DIGITAL MARKETINGWEEK 2

Instructor:Detlev Zwick, Ph.D.E-Mail: dzwick@schulich.yorku.caWeb Site:http://www.yorku.ca/dzwick/

DIGITAL MARKETING IS BIGGER THAN TECHNOLOGY

The Internet provides individual users with convenient and continuous access to information, entertainment, and communication.

Communities form around shared photos (Flickr), videos (YouTube), and individual or company profiles (Facebook).

The digital environment enhances processes and activities for businesses.

Societies and economies are enhanced through more efficient markets, more jobs, and information access.

THE D DROPS FROM D(IGITAL)-MARKETING

Gartner predicted that the d would drop, making d-business just business and d-marketing just marketing.

Nevertheless, d-marketing will always have its unique models, concepts, and practices.

Online search

Online data collection

Online marketing strategies

SLOW APPROACH…WHAT WAS TRADITIONAL

MARKETING ALL ABOUT? When did marketing as a practice come about? Why? What has been driving the latest innovative push in

marketing starting in the early 1990s? What did this event do to marketing? What did the Web 1.0 bring to marketing?

DIGITAL MARKETING TODAY: WEB 2.0

Web 2.0 technologies connect people with each other through social media, which have created opportunities and challenges for marketers. Power shift from sellers to buyers. Consumers trust each other more than

companies. Market and media fragmentation. Cultural shift (participatory, open,

autonomous) New opportunities and new risks for

marketers.

EXERCISE

What to do when it flows?

A CRISIS FOR MARKETING?

“Today’s marketing world is broken…We are still too dependent on marketing tactics that are not in touch with today’s consumer”

Jim Stengel, Global Marketing Officer, Procter &Gamble

“Used to be, TV was the answer. The only problem was it stopped working sometime around 1987.”

President GM North America

“Broadcasting an ad on television or in a newspaper is admitting you have no idea who your customers are.”

Gary Loveman, CEO, Harrah’s

OR OPPORTUNITY?

Today the customer is in charge and whoever is best at putting the customer in charge makes all the money. Stephen F. Quinn, Senior vice

president for marketing, Wal-Mart.

Consumers wrest control away from brand management control freaks...get over it. Turning your brand over to the consumer is taking control - and in fact, if you do, they'll return it to you in better shape. Russ Klein, President for global marketing, innovation and strategy, Burger King

POWER SHIFT FROM COMPANIES TO INDIVIDUALS

Ex. Store.ca

ACQUIRING A CUSTOMER FROM SOCIAL MEDIA

OTHER OPPORTUNITIES AND CHALLENGES IN WEB 2.0

Internet adoption matures.

Online retail sales reach 7%-10% of all sales.

Search engines are now reputation engines.

Improved online and offline strategy integration

60% broadband adoption at home

The long tail

THE FUTURE: WEB 3.0

Lines between traditional and new media are blurring.

Appliances are converging and becoming “smart.”

Wireless networking is increasing.

Semantic web will provide worldwide access to data on demand without effort.

CONSUMER BEHAVIOR ONLINE

THE CUSTOMER’S STORY

A typical one-hour adventure in the life of a 25-year-old professional, Sue:

Tunes her iPod to the latest Diggnation podcast while her TV is tuned to CNBCs Morning Call and her cell phone and PC are within reach.

Picks up her computer to find a blog mentioned during the podcast, sees a video on the blog and texts a friend about the video.

THE CUSTOMER’S STORY, CONT.

Sue searches for the video title on Google and finds a job posting on Vimeo, an online video-posting site.

She posts a link to the video and Vimeo site to her Twitter stream.

Sue is the new consumer: a multitasker attending to different media simultaneously.

How can a marketer capture dollars from these behaviors?

EXCHANGE OUTCOMES

There are 5 basic things that people do online: Connect Create Enjoy Learn Trade

Each is ripe with marketing opportunity.

CONNECTING ONLINE IN THE U.S.

CREATING & UPLOADING CONTENT IN THE U.S.

LEARNING AND GETTING INFORMATION

TRADING ONLINE IN THE U.S.

21ST CENTURY MARKETING CHALLENGES

Twitter, Youtube, Facebook, Instagram, and on and on…

FRAGMENTATION!! Attention

Demand

MARKETING IMPLICATIONS

Fragmentation makes

reaching

keeping the attention of your customer

ever harder.

WEB 2.0 COMMUNICATION SHOWS TWO THINGS:

Consumers love to interrupt!

Consumers love to talk!

=> Give me some examples…

CHANGES YOUR RELATIONSHIP

From ‘selling to customers’ to hosting guests

From ‘controller’ of communication (teller of stories) to enabler of communication (resource for stories told by others).

D-MARKETING MAPConsumer

Marketer

Marketer Consumer

D-MARKETING MAPConsumer

Marketer •Retail sites•Banner Ads/Links•Email/Spam•News Releases•Blogs/Online forums•Search Engine Optimization•Viral/social marketing/Twitter

Marketer Consumer

D-MARKETING MAPConsumer •Social search

•Third party and retailer evaluation sites (e.g. epinions.com)•Blogs/Twitter•Wikis•Social networking sites

Marketer •Retail sites•Banner Ads/Links•Email/Spam•News Releases•Blogs/Online forums•Search Engine Optimization•Viral/social marketing

Marketer Consumer

D-MARKETING MAPConsumer •Social search

•Third party and retailer evaluation sites (e.g. epinions.com)•Blogs•Wikis•Social networking sites

Marketer •Link building•News releases•Blogs/Online forums

•Retail sites•Banner Ads/Links•Email/Spam•News Releases•Blogs/Online forums•Search Engine Optimization•Viral/social marketing

Marketer Consumer

D-MARKETING MAPConsumer •Search

•Email•Twitter•Company-owned product evaluation sites (beta)•Blogs/ Online forums/Twitter•Feedback sites

•Social search•Third party and retailer evaluation sites (e.g. epinions.com)•Blogs•Wikis•Twitter•Social networking sites

Marketer •Link building•News releases•Blogs/Online forums•Twitter

•Retail sites•Twitter•Banner Ads/Links•Email/Spam•News Releases•Blogs/Online forums•Search Engine Optimization•Viral/social marketing

Marketer Consumer

BUT WHAT ELSE HAPPENS TO CONSUMERS ONLINE?

Too many choices! Information & cognitive

overload!

HYPERCHOICE AND THE CHOICE PARADOX

We think more choice is better, but there can be problems with excessive choice:

1. Ability to Choose

2. Satisfaction with Choice

THE JAM EXPERIMENT

Tasting booth for unusual jams in an upscale grocery story.

A: offered 6 jams

B: offered 24 jams

What percentage of tasters later purchased one of the jams?

A

B

Iyengar, S. & Lepper, M., 2000, When choice is demotivating: Can one desire too much of a good thing. Journal of Personality and Social Psychology, 79, 995-1006

CHOICE AND SATISFACTION

No choice can be bad.

Excessive choice can also be bad.

Limited choice may be best.

Number of choices

satisfaction

BREAKING APART THE CHOICE PARADOX

E. Reutskaja & R. Hogarth, 2009, Satisfaction in Choice as a Function of the Number of Alternatives: When “Goods Satiate. Psychology and Marketing, 26(3), 197-203.

WHERE DOES THIS LEAVE THE E-MARKETER (E.G. RETAILER,

INFORMATION BROKER, ETC. ?

New Businesses and Business models

Search

Curating & subscriptions model (s-commerce)

EXERCISE

Fab.com

Birchbox.com

Mistobox.com

Quarterly.co

In teams, analyze what these sites do?

What need(s) do they satisfy?

Based on your example, identify one additional C&S idea.

SUBSCRIPTION COMMERCE AND CURATED COMMERCE

Solving the BIG CONSUMER BEHAVIOR CONTRADICTION OF E-MARKETING:

Balancing the risk of consumers’ cognitive overload with a need to offer choice

Or: a need for simplicity driven by very busy lifestyles coupled with the pleasure of trying and discovering something to one’s own taste in this contemporary Aladdin’s cave.

Answer: style-masters, professional stylists, celebrities and experts on a certain field carefully select a limited and manageable choice of products

S-COMMERCE & CURATED EXPERIENCES

Curation: simplicity, convenience, personalization and discovery.

Since 2010 there has been a rise in the number of e-sites offering handpicked item selections, usually on a subscription model that combines convenience, curation and the pleasure of being surprised and taken care of.

S-COMMERCE

Curate & subscribe e-commerce sites

cater to a wide range of consumers’ needs (tea lovers, foodies, fashionistas, new parents, etc)

Subscription fees range from the US$10,000 per year for a Net-a-Porter shoe-subscription to the US$39.95 USD for ShoeDazzle and the US$10 per month charged by Birchbox.

CONSUMER BEHAVIOR: CONCLUSION

Consumers become active

Consumer Attention becomes fragmented

Consumer Attention reaches limit

Leads to new value propositions

Curate & subscribe

MARKETING IN THE AGE OF FRAGMENTATIONMapping Digital Marketing Media

and

What can we learn from an Youtube/ebay/Facebook world?

NOW, THE GOLDCORP CHALLENGE How do you innovate in Gold Mining??

It was late in the afternoon, on a typically harsh Canadian winter day, as Rob McEwen, the CEO of Goldcorp Inc., stood at the head of the boardroom table confronting a room full of senior geologists. The news he was about to deliver was not good. In fact it was disastrous, and McEwen was having a hard time shielding his frustration. The small Toronto-based gold-mining firm was struggling, besieged by strikes, lingering debts, and an exceedingly high cost of production, which had caused them to cease mining operations. Conditions in the marketplace were hardly favorable. The gold market was contracting, and most analysts assumed that the company's fifty-year-old mine in Red Lake, Ontario, was dying. Without evidence of substantial new gold deposits, the mine seemed destined for closure, and Goldcorp was likely to go down with it. Tensions were running at fever pitch. McEwen had no real experience in the extractive industries, let alone in gold mining. Nevertheless, as an adventurous young mutual fund manager he had gotten involved in a takeover battle and emerged as Goldcorp Inc.'s majority owner. Few people in the room had much confidence that McEwen was the right person to rescue the company. But McEwen just shrugged off his critics. He turned to his geologists and said, "We're going to find more gold on this property, and we won't leave this room tonight until we have a plan to find it." At the conclusion of the meeting he handed his geologists $10 million for further exploration and sent them packing for Northern Ontario. Most of his staff thought he was crazy but they carried out his instructions, drilling in the deepest and most remote parts of the mine. Amazingly, a few weeks later they arrived back at Goldcorp headquarters beaming with pride and bearing a remarkable discovery: Test drilling suggested rich deposits of new gold, as much as thirty times the amount Goldcorp was currently mining! The discovery was surprising, and could hardly have been better timed. But after years of further exploration, and to McEwen's deep frustration, the company's geologists struggled to provide an accurate estimate of the gold's value and exact location. He desperately needed to inject the urgency of the market into the glacial processes of an old-economy industry. What is he to do?

NOW, THE GOLDCORP CHALLENGE

form groups of 5.

1) Describe McEwen's problem (strategic issue).

2) Analyze the challenge for reaching Goldcorp's strategic objective.

3) Based on your knowledge from other industries and Chui et al.’s points, recommend a course of action for McEwen.

21ST CENTURY MARKETING CHALLENGES

FRAGMENTATION!! Attention

Demand

Community and Communication

ATTENTION ECONOMY

Fragmented media

Consumers tuning out or completely skipping messages

61% of consumers say that marketers and advertisers do not treat them with respect

69% are interested in products or services that would help them skip or block advertising

Poor Information/Metrics on effectiveness

LONG TAIL (CHRIS ANDERSON)

Fragmented Demand

Niches are Riches

WHAT IS “NATURAL DEMAND”?

The “Head” of the Demand Curve:

Pre-Internet, old economy firms turned out a small number of “hits” or blockbuster products

The “Tail” of the Demand Curve:

Internet-era, new economy firms offer a broader range of niche products.

THE HEAD

Prior to the Internet, production, distribution, and consumption focused on a few hits because of scarcity of resources: there simply was not enough time, space,

or money for businesses to offer everything for everybody.

The 80/20 rule was the dominant model—20 percent of a business’s products accounted for 80 percent of its sales (and usually 100 percent of its profits).

THE LONG TAIL

In markets where technology dramatically reduces the costs of reaching niches through one or more of these powerful forces: democratizing the tools of production

greatly expands the universe of content

democratizing distribution greatly reduces the costs of consumption

connecting supply and demand by lowering search costs of finding niche content drives demand down the tail.

But how do you lower the search costs?

THE LONG TAIL

In the long tail model, these forces allow online businesses to greatly increase the variety of their products. Anderson argues that 98 percent of a long tail

business’s products sell at least one unit in a quarter

on a cumulative basis, these small numbers of sales of large numbers of niche products generate enormous revenues and profits.

IS THERE A LONG TAIL?

www.rogerebert.com hosts more than ten thousand reviews and its Web traffic statistics show that even the most popular film represents less than 1 percent of their business. In June 15, 2006, "The Da Vinci Code" and "

Brokeback Mountain" were tied at 0.8 % of page views the next most requested reviews in 2006 were for "

V for Vendetta" (0.7) "X-Men: The Last Stand" (0.6) "An Inconvenient Truth" (0.5).

The lesson: People are curious about a lot of different movies."

IS THERE A LONG TAIL?

The Long Tail of Holiday Music.

eMusic had 1,226 holiday albums in the catalog

1,128 had been downloaded over the Christmas season.

That's 92% of the catalog!

Source: Digital Audio Insider, 2007

TO SUMMARIZE: In virtually all markets, there are far more

niche goods than hits

The cost of reaching those niches is now falling dramatically.

Simply offering more variety does not shift demand by itself. Consumers must be given ways to find niches that suit their particular needs and interests. A range of tools and techniques—from recommendations to rankings—are effective at doing this.

TO SUMMARIZE CON’D

Once there’s massively expanded variety and the filters to sort through it, the demand curve flattens. There are still hits and niches, but the hits are relatively less popular and the niches relatively more so.

All the niches add up. Although none sell in huge numbers, there are so many niche products that collectively they can comprise a market rivaling the hits.

Once all of this is in place, the natural shape of demand is revealed. That shape is far less hit-driven than we have been led to believe.