We have to take calculated risk. Knowing that growth and comfort are two concepts that can never coexist. We had to ensure that our infrastructure, our budget and our resource allocation was conducive to calculated risk taking or else no one would take any risk. So 50% of our budget is rooted in proven tactics. 30% is calculated risk based tactics that could have worked in a different industry that our industry had not yet adopted. 20%.

[Seth Matlins]

I'm sorry, before you get to the actually finish the 20 and then I want to go back to the 30.

[Chris Davis]

Sure. And then 20% is experimental with a high probability of failure. If something works in the 20% once, it then moves into the 30%. If it works in the 30% a couple of times it then moves into the 50%. So we have a high, we have this like self fulfilling prophecy of innovation. And the best thing is if, if, if a 20% tactics doesn't work, if it fizzles, there's no repercussions. The only repercussions, Russia is not driving a 20% tactic.

[Seth Matlins]

I want to get back to that, but can you give us a quick example of a 30% of something you allocated part of the 30% to where it was working in another category but perhaps hadn't been embraced by yours.

[Chris Davis]

I think a great example was probably a few years back, I'll say three or four years ago were gaming in esports rose to prominence rapidly alongside sport betting and gaming. And esports was not something that our industry had adopted as a culturally relevant tactic to our consumers and integrating real sports with fantastical sports. So developing a gaming strategy that we had seen work within other CPG categories and sports team categories is something that we quickly adopted and did our own way. But at that point in time, none of the other brands within our industry were adopting gaming tactics.

[Seth Matlins]

Perfect example and a perfect example of thinking about your audience first and then the relationship to product and or service. I'm wondering if you can give us an example of something inside the 20% that moved into the 30.

[Chris Davis]

My favorite example of 20% tactic that was instituted a few years ago at London Marathon. London Marathon is a globally renowned race that New Balance has a long term partnership with. We were trying to figure out a way that we could disruptively connect to authentic local London culture with runners. And we decided to open a pub in the center heart of London that the only way that you could pay for pints was exchanging 10 Strava miles for one pint. So imagine this from an HR legal and finance standpoint. So one, you're opening a bar with alcohol.

[Seth Matlins]

Two, and this was a New Balance themed bar, a branded bar.

[Chris Davis]

Yeah, it was the New Balance miles pub. And the second thing is you're taking out a significant real estate lease with zero product commercial return. Third, we've never had a liquor license attached to our brand name and the legal process of how that ensued is complicated. So you're involving alcohol, rent and legal implications with no commercial return. But what ended up happening was we created this amazing, unique experience that connected our brand to the local consumer in London. But New Balance was the only company that could bring people together that loved beer, loved running, and shared stories about their Strava miles and exchanging 10 miles for a pint. So we cultivated this like really interesting community in the center of London around runners that only New Balance could bring together. And then that then moved into the 30% bucket for the New York City Marathon. We did the same thing with pints and pizza. So that quickly became a 30% tactic and then it's now part of our 50% initiative. Exchanging Strava miles for entertainment.

[Seth Matlins]

So you used the word only and you said only New Balance could do it. Why couldn't another? Why couldn't Nike or Adidas do that? Or is only sometimes just about, in fact being first and having the courage to be first and do what's different?

[Chris Davis]

Exactly that. Exactly the latter. I think we were the only ones that could do it because we had risk and operational failure baked into our budgetary process that enabled us to go forward with something like that and be okay with failure if it did not work.

[Seth Matlins]

Obviously, as a privately held enterprise, you have certain advantages over structurally over the CMO of a huge publicly traded enterprise. 20% for them, 20% of their budget, and especially at a time of declining marketing budgets overall, probably feels like a whole lot of risk. How would you recommend to a CMO listening, who is overseeing billions of dollars in spend for a publicly traded enterprise where they're responsible to quarterly numbers? Why should they embrace, if not the percentage, then the mindset of strategic high strategic risk of failure, or I'm sorry, however you put it.

[Chris Davis]

And it goes back to my previous point of cultural relevance, being a key foundational pillar of the commercialization process. The the value of earned media and the value of earned impressions I don't think can be underestimated. When other editorial outlets, other people on social media, other prominent influencers are talking about your brand in a positive light because of something interesting, creative or authentic that you've done, there's not a price that you can put on that. And those things only happen if you have the courage to take risk and innovate.

[Seth Matlins]

We're at time, but I want to ask you one more question and I just want to add. And there's so much we didn't get to, so you need to come back. But I want to add to your last point there. I saw a great quote from Richard Dickson, who's now CEO of Gap Inc. And he had come from Mattel, had, you know, many successes there. And he said something, and I think I'm getting this correct, which is to be to, to make sure people are interested, you have to be interesting. Right. And that's the aspiration for this podcast, certainly. But. But it's something that I think a lot of marketers and a lot of businesses don't. The simplicity of it, I think gets lost to keep people interested, to make people interested, which is a core part. Right. Of driving brand and business growth. You gotta be interesting. And a lot of marketers aren't doing interesting things. So last question for you, and I think you've answered it any number of ways, but it's the question I skipped over in our 10 question list. But I think it's a great place to end. What do you think the C suite who may not. Those in the C suite who may not understand marketing well need to understand about sources. Marketing driven. Sources of competitive advantage. Strategic advantage. Yeah. What do you want them to know about how that's driven and how it's commercialized?

[Chris Davis]

The and I think I'm answering your question again, but I think what everybody has to understand is that it's pivotal to embrace your brand truth because your brand truth ultimately ladders into your competitive advantage and your unique proposition. And that differentiates, as we talked about before, a company or a brand. And without your brand, true, your company wouldn't exist or persist. So if you aren't leaning into who you are and what makes you different and communicating that outwardly, then you've lost sight of who you are ultimately. And I think that's the most important thing I think that our C suite understands. They understand our point of differentiation. They understand how our point of differentiation drives our perspective to the market and then how consumers digest our brand differently than our competition, ultimately leading to commercial return. Because we know who we are, we know why we're different, and we know what we're providing. So I think that's the most important thing that you have to understand. Like what's your brand truth? Why are you different? And leaning into that.

[Seth Matlins]

You know, I'm reminded as you say that and you know that amongst my favorite ads of all time is the New Balance ad. It's printer out of home and it says, correct me if I'm getting it wrong. It's a picture of which shoe? The gray. Right.

[Chris Davis]

The 990.

[Seth Matlins]

The 990. Sorry, I'm alphanumerically challenged, worn by supermodels in London and middle aged dads in Ohio. And what I think is so brilliant about that is that it provides permission, a brand driven permission, to both the supermodel, the middle aged dad and everybody in between to see themselves within the franchise. And I think it goes right back to what you talked about in answer to that last question. Competitive advantage, the most important one is how people think and feel about whatever it is you're selling.

[Chris Davis]

Exactly. And it goes also goes back to like bringing new consumers into the brand without alienating your existing consumer base. It's about addressing the elephant in the room, whether it's positive or negative. And the last thing I'll say is a lot, a lot of our growth has been fueled by products that have existed for decades. And we're communicating the unique proposition of those products and of our brand in a culturally relevant way to contemporary times.

[Seth Matlins]

Well, you contemporize the brand, which contemporizes the products that have existed for decades, which is of course the challenge of any business once it gets past its first years, its infancy. And we see that more often than not across global brands. It's extraordinary what you all have done over the last period of time and equally extraordinary kind sir, the wisdom you've shared with our audience. Chris Davis, we really appreciate your being with us.

[Chris Davis]

Thanks, Seth. Always appreciate it. Thank you so much.

[Seth Matlins]

You gotta come back. We got a lot more to talk about.

[Chris Davis]

I definitely agree. We'll talk about it next time.

[Seth Matlins]

Thanks for listening. Today's show has been brought to you by ROKT and you can find the CEO's guide to marketing wherever you get your podcast. Don't forget to juice that algorithm. Smash that subscribe button and leave us a review so others can find us too. We'll see you next time.