(ANNOUNCER)
Ladies and gentlemen, please welcome Jim Stengel, global marketing officer for Procter & Gamble. Jim? Jim, are you here? Jim?

(A video appears on the screen. Jim Stengel appears as an avatar of himself in Second Life.)

JIM STENGEL AVATAR: I'm somewhere, but I'm not sure where. I'm quite certain that I have not been here before.

LEO BURNETT AVATAR: You're on Leo Burnett's Island in Second Life.

JIM STENGEL AVATAR: Well, I'm supposed to be in Las Vegas at the AAAA Media Conference.

LEO BURNETT AVATAR: Don't worry; we'll get you back in time. But since you're here, why not come look around?

JIM STENGEL AVATAR: Well, okay, you lead the way.

LEO BURNETT AVATAR: Second Life is a virtual world which acts as a really big, online brainstorm. Here you can chat, like instant messenger, but in 3D; build whatever you want; and collaborate with the best digital talent around the globe. The hope is that, in a world where you can turn off gravity, you're going to see the best blue-sky thinking. So, as you can see, Jim, if you want to build relationships with inspiring people, maybe you should stick around for awhile.

JIM STENGEL AVATAR: This is really incredible. There's just one small problem.

LEO BURNETT AVATAR: What's that?

JIM STENGEL AVATAR: There are a lot of inspiring people waiting for me in my first life right now…

LEO BURNETT AVATAR: No problem at all. Remember, the possibilities are endless here…

(Video ends, there is flash of light and Jim Stengel appears on stage.)

Good Morning.

It's good to be back in my first life and here with all of you this morning. I'd like to say thanks to my friends at Leo Burnett for the tour of their Second Life Island.  I think it's a definite upgrade on the Chicago office. And Leo certainly looks better in Second Life than he did in his first life!

Can we turn the lights up for a moment? Do any of you out there have avatars on Second Life? Come on, admit it… Show of hands -- how many of you have visited the Second Life site? 

As you probably know, this virtual community has over 4 million residents in the form of avatars, and that number is growing everyday. These avatars build everything from homes to businesses. They socialize with each other. They attend events. 

And what is even more astounding is that Second Life has developed a robust economy. According to a recent Business Week article, thousands of people make at least $20,000 a year–in real dollars–selling virtual clothing, houses, games, you name it.

More and more off-line businesses–like Leo Burnett–are building properties there, and Reuters has even assigned a reporter to cover events inside Second Life.

The concept of Second Life wasn’t even on the horizon when I spoke to this group just three years ago in Orlando. It's gone from nothing to four million people in just three years. And Second Life is just one example of the pace of technology and how technology is being embraced by the consumers, the people we serve.

It is emblematic of how consumers are in control, and why it's time for us to make a dramatic shift in our thinking.

Three years ago, we were a long way from making that shift. You may recall that I when I spoke at this event in 2004, I gave our industry–including my own company–a collective C-.

That 2004 report card painted a picture of an industry that was slow to react to technology changes that were turning the marketing world upside down.

Looking at this report card today, there’s no question that we've made significant progress in the last three years. 

As an industry, we've definitely improved on consumer engagement. When we get it right, people are choosing to watch our advertising. 

And yes, people are still watching television. In fact, they’re watching quite a lot of it.  And, with the marketers I know, television is just one component of fully integrated campaigns.  But there’s still room to do more.

(Video sound bite from Bernhard Glock, P&G Global Media. "There are different sorts of innovation in the media world. First, if you think about mass media, we can be more creative and innovative within the respective tools we are using today. So with TV not only use the :30 spot for positioning, think of different ways to connect with them (consumers). Be a surprise. Be engaging.")

Content sponsorship is an area where the industry has taken a big step forward when it comes to innovation and engagement.  Many advertisers, along with their media and creative agencies, have really taken it to the next level. There are many examples of engaging content. Content that provides solutions. Content that connects at the right time and right place.

So, when I look at the report card from 2004, I think that the industry has made progress. If I were giving us a collective grade against this report card today, I'd say we've gone from a C- to a B.  But the reality is that whatever grade I–or any of us might give-doesn't really matter. That's because this report card is obsolete.

I thought about creating a new report card for this presentation. A report card that reflects the technological changes and the media challenges we've faced in the last three years; a report card that addresses where we need to go from here.  But that report card would be instantly obsolete too. Because the people we serve–our "consumers" as were accustomed to calling them-move faster than we do.

We can no longer measure our success in terms of "keeping up" with technology. Because keeping up is just not possible in a world where we are not in control. The Second Life phenomenon is a case in point, as is Time Magazine's person of the year for 2006.

The managing editor of Time magazine said it well: "individuals are changing the nature of the information age…the creators and consumers of content are transforming art, politics and commerce-they are the engaged citizens of a new digital democracy."

These "engaged citizens," keep raising the stakes. The "You" on the cover of Time wants to be treated like a person, not a consumer. We don't need another report card to accomplish that.

What we really need is a mindset shift. A mindset shift that will make us relevant to today's consumers. A mindset shift from "telling and selling" to building relationships.  

So no more report cards. Let's talk instead about how we're going commit to building honest, authentic relationships with the people we serve.

The first step in any caring relationship is having a deep understanding of where the other person is coming from.  At P&G we've identified three major value shifts that are foundational to understanding and building authentic relationships with consumers. I’d like to touch on those shifts this morning.

Let’s start with "Craving Trust." In his most recent book, Dan Yankelovich notes that the U.S. is now into its third major wave of societal distrust of business and institutions. And this is echoed globally. You only have to turn on CNN to see it. This makes relationships incredibly important to people when it comes to trusting any institution or brand.

(Video sound bite from Delaine Hampton, P&G Consumer Knowledge. "People are seeking out people of like mind, like agenda, like values is really what’s happening in the world. And there are tremendous implications for marketers. If we’re not aligning with their values, we’re not going to be trusted.")

At P&G we're taking a long, hard look at what we're doing to inspire the trust of the people we serve. Do we understand what’s important to them? How can our brands credibly connect with them?

Our Gillette colleagues have taught us a great deal about connecting with men. The Gillette Champions program features three trusted sports heroes who bring to life the equity "the best a man can get." These athletes have set new standards for performance in their respective sports–what a powerful and relevant connection for the Gillette brand.

Clicking for Self-Expression is the second shift we see having implications for us as marketers. We all know that consumers are embracing technology, but this shift goes deeper than playing video games or shopping on-line.

Look at the number of people who are blogging…sharing content…and participating in online communities like Second Life.

This reflects consumers' increasing desire for self-expression–to be heard, and to be understood. Technology is simply the enabler. And in addition to enabling self expression, technology is also driving unprecedented levels of connectivity.

As people feel more uncertain and disillusioned they are seeking connections. Just as technology is a means for self expression, it is also a means to stay connected–anywhere and everywhere.

I recently spent some time with our team in Korea, because Korea is a world vanguard when it comes to adoption of new technology. We visited an Internet café–they are ubiquitous in Korea-and I was struck by the constant connectivity I saw there. I was also struck by the complete irrelevance of what we call traditional media. Korea is just one example of what I see everyday around the world. People are connecting on their terms. I see it in my teenage kids and their friends. I see it with myself and my friends and family.

Mobile technologies are as much about enabling human connection as convenience, although that's important, too. People today are in constant conversation. We talk in person. We talk on our cell phones. We text. We interact in social networks online. And each of these conversations is incremental to the other.

These value shifts paint a complex picture of consumers in the 21st century…people with  battered trust levels…people yearning for self-expression…people with the boundless desire to find comfort in connecting with like-minded others. And, make no mistake about it, people who are very much in control. In control of the messages and the media with which they choose to engage.

This is why it's no longer enough to simply keep up with technology. Why we must bring a relationship mindset to our marketing activities. We must be sensitive to where people are coming from. And if this sounds soft to the media professionals in the room, think about how it sounds to a data-driven marketing organization like Procter & Gamble. We invented "telling and selling."

Needless to say, we've been on quite a journey at P&G. In many ways we're still at the beginning of that journey. We certainly don't have all of the answers–in fact, every day raises new questions. But we do believe that the most fundamental thing we can do is shift our thinking as marketers from "telling and selling." We must bring a true relationship mindset to brand building. 

There are three deceptively simple, yet very powerful principles that we’re focusing on at P&G to accomplish this.  We believe our communications, our brands and our people must be:

• Authentic
• Generous
• Experiential

Let’s start with authentic. In the face of insecurity and mistrust, authenticity is critical to building or re-building trust.

And if you're not convinced that doing the right thing is right from a business perspective, here’s what we've learned. We undertook a study at P&G of 15 categories in 10 countries. We found that brands with the highest market share have the highest levels of trust relative to competition. In today's trust-challenged world, market share is really a materialized trust bond.

However, trust is an outcome–and we have to let go of the idea that we're in control of outcomes. The key to building trust is being authentic and being transparent. And that's something that we can control. One way is to be transparent about who is behind the brand–the men and women who are at the heart, soul and integrity of a brand.

(Video from Hurricane Katrina featuring the Folgers plant and employees expressing how important it was for them to continue to do business and be there for the community.)

The business situation was serious–Folgers would be off store shelves for weeks. But the business situation was nothing compared to the human situation. We decided to be transparent about what had happened. We asked our people–whose courage, commitment and passion in the wake of the disaster was truly inspiring–to tell the story. That story became our advertising.

(Folgers commercial that aired after Hurricane Katrina featuring employees telling their personal stories.)

The rewards of transparency were immediate. Within three months, Folgers regained the market leadership we'd lost when we were out of production. And, since then the brand has extended its margin of share leadership. The results are irrefutable. When we are authentic we connect with people, and they reward us by buying our products in record numbers. And while the Folgers example is particularly dramatic, we've seen other brands around the world post record share gains as a result of this shift in thinking.  

Let's talk about being generous. Think about your own personal relationships-we all know that the best relationships are giving relationships. At P&G we've borrowed the term "abundance mentality" from the field of psychology. We think it captures the spirit of generosity we want to cultivate in our marketing. 

We’re not alone in this. Fitch, a global design firm, has even coined the term "generous brands." These are brands that understand the concept of abundance mentality and how it builds business.

It's Starbucks giving away used coffee grounds for compost.  It's Amazon providing consumer-written book reviews and offering customers second-hand books. It's our detergent brand Ariel giving families in Caracas a safe, clean place to do laundry.  It's Apple providing free in-store seminars. And, indeed, consumers have rewarded those brands for their generosity.

At P&G, we're working hard to bring this spirit of generosity to the forefront.

You can see it at work in our "Always Moving" campaign in South Africa; in Capessa, an on-line community we launched for women; and in product enhancements we made to Ace, a detergent serving low income markets. All of these are brands that put their consumer first, and in turn those consumers rewarded us with record sales gains.

Finally, I'd like to talk about how we're working to co-create rich experiences that tap into the desire for self-expression.

There's been a lot of coverage in the industry trades about consumer co-creation of advertising executions. But I think the notion of co-creation is about more than holding online contests for consumers to create brand ads.

I think there's a bigger opportunity to listen and take a stronger cue from consumers on all aspects of branding. Thanks in part to the work of Tremor, P&G's word-of-mouth marketing group, we're getting much more comfortable with the idea that consumers truly own our brands and our brand messages. It may be a little scary for us to "let go," but in the end we must realize that what people say about our brands is valued far more than what we say.

(Video sound bite from Steve Knox, Tremor. "We're finding that consumers don’t object to advertising messages, they provide a certain sense of information. But there's a message consumers want to share with their friends. 100% of the time those are different messages. There is a necessity to have advertising messages, marketing messages that provide information and help establish brand equity with consumers. But then there's a more powerful message which is the message consumers are sharing with their friends. And if you think the consumer is sharing your marketing message, you’re wrong.")

At P&G we're learning that if we want to engage people with our brand messages it has to be on their terms. We have to add value to their social relationships. That means we have to listen to them to understand what is meaningful to them.

Are we:

• enhancing their social currency?
• providing helpful information?
• improving the shopping experience?
• or entertaining them, while we build equity?

Building relationships through our brands is the future of marketing. It's not about new media models or new tools. It's about engaging with people in a two-way relationship. It's about seeking to understand the other person rather than trying to control their actions. Trying to control someone is no way to build a relationship–or grow market share long term. We have come to realize that at P&G.

That's why we're changing. That's why we're committed to building brands that stand for something meaningful to consumers rather than just "telling and selling." Brands that have taken this approach-Ariel, Pantene, Downy/Lenor, Ace, Crest, and Olay among others within P&G-have discovered that smart business is authentic, generous, experiential…a winning combination that is rewarded and embraced by consumers.  Building honest relationships between us and our consumers-it's not only a smart business decision, it is the right thing for us as marketers to do.

But it takes courage. It takes conviction. It takes stepping outside your comfort zone and eliminating the barriers that separate you from your "consumers." After all, at the end of the day, we're all consumers. Sometimes, we just need to be open to bringing more of that personal, human perspective to our professional lives.

This business is personal. That's the bottom line. And making it personal is how we'll grow the bottom line in the future. But we need your help and your leadership.
We need you, our agencies and media partners to help us infuse our communications with a relationship mindset–I hope you’ll give more thought to what that could look like for your business.

We’re on this journey together-media companies, agencies and advertisers. This change isn't going to happen overnight, but if we focus on building relationships, right here, right now, we’re taking a big step toward a bright future.