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Marketing 2.0

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How the consumer shift to online media channels is changing the marketing mix.

(All research is cited. Special shout out to Hubspot and Aberdeen Group, both great resources on the subject matter).

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Marketing 2.0

  1. 1. Marketing 2.0: <br />How the consumer shift to online media channels is changing the marketing mix.<br />General Eric Shinseki, a four-star general in the US Army and Vietnam veteran, left behind in combat with an injured foot, once said, “If you don’t like change you are going to like irrelevancy even less.” While it is unlikely that he was speaking to the marketers of the world, his words should resonate just the same, as marketers who fail to effectively integrate new forms of digital media into their traditional marketing mix will find themselves left behind as well. <br />The Shift to Online Channels <br />1/3 of US Consumers spend 3 or more hours online per day<br />- The Media Audit, 2010<br />Although the role of marketing – to educate consumers, build brand equity, and generate sales – remains unchanged, the growing importance of online media channels to consumer buying behavior is forcing brands to rethink the way they interact with their consumers. With consumers 34 years of age and younger reported to spend more time interacting with digital media than with television and print a shift to digital inbound marketing from the traditional, push focused marketing mix – television, radio, newspaper, and magazine – is critical for brands to remain competitive and relevant. Brands have started to follow their consumers – online advertising spending has reportedly surpassed radio in 2009, and was projected to surpass magazines in 2010 and newspapers in 2011 – but to be successful in this channel marketing management must also understand that consumer behavior has changed as well. Marketing needs to transform from an outbound strategy to an inbound, pull strategy, as customer perceived value in the digital space derives from authentic, mutual information-sharing and one-to-one marketing interactions. <br />Inbound versus Outbound Marketing<br />200 Million Americans have registered on the federal trade commissions do not call list.<br />- www.FTC,gov<br />“The Internet has turned what used to be a controlled, one-way message into a real-time dialogue with millions.” <br />- Danielle Sacks, The Future of Advertising<br />The aforementioned highlights the fact that consumers are willing to communicate with brands however, they expect these interactions to be on their terms, at their convenience, and with mutually beneficial outcomes. Outbound marketing strategies including advertisements, direct mail, e-mail, and outbound calling have been traditionally focused on consumer interruptions to push messaging out to the consumer. With the Do-Not-Call List, DVR, spam-filters, and consumer shift to digital media for entertainment and news, outbound marketing efforts have lost their edge yielding an average response rate between 1 – 5% with an average cost of approximately $373 per lead. <br />“Inbound marketing is a set of marketing strategies and techniques focused on pulling relevant prospects and customers towards a business and its products.” Examples are direct to consumer, web tracking & analytics, call-to-action, fan sites, fan hosted sites, blogs, social media, and video. Inbound marketing is permission based, costs 62% less per lead than outbound, and yields an average response rate between 20 – 50%. With these results, it is no surprise that 54% of businesses surveyed expect to increase their inbound marketing budgets this year. In the next few pages we will look deeper into a few successful inbound marketing channels including social networks and blogs and social media monitoring and web analytics. <br />Social Media: Why it Matters<br />US Internet users spend 3x more minutes on blogs and social networks than on e-mail.<br />- The Nielsen Company<br />Companies that blog receive 55% more website views<br />- Hubspot, 2010<br />Today there is an expansive variety of social media channels available including social networks (Facebook, LinkedIn), blogging, micro-blogging (Twitter), product commenting and rating, document sharing, video widgets, and podcasting. Although social media and blog spending has nearly doubled in two years many marketers shy away from the channel because they are unable to quantify the benefit of being in the space. Instead of marketing managers asking if they can afford to put resources toward social media, they need to ask if they can afford not to. <br />Currently there are approximately 240M internet users in the US and 78% of internet users polled reported that they conduct product research online prior to purchase. Additionally 72% of internet users polled go online to buy a product and 32% rate products using an online rating system and another 32% go online to review or comment on a product or service they have purchased. These numbers suggest that even if your firm chooses to opt out of social media your brand is still present through unmonitored content generated by the ~77M users who, as stated above are reviewing, commenting on, or rating your products and brand. Social media forums, especially micro-blogging, product commenting and rating sites may provide a venue for customer advocacy but can just as easily turn into a forum for spreading false rumors, leaking confidential information, and brand infringement. Given these metrics, it is easy to see why companies who are choosing to actively participate in social media are doing so in hopes of not only joining the conversation but mitigating these apparent risks. <br />Although “price and brand loyalty drive CPG purchase decisions, the internet can drive deeper product engagement and enhance sales by facilitating brand awareness and positive word of mouth.” Alternative to controlling the conversation marketers are gaining success in using social networks and blogging as a means of sales conversion: <br /><ul><li>67% of B2C companies have acquired a customer through Facebook
  2. 2. 57% of businesses have acquired a customer through their customer blog
  3. 3. 42% of companies have acquired a customer through Twitter </li></ul>“[The Internet] is a proven channel – for any kind of marketing – to target potential consumers and deliver a message that can create positive brand associations, maintain top-of-mind awareness, and purchase intent and trial.”<br />Social Media Monitoring & Analytics<br />“Utilizing customer feedback ultimately strengthens firms’ relationships with their customers by increasing interaction and showing customers that their insights and concerns are not only acknowledged, but addressed.<br />- V. Kumar & Yashoda Bhagwat, Listen to the Customer, <br />Social media monitoring (SMM) is an evolving technology, as is social media itself, which companies are adopting at an increasing rate. SMM allows marketers to track, analyze, and respond to consumer conversations within social networks, blogs, and product rating sites. The top pressures for adopting social media monitoring cited by companies are to increase customer advocacy (WOM), protect brand reputation, increase brand awareness, increase customer loyalty and to increase customer research capabilities. <br /> <br />With many firms still struggling to recover from the economic downturn, marketing departments are expected to yield greater returns with fewer resources. In a study conducted by Aberdeen Group, The ROI on Social Media Monitoring, the recession is reportedly a contributing factor to the adoption of social media by companies surveyed, as it is a low cost and high-touch alternative. However, the real value in social media, as the Best-in-Class of those companies surveyed have come to realize is the access to consumer insights. Companies are able to observe as consumers discuss freely their brand perceptions and their likes and dislikes of a products. The information is not only valuable to marketing it is forming insights that are invaluable to the enterprise as a whole. Product Development can use this information to gain insights into what products consumers want and need, and what changes they want, marketing can understand which campaigns are working, and what marketing messages they need to be sending out, and customer service can use the information to reach out to disgruntled customers and improve customer satisfaction and retention. <br />Many customers such as Starbucks and Coca-Cola have already been able to use social media, and social media monitoring to co-collaborate with their consumers to improve their products and brand. Dominos’ in particular has done an excellent job with this, having re-designed their pizza and their brand after sluggish sales and the lowest rating in a consumer taste preference survey. CMO Russell Weiner says of the co-collaboration with consumers, “We’ve created a pizza to reflect what consumers are looking for.” He goes on to say, “Our inspiration came from the thousands of direct consumer feedback messages on several social media channels.” Many companies are beginning to realize the insights from this channel, as they are all transmitted over the internet and completely traceable, are invaluable across the enterprise. Social media monitoring can help companies: <br /><ul><li>Identify and reduce risk to the brand
  4. 4. Improve customer service by speeding up customer problem resolution
  5. 5. Identify and engage top influencers and understand how they’re influencing others buying decisions.
  6. 6. Find new ways of communicating with, new questions to ask their consumers, to gain key consumer insight. </li></ul>Ultimately if used properly SMM can help companies increase consumer satisfaction and retention as it did in Dominos’ case. <br />Competencies of the Marketing 2.0 Company<br />58% of marketers surveyed feel they do not have the people they need to meet their organization’s objectives. <br />54% do not feel their team is equipped to handle new trends and technologies. <br />- 2010 Trends in Marketing, Aquent & AMA Report<br />As mentioned, simply being present in the social media channel is not enough, in fact whether you are participating or not your consumers are out there forming brand perceptions for you. According to the Aberdeen Group study the Best-In-Class (top 20% performing companies effectively using SMM) have used social media to: <br /><ul><li>Improve ability to generate consumer insights that drive new product/services development (BIC 93%, Avg 11% of companies saw improvement)
  7. 7. Improve ability to identify and reduce risk (BIC 82%, Avg 9% of companies saw improvement)
  8. 8. Improve customer advocacy (BIC 75%, Avg 9% of companies saw improvement)
  9. 9. Decrease customer service costs (BIC 63%, Avg 7% of companies saw improvement)</li></ul>The study goes on further to explore what capabilities and enablers that have allowed these Best-in-Class firms to excel in these above areas at a rate much higher than the Average (middle 50%) and Laggard (bottom 30%) firms. The study highlights five key areas where BIC firms are excelling: process, organization, knowledge management, technology and performance management. <br /><ul><li>Process: These firms are 42% more likely than laggard firms to have a process in place for gathering and analyzing insights gleaned from consumer-generated content and disseminating it to key decision makers. Additionally these firms view this as a continuous improvement process and they are twice as likely to have a process in place for improving SMM.
  10. 10. Organization: Top-level support and a dedicated resource team devoted to social media activities, including analyzing and reporting, are essential to properly leverage social media and SMM.
  11. 11. Knowledge: Marketing executives are now being tasked with regular communications with customers to obtain their needs. Regular interaction enables companies to respond to their customers’ needs and this data can be warehoused for further analysis. Marketing executives will also be tasked with figuring out which social media outlets are most effective. Marketing professionals need to be not only analytical but digitally savvy, creative in driving inbound traffic and good communicators, as they will be speaking to consumers one-to-one and in a very public way.
  12. 12. Technology: A number of best-in-class companies are deploying branded social networks and digital dashboards for their consumers. These will of course be a resource for collecting consumer data, which will also require data warehousing technologies. “These [technologies] make it possible to do deeper dives into specific data, and to slice and dice the data in multiple ways to reveal additional patterns and insights.”
  13. 13. Performance Management: These Best-In-Class companies also have defined performance metrics allowing them to measure and increase the value of social media to their business strategy. With social media and SMM still emerging these metrics are still very experimental some examples include, reduction in inbound customer support calls, increase in positive consumer sentiment, and quantity and quality of consumer insights from social media. </li></ul>Conclusion<br />Social media and social media monitoring, if effectively leveraged, enables firms to obtain consumer insights that used to be secured only through costly consumer focus groups. The shift of the consumer’s attention to online channels, the quantity and quality of data that can be collected, the lower cost per lead, the conversion of leads to sales, and the reduction of customer service costs are all solid reasons for companies to integrate social media into their marketing and business strategy. However, this is not a call to abandon traditional media all together. Companies must always be aware of their strategies and goals for the enterprise before making decisions that involve major shifts such as this one. Knowing what your objectives are and the messages you are trying to get out to your customer will enable your firm to make the appropriate decisions as to which forms of social media to utilize. Because the technology is rapidly changing and relatively new it would be unwise to make a complete switch to social media and abandon all other forms of traditional media. <br />“Failure to consider the total impact of one driver on sales – and thereby allocating budgets based only on the direct impact associated with each driver – could cause executives to misallocate their marketing dollars.” When making your marketing mix decisions it is important to keep in mind the diminishing economic returns of each media channel, the interaction effects between channels (such as television campaigns that drive consumers to your blog which then converts to a sale), and separation of causality (internal and external competitive forces). <br />

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