Friday, June 26, 2009

McKinsey’s Lesson for Marketers – Focus Less on Push and More on Pull

For years marketers have used the metaphor of the “funnel” to explain the process consumers go through when making purchase decisions. The theory being that consumers begin their journey towards purchasing a product at the top of a funnel where they have several, if not more, brands on their short list.

As they proceed down the funnel, so the theory goes, consumers become more familiar with the features and benefits of each brand. Ultimately, the funnel narrows and those brands deemed less desirable are rationally and deliberately eliminated by consumers save for the one that best meets their needs and requirements. At least, so the theory goes.

For better or worse, this framework has been at the core of many a marketing plan for a good part of the last half century. The result - marketing plans that almost exclusively focus on pushing messages (or offers, discounts, etc) at consumers at each stage of the funnel with the intent of moving them towards a purchase.

The Consumer Decision Making Process in the Digital Age
Not surprisingly, many have questioned the validity of this model on grounds that it’s overly simplistic, too rational, or that it fails to account for the increasing media fragmentation of the digital era. Now, a new study and report from McKinsey validates these skeptics.

The report, “The Consumer Decision Journey,” issued earlier this week was the output of a study McKinsey fielded that examined the purchase decisions of nearly 20,000 consumers across five industries: automotive, auto insurance, cellular carriers, personal computers and skin care. The key finding: the Internet, the rise of consumerism and a marketplace marked by an increasing array of product options have made push based marketing less relevant and, in many instances, less effective.

The study partially discredits the funnel metaphor and makes the case for a consumer decision making process that is less linear and more bi-directional where the consumer has increasing control over where, when and how they engage with a brand.

But what I find really interesting about the study was the finding that, incredibly, two-thirds of purchase influences during what McKinsey calls the active-evaluation phase involve consumer-driven activities such as Internet reviews and word-of-mouth recommendations from friends and family.

Two-Thirds of Purchase Influences are Driven by Consumer-Driven Activities

In the Digital Age Consumer Outreach to Marketers is More Important
If anything, the study confirms the urgent need for brands to invest less in push-based advertising campaigns, and more in pull-based experiences that deliver relevant and informative brand-to-consumer interactions where decisions are being made.

The obvious places to start would be by delivering more engaging and usable Web and point-of-sale experiences. It’s also clear that leveraging the word-of-mouth power of the social Web should also be at the top of the list.

While there is clearly a continuing place for push-based marketing, an over emphasis on these types of tactics will not only prove ineffective, they might also indicate that a brand is out of touch with its consumers. In an industry where perception is reality what can be worse?

Wednesday, June 17, 2009

Who says Twitter doesn't have a business model?

Is it possible Twitter may have finally stumbled into a way to monetize its business? Well, maybe.

According to Reuters, over the past two years Twitter reportedly helped Dell sell over $3MM in products to its Twitter followers who were directed to Dell e-commerce sites from posts they placed on Twitter. Dell, apparently, posts on Twitter several times a week and offers up coupons and promotions to its followers (all 600,000+ of them).

While $3MM for a company the size of Dell isn’t exactly a groundswell, it’s something. And although Twitter is not charging Dell for these referrals it hasn’t ruled it out as something they might consider in the future.

Maybe this is the beginning of a vertical application strategy for Twitter where developers using the Twitter API build apps for companies to hawk their wares in a way that generates Twitter fees (e.g., either on a licensing or per transaction basis).

Another strategy that has been kicked around has Twitter monetizing itself by selling its platform as a tool to track public sentiment about a brand (a product, service, politician, or what have you) or other topics of interest to researchers. The problem, at least as I see it, is that the very free nature of Twitter seems at odds with this approach.

Finally, others have suggested that Twitter be used as a vehicle for delivering targeted ad messages to its users. Whether these would be served up in the context of tweets (which seems problematic) or in custom applications built using their API (which seems more promising) is anyone’s guess.

Whatever the approach, the enormous number of people who use Twitter and the passion in which they monitor their messages makes it an incredibly value platform. Now all it needs is a strategy.

Monday, June 15, 2009

Forrester’s Lofty Vision for the Social Web

Wondering what social networking will look like a few years hence, or how it will impact your business or brand? Then look no further than the recently published Forrester Research report: “The Future of the Social Web.”

The report, penned by social media guru Jeremiah Owyang and team, provides an ambitious vision for the social Web and lays out a roadmap for its evolution starting with the birth of the commercial Internet in the mid-90s.,7211,46970,00.html

After reading the report I’m convinced that if even half of what Forrester predicts is true, it portends dramatic changes for both how people will experience the Web in the near future and how they will choose to engage (or not) with brands online.

According to Forrester, the social Web has grown (and will continue to grow) through five “eras” of evolution:

  1. The era of social relationships – starting in the mid-1990s this era involved basic community sites like AOL and social tools such as forums, discussion boards, blogs, etc.
  2. The era of social functionality – the period in which we currently reside where our social experiences are moving beyond just “friending” to include richer sharing experiences and interactive applications (like Facebook apps), but with the inherent limitation that peoples’ social experiences are, for the most part, limited to the sites they are visiting at any given time.
  3. The era of social colonization – starting later this year as a result of the growing adoption of universal authentication technologies like OpenID, individuals will be able to surf the Web without leaving their preferred social networking platform in a way that will allow them to bring their network along for the ride.
  4. The era of social context – starting sometime next year as these new authentication technologies become universally adopted, sites will begin to recognize people’s personal identities and their social networks. This will enable much more robust and personalized social experiences and will result in the social Web becoming the core of most people’s Web experience.
  5. The era of social commerce - here’s when, at least according to Forrester, things will get interesting. As a result of the increasing personalization that social destinations will offer, people will be more willing to share personal information with sites in exchange for more valuable and relevant experiences. The result – a self-fulfilling virtuous cycle that will further expand the influence and scope of the social Web as it becomes more meaningful and useful.

Implications for Brands and the Traditional Advertising Model
This evolution will have deep and lasting effects on brand management and advertising as we know it. Already, numerous studies show that advertising is not considered credible and that the opinions of friends and peers are far more important in terms of informing and influencing consumer attitudes towards companies and brands.

By putting even more power in the hands of consumers in terms of when, and under what circumstances, they chose to have brand interactions, it’s hard to see how this trend won’t continue the declining credibility of advertising. Brands, in response, will be forced to shift their focus to building and managing online communities and advocates as a way to get their message out and build equity with consumers.

For brand and advertising managers the message is clear – start thinking now about how you’re going to cultivate these communities and advocates in the future because it’s nearer than you think.

Sunday, June 14, 2009

Pandora’s Geo-targeted Ads Latest Example of Online Advertising Beyond the Banner

There’s been quite a lot of talk lately on how some Web publishers are moving beyond standard banner ad formats in favor of customized units as a way to increase viewer engagement and clicks. And no wonder with click-through rates for standard IAB banner formats on the decline across many properties.

One big shift, especially among social media sites, is to integrate ads squarely into page content as opposed to on the periphery of a page like most banner units. For example, social news site Digg just recently began flowing ads into the stream of its page content as a way to increase subscriber interaction.

Another good example of this is music service’s placement of ad units squarely into its music player. But Pandora is taking it a step further by adding geo-targeting to the matter.

For example, this morning while logged into Pandora an ad was served up by the Paper Mill Playhouse, which is several blocks from my house, for the musical play “The Full Monty.” Obviously I was targeted for this ad based on IP information from my browser.

I could only wonder if they are also using information about my music preferences (which as a subscriber is stored in their databases) as a way to serve up ads that would be of interest to me. For instance, knowing I like indy rock an ad for “The Full Monty” makes sense – but for "South Pacific," probably not. Some might think this is a little creepy – I don’t, just a way to deliver more relevant and useful information.