Episode 190 / Anna Musikhina / L'Oréal / CMO, Digital Transformation and E-Commerce Acceleration
Opening Up to the World of Virtual Goods Marketing
Anna Musikhina is CMO for Digital Transformation and E-Commerce Acceleration at L’Oréal, looking after everything from E-commerce and business to data, advocacy and consumer research and market insights. Her experience and understanding of the digital world have led her to naming virtual goods as her Shiny New Object. Here’s how brands should enter this growing market.
As people spend more time in virtual worlds, whether in gaming or interactions with other brands such as Nike, we are also spending more money on the virtual goods that are offered in those worlds exclusively. So, why shouldn’t brands spend their time and energy into this area of digital marketing?
The NFT market is set to grow exponentially
The size of virtual goods market is estimated at around $50 billion for last year. This is already a huge economic impact, but it becomes even bigger when considering that some projections put it at $500 billion in the next five years.
As people use NFTs more, they are also willing to pay more for them. This is no longer exclusively the realm of gaming. In fact, real-life fashion brands like Balenciaga have done cross-overs with games like Fortnite. Moreover, purchasing virtual goods can actually become an entry point towards purchasing more expensive “real-life” equivalents. For example, a Balenciaga bag might cost a few hundred dollars, but only £1 in the game – it’s a simple and effective way to reach a new audience for that brand.
Virtual goods open up new opportunities for creators
The virtual world is not relevant just for selling, but also for creating. The increased popularity of virtual goods allows more creators to make a name for themselves and to collaborate with brands they might not have otherwise had a chance to contact.
It’s also exciting to see how brands embrace new creators and support them.
From marketing to real-life direct revenue streams
Today, the virtual world represents a digital marketing opportunity first, before a full-on direct revenue stream. While it belongs more in the marketing side of a business, however, it can develop into a bigger product development area that yields real growth potential for brands in the future.
Virtual goods are therefore important in branding, as a potential business revenue stream, and as the opportunity of new creativity and connection with artists, co-creating a new brand implication in the virtual world. Listen to more details from Anna on the latest podcast episode.
Transcript
The following gives you a good idea of what was said, but it’s not 100% accurate.
Anna Musikhina 0:02
Hello, and welcome to the shiny new object podcast. My name is Tom Ollerton. I'm the founder of automated creative and this is a weekly podcast about the future of marketing and advertising. Every week, I have the pleasure and the privilege of interviewing a very clever, usually very senior person from the industry. And this week is no different. I'm on a call with Anna Musikhina, who is CMO of digital transformation and Ecomm acceleration at L'Oreal. So Anna, for anyone who doesn't know who you are, and what you do, can you give us a bit of a background?
Hi, sure. I'm actually financial manager by training. And I started my career as a journalist in newspapers and eventually at a radio station. So I'm getting back the vibe now, which is very nice. And by doing this, I got into this very interesting world of very exciting people who are successful in business or politics are running some NGOs. And this launched me into several endeavors in event management and PR and sales. And eventually, I ran several small business initiatives in media and advertising. And this is how I encountered digital for the first time. And my first digital project was actually to move an actual physical phone dictionary into our website. And this, this was so fascinating, and so captivating, and I went to study coding and web design. And I wanted to really understand how this works, and how you can build those virtual worlds basically, and services and ads and media, et cetera, et cetera. And this is how I landed in a startup. And after a while, L'Oreal hired me. When I joined L'Oreal, I was one of the few digital experts. My first year, I think, I spent a lot of time explaining to people how social media actually works, and what it means to invest into this, and building websites and search strategies and so on. And then, in 2014, the company embarked globally on a huge digital transformation. And of course, it brought about a lot of interest and a lot of sponsorship, but also budgets and autonomy and projects. And that was, that was extremely exciting, I was very happy to be in this place, the right time with the right skill set. And eventually, I headed and I landed in Paris in 2018, to lead the L'Oreal Paris digital transformation globally as the CTO of the brand in the Paris team. And now I'm responsible for what we call digital and marketing officers cope cdmo role for a number of countries in Europe. And in my scope, I actually have like everything from everything digital, from E commerce and business to data, advocacy media, and also CMMI, which is consumer research and market insights. So this function is at the core of the business now, which is a lovely change compared to what was happening when it just done the company.
You sound like a busy lady. Sounds like a lot of late nights and weekends to me. Brilliant. Well, what a career what a perspective. So I'm keen to dive into that a bit. So what new belief or behavior has made your work life better in the last five years or so?
It's a great question. And I'm, I hope that if I share this, maybe it will help somebody else also to change their work life balance and their emotional stability situation to the best because the belief that really changed my attitude, and my approach was, it was actually the cancellation of a belief, I would rather say that I had before, which was that you have, if you're not tired, it means you didn't do a good job. And I don't know where it came from. But it's important to realize that I could achieve a lot of results and I could be I could, I could have a very successful day with some progress and impact and I could see that the things were moving forward in the right direction. But if I don't feel exhausted at the end of the day, I kind of feel unsatisfied. And I started questioning like why would that be and one person I was talking to about this told me Look, if you have this attitude and this belief and if you follow it, it means you will never actually find a job which will make you happy because you will be looking for a job that will make you tired. I think this is basically now called and this I discovered recently, this approach is now called positive psychology and growth mindset when rather than trying to cover your weaknesses, you're playing on your strengths and this doesn't make you exhausted rather it gives you additional energy. So the ideal work life situation is actually when you utilize what you are talented at or you're good at what you like doing at work, which drives results, obviously. And then you build the collaboration with people who have other strengths. Or you build a team, which covers your weaknesses, you hire your weaknesses, basically, which is not a new thing. But when you think about it in the perspective of what work gives you, does it make you tired? Or does it make you excited, energetic? I think this is something that we should all look at it, maybe especially with the COVID situation, and all the changes have brought about of the attitude towards work and its place in our lives and how much time we're actually having to spend. I think this is very relevant for me, it brought a lot of change and made a huge difference.
Tom Ollerton 10:52
So at the end of the day, uh, you know, no longer exhausted and now cruising into half past six in a calm, meditative way, or are you still fighting that demon?
Anna Musikhina 11:04
Totally. No, I, I think we are not at full liberty to live our daily lives, none of us are. But at least I feel much more enthusiastic and empowered. And much more motivated to start my days, even if they're challenging, even if I have some stressful work ahead, or some important discussion or, you know, a crisis situation, when I approach this from the perspective of, okay, how can I use what I'm good at to solve this? This brings a huge, huge difference. And then even if I'm tired, some days, at least, I know that if I'm not tired, it doesn't mean that I did a bad job, it doesn't mean that I didn't perform at my best, it just meant that I found the model to run the day, which works for me. I think it's very, it's very important.
Tom Ollerton 11:56
So let's get into some advice. What's your top marketing tip, what's that bit of advice you give to your teams most often, based on your expertise?
Anna Musikhina 12:09
I would say. And again, this might sound pretty basic, I would say the best marketing tip I received was to never, ever try to use my own experience as a proxy to what the result can be. Meaning, we need to rely on real data to make decisions rather than just making decisions based on our own personal experience, or our family experience or what our relatives would say about a campaign or about a creative or about approach or strategy or whatsoever. Unfortunately, in digital, we have data in abundance. So then there is now another debate more to say, Okay, should we still leave some space to intuition, because this is a powerful superpower that humans have making decisions based on some experience some information that they have in their head, that they can actually realize, and then the decision just pops out, even if it's contradictory, somewhat to the facts and figures that you have the table. Nevertheless, not trying to project yourself into your consumer shoes. I think this is one of the most powerful marketing advice you can give.
Tom Ollerton 13:28
So, up until relatively recently, I would have agreed with you 100%. And I heard someone say this on a podcast, and I'd love to give them credit. I just can't remember who it was. But they said, and I think I've said this in the podcast since, is that data is the shadows of people, right? So yeah, we can see that 57% of people click on this messaging theme most often, right? Or like, you know, this color button drives, like, that is a shadow of what people are right? It's not, you can't then go into each of those clicks, and then write to the person and say, Why did you click on orange or not blue? You don't actually know the story. It's a shadow of what someone did. It's the shadow of what they were thinking and feeling and doing and living at that point in time. However, the bit however, they're kind of, well, I think that's a real explained thing. And I'm absolutely I think if I, if I'm running a campaign for Mars Petcare, for example, like I'm not a pet owner. So it's kind of crazy for me to go well, I think that dog looks better than that cat, for example. But at least if you're vaguely related to the target audience, and may even sit within the target audience, your real lived feelings about that aren't shadows of what you would do. So yes, it's not got the scale. Yes, there's loads of data, but I still don't really see that much data that isn't just shadows of people as useful as it is, so keen to get your view on that.
Anna Musikhina 14:59
I agree with you. And it's a nice perspective on the same question. Of course, if you are truly a part of the target audience, then your perspective and your judgment and your emotions are completely valid and impactful and valuable. Although what we see, oftentimes is people judging on things, they have nothing to do with. So this is something that I think needs to be avoided. And then when we talk about data, we don't only talk about data like clicks or CTRs view through rates. But we also talk about consumer focus groups and research and panels and you know, home visits and things like this, which actually are eye opening for so many marketers, especially when you are in a category or in a business for quite some time already. And you think you know it all. But actually, the things change so fast, that when you go and connect with real people who are using your products or your category, often, every time you discover so much that you had no idea that just because you were running on your own biases and your own, you know, patterns. So I think this reconnection with consumers and I agree this should be live consumers rather than just shadows, it's a very nice way to put it, it's true that you have the the kind of the initial consumer, and you have all the traits and the long tail of the actions and consequences or whatever can happen along the journey. Yeah.
Tom Ollerton 16:43
So we could talk about this for the rest of the podcast, but we're not, it's the shiny object podcast and your shiny new object is virtual goods. So I think I know what virtual goods are. But could you give the audience a one on one and then tell me why that is your shiny new object?
Anna Musikhina 17:04
Sure. So virtual goods, actually, they are pretty hard to define if you go online and find a bunch of different definitions. But generally, we can say virtual goods are non physical assets that you can purchase that don't really exist in physical space. Typically, the example that is brought is the gaming assets, anything that you can buy in games from weapons or avatar skins, or, you know, berries, or whatever you need for the gaming experience. But now more and more, we see different other players come into this field. And actually, the size of the market is estimated at around 50 billion for last year. And the projections are crazy, like from from tripling to, you know, quadrupling like somebody says it's going to be 500 billion in five years. So when I'm looking at this, I'm thinking about, like, my own experience in social media and video chats and games. And it's true that it's virtual, and it sounds very futuristic, and maybe even, frightening to say that people live part of their lives in virtual worlds. But actually, surely we are doing this. And when we're doing this, we are ready to spend real money on things which don't exist, but which deliver real emotions. So if you think about gaming experiences, this is all about expressing yourself. And if you're ready to pay for things to express yourself, in real world IRL, why don't we think that people will be ready to pay real money to express themselves in virtual worlds, especially if they become a significant part of our lives? And then behind this, there's a lot of fun discussion about you know, how funny this would be to run a video call actually sitting on your sofa and having a virtual avatar speaking instead of you with a perfectly dressed, you know, visual and made up and hairstyle and so on. And you're just in your pajamas on a beach or whatever. Yeah, in pajamas on the beach, weird. Either or, but, you know, there are so many implications, again, if we think about how we spend our time, and where do we express ourselves? Where do we communicate, where do we socialize? Bigger and bigger part of it happens in virtual reality. So virtual goods actually become huge. And then we've seen a lot of brands moving into this space, especially in fashion and Nike with their acquisition of Artifact which is a company which makes virtual basically sneakers if I simplify it like till the end. So I think this is super exciting, because this is another take on culture and human psychology and the value that different things provide to us and what value we attribute to different items, whether physical, or virtual. That's why I think it's super exciting.
Tom Ollerton 20:13
Yeah, I echo that. And it's only middle aged and old people, you have to have the argument with, like, what's all about virtual goods, it's NFT's. It's all nonsense. Like, you only think that because you haven't grown up with that, whereas everyone has grown up with it, it's completely obvious, you know, like, my godson has to have the right skin on his gun in Fortnite, or he's just not as cool as his mate. And it's like 5.99. I understand why his mom begrudgingly pays for, I don't know, whatever skin it is. But that is the equivalent of him having the right t shirt or the right trainers in the real world. And I totally get it and I saw a great presentation at MADFest by someone at AB InBev. I can't remember the lady's name is fantastic. She's talking about Balenciaga, and their Fortnite crossovers where you could buy the Balenciaga bag that said Fortnite on it, I think, was like $700 Oh, OMG. But you can buy the same thing within Fortnite for 7.99, or one pound, or whatever it was. So there's all these different kind of entries, entry points sort of thing. And I love that. I love that balance between the real and the digital, like, if you buy the most beautiful and hardwearing pair of shoes or trainers, like, once you've been out drinking, they're never the same again, the spell has broken, whereas the digital good always shows up, always looks incredible, always looks immaculate, and the dream sustained. So I think I like I just see it as a normal thing.
But like, a value is virtual anyway, right? You know, the value of a coin or a note is virtual.
Anna Musikhina 21:56
A bag is virtual.
Tom Ollerton 21:57
A painting on my wall, like, you know, if you had the Mona Lisa, the actual parts itself would be worth almost nothing, but the value is virtual. And I think that it's no different for me. So my question to you is, who owns this at a brand? Like if a brand are going to create virtual trainers, virtual dresses, virtual makeup? But who, is this marketing? Is this product? Is this the like? Who should be standing up at a brand who doesn't have virtual goods and say, I'm owning this?
Anna Musikhina 22:32
This is a great question. And I think it depends on the stage we're at. And this is kind of a function of the stage we're at, or the virtual market and the virtual economy, I would say for now, for brands, this is more of a branding exercise. So it should be owned by whoever owns the brand, the brand health, the brand equity, the brand communication maybe. But then we see more and more brands assessing this as a revenue stream and looking at it as a potential growth channel like Gucci with their last case, the virtual bags of the store, like some virtual bag sold for like 4000. There was a virtual bag that sold more expensive than its physical copy actually. So it can really become for some brands, a significant revenue stream, maybe several years down the road. So then it moves more into business and more sales or E commerce or however you define it. But I think right now for it to make sense for a brand it needs to fit within the values and the sense of purpose and the relationship the brand wants to build with the audience. Your example, really rang a bell with me because my own personal investigation of the fear of the virtual world and the world of virtual goods started with my daughter getting into Roblox and when she started asking real money for some virtual stuff in Roblox I was like, what are they? What is that? Like? Why? Why do you need that? Why can't you just play the game and that's it. But then when you understand all the again, social communication, all the implications, like in the interactions and how it changes the experience in the game, but actually, the most interesting part is that there is the other side of it. There are other creators who actually earn money on that. So it's not only that you spend money on that, but you can build a business around that. And this is also an interesting opportunity, right? Yeah, I try to motivate her to become a creator in Roblox and start selling her own skins and clothes and whatever items for the avatar. It didn't really work out just as of now, but I'm still hopeful. But for the brands can also be a good angle to see how they can use this space to build relationship with creators, with new creators. And this is a completely different area and I'm following some artists on Instagram who are going into this NFT space. And I see how, how different it is for them all the process of creation and ideation and even the, you know, the vision that they have, which they are, when they're skilled to implement it in the physical realm, and they need to move into NFT's, for example, it's a completely new learning curve. It's like you start from scratch, you're not an artist anymore, you start again, you know. So going back to your question, I think, as of now, the core of it is in the branding, then there is definitely a business potential, especially and maybe we haven't talked about this, but especially in Asia, where the whole virtual goods thing is not only a gaming topic, it's a lot about live streaming, it's a lot about chat, messenger apps, and there's a whole ecosystem that they have in social interactions, which happen online and to support them all the different, you know, virtual gifts that you can buy for real money to send to your friends or relatives wherever to congratulate them with an event or something. So in that part of the world, it's a completely different story. And maybe it's very inspiring, because a lot of things are now spreading that started, they're spreading in the Western world. But then again, to sum up, so branding, a potential business revenue stream, and then the opportunity of the new creativity and connection with the artists and CO creating this new brand. implication in the virtual world. This can be also very powerful.
Tom Ollerton 26:49
And regrettably, we are at the end of the episode, although I'd love to carry on talking about this fascinating, really exciting, always puts me in a bit of a panic, but it's good to keep talking about it, in the very least. So if someone wants to get in contact with you, where would you like them to do that, and what makes the perfect message to you?
Anna Musikhina 27:13
I would say LinkedIn would be the most appropriate place to do that. And I really value and appreciate when a person when reaching out, is really upfront and straightforward and transparent about the reason and the why. You know, explain it because if we are to get in touch into Exchange, there needs to be a value a value exchange of some sort. Or at least if there is a request, I'm happy to understand it upfront, and kind of prepare a little bit for what I would I respond with so if you reach out just please make sure that it's not just a hello, I would like to connect but something more you know, explanatory.
Tom Ollerton 28:06
Anna, thank you so much for your time.
Anna Musikhina 28:08
Thank you very much.
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