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At Future Smarts early this week, Coca-Cola CMO Manolo Arroyo offered deep dive into soft drink giant's fast-advancing AI strategy, emphasizing that it's about a lot more than generating variations of TV ads quickly and cheaply. As with another Future Smarts speaker, Keurig Dr Pepper CMO Drew Panayiotou, Arroyo marveled at tech's ability to segment consumer base for unprecedented degree of effectiveness in targeting right messages to right consumer cohort (BBI, Dec 18). But it's still fine-tuning approach even as it builds in guardrails against inevitable risks, particularly in its mustering of tens of thousands of influencers around the world, as he told his questioner, Beverage Digest owner/editor Duane Stanford. Manolo, whose full title is evp and global CMO, traced the AI initiative back to late 90s when first AI automation efforts occurred via multivariable modeling. But generative AI push is far more recent effort dating back to 2022, starting on production side of some ads - those multiple variations of holiday and other ads that made headlines. It kicked into high gear in Mar 2023 with launch of partnership with OpenAI and Bain. The difference was quickly apparent. "We deployed a minimum amount of resources there to help us drive experimentation very, very quickly," Arroyo said. Within 6 weeks the co had held event in NY to herald Create Real Magic platform with text and image generation prompted by the new tech. "Very, very quickly we saw the possibilities of that technology because of its speed, its flexibility and particularly, I always underline one word, it&#39;s just incredibly convenient," Manolo marveled. "It&#39;s fast, it&#39;s user-friendly in most instances."From there deployment rippled out across other marketing pillars. "If you really think about the whole marketing process end-to-end, there&#39;s nothing, not a single one of the processes, that is not being disrupted in a major way by AI." That includes not only the quantitative part of consumer insights but the qualitative side with generation and production of creative elements. "Those two are being merged as we speak." Also media planning and buying, then performance management. Thanks to the AI lift, creation and production costs are dropping substantially, he said.But "the point really is not only the cost-efficiency, it&#39;s much more the effectiveness, because AI allows you to do at scale things that were unthinkable, particularly as it relates to segmentation, targeting way better and much more precisely from a messaging standpoint."Still, Arroyo emphasized that "ultimately, the whole process is still 100% driven by a human. There&#39;s no such a thing as a machine that operates, at least in marketing today, without a series of very skilled individuals" who know how to do the prompts and how to curate the output of the machine. "If you don&#39;t have that, you can have all the technology in the world, but you need people that really have the level of experience, the level of judgment to be able to do that appropriately. So the focus for us is much more in driving the effectiveness, the quality of our marketing. That&#39;s our single-minded focus."With effectiveness more the driver of AI effort than simple cost efficiencies, moderator Stanford wanted to know what these benefits are and what hasn't panned out to plan so far. It all starts with segmentation, Arroyo responded. That's made possible by several advances. Thanks to cloud computing, KO has available a degree of computing power it lacked even 3 or 4 years ago. Clear workflows and processes also are being codified, and being more thoroughly integrated. In combination, those advances "can really transform the effectiveness of your media buying by 2 to 3 times. I&#39;m not talking 20 or 30%, I&#39;m talking 200 to 300%. You really have the right approach."Integrating all the data sets eliminates one key barrier: that of the retailer that stands between Coke and its consumers. By contrast, "today you have the ability to integrate all of those data sets, including not only retailer, but first-party data, second- and third-party data. And the levels of attribution and the levels therefore of understanding of your marketing ROI are exponentially different than just 3 years ago." That info guides Coke marketers on where and how much to buy - increasingly in the digital space."The movement to digital has been instrumental for us," Arroyo told Stanford. "In 2019, less than 30% of our media investments were in digital. We were still primarily a traditional TV marketing company. We&#39;re going to close this year at 67% of all our media is going to be digital," including hefty component of social and influencers in digital spend that's a multiple of TV these days. "This is a complete reshape of our media mix in the last 4 years basically," he noted.Arroyo recalled a conversation he'd had a few weeks ago with chmn/CEO James Quincey. Referring to US market, "I asked him, if I can get a 10% growth in volume talking to 15 different cohorts or segments . . . or a 3% volume growth, just with one approach, with one messaging for everyone, which of the two would you prefer?" CEO asked whether there's a middle ground, say 7%, scenario with greater consistency. "What&#39;s happening really is that when you really get into the details of the data, you may care about football, I don&#39;t. I love baseball or music." Others may be driven by other hot buttons, like meal occasions or sustainability.In old days, if 70-80% of marketing calendar throughout the year is driven by football or music, "you&#39;re not touching me . . . The driver of conversion into consumption, into purchase, into transactions, is different by individuals. And that technology allows you to do this at the scale, which would be unthinkable, impossible just a few years ago." It amounts to "a true, real revolution as it relates to targeting and segmentation, a much more precise marketing and being able to do that at scale." As Panayiotou had in his q&a, Arroyo emphasized, "We&#39;re not going to go to individuals. You don&#39;t need them. I mean, ultimately, it&#39;s not that different. You&#39;re not buying a car or a luxury product, but you do have very different cohorts and segments in the US that drives a very different conversion to consumption." The key is "understanding that and being able to manage this dilemma between consistency and scale and growth."So is Quincey's 7% option the right one "or are you the 10% guy?" Stanford wanted to know. "We&#39;re trying to figure out what is the secret recipe of that," Arroyo replied.What about the risks with AI? CMO cited "a very clear set of policies and governance and processes that allow us to manage end-to-end the risk of that" in the awareness that "sooner or later you&#39;ll have some kind of event." One clear example is the area of influencers. "As you get to deploying and leveraging social media and influencers at scale, you got to find a way to manage this huge group of influencers that might be working for your brands or for your company." In KO's case, "huge" means "dozens of thousands" across the globe, in Manolo's words.There are lots of software applications that help on this side. Coca-Cola uses CreatorIQ, which has pre-scored 40K+ creators around the world (out of the 15 mil people who make a living out of being an influencer, Arroyo noted). Software allows clients to manage end-to-end process of influencer management from screening to reading. "That screening includes a moment of engagement with them where you understand if you have an alignment of not only growth targets but particularly of values." A disconnect there, of course, undermines any sense of authenticity in influencer. Those software tools also cover legal requirements from contractual arrangements. It also covers legal requirements and integrate the creation, production, and then as the activity gets into the market, it continues tracking of that, including scoring. "So it&#39;s actually very, very convenient. It allows you to do it at really global scale as we&#39;re doing that today."The influencer game isn't just about reaching those coveted young consumers. "We leverage influencers not only for Gen Z," Arroyo said. In Japan, for instance, 60% of population is 50+ years in age. So "we leverage in a huge way influencers for 50- and even 60-plus." Also in the mix for those targets are professional influences. It's no different in the US, he added, "depending on what you&#39;re selling. But that&#39;s a big component."

FUTURE SMARTS: How Coca-Cola Harnesses AI to Slice & Dice Its Consumer Segments; Guardrails vs Rogue Influencers

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