08 October 2007

Why companies are not marketing online as much as we would all like to think.

A new McKinsey survey of marketing executives from around the world shows that in marketing while companies are moving online across the spectrum of marketing activities, there’s also a problem with Web 2.0.

In July McKinsey surveyed 410 marketing executives from public and private companies around the world, representing industries such as business services, energy, retail, technology, and telecommunications. It asked respondents about the frequency and effectiveness with which they applied Web-based, digital techniques to five core marketing functions: sales, service, advertising, product development, and pricing. It also asked about future plans for digital marketing, including where respondents anticipated spending more money in the future.

However, while the survey shows marketing making a swift transition online, executives also indicate that they are making less frequent use of digital tools, including e-mail and informational Web sites to Web 2,0 tools such as wikis and virtual world.

Their concern, and one that DIFFUSION has seen echoing around the world since the first dotcom collapse, is the lack of capability and knowledge at companies and their agencies as well as an absence of meaningful metrics. It’s particularly notable that more than half of all current advertisers surveyed by McKinsey see this as a barrier—a proportion significantly higher than it is among nonadvertisers. Perhaps, it’s more to do with the fact that media agencies are still selling along traditional lines (see DIFFUSIONblog The Future of the Media Agency 21 July 2007) and so the real returns are still be masked by a fondness for brand building campaigns, rather than tactical activitiy focussed around identifying and selling to distinct customer needs. Hence, pay per click advertising looks great on paper but in reality, if its only ever awareness, and never translates to sales then there is a problem.

It’s also going to be a similar catchcry for companies looking to to reach customers through Web 2.02 tools such as blogs, podcasts, social networking (witness the corporate shutout of Facebook rather than embracing it as a social commerce tool), virtual worlds, widgets and wikis (increasingly being used by corporate to manage company perceptions externally). As the survey notes, will my company and agencies be able to keep up with what are ultimately ever expanding technologies and more competitive usage of these added to increasing customer sophistication and what is now the sheer visibility of global access to goods and services.

The survey reports that in 2010 respondents expect a majority of their customers to use the web as a funnel to discover new products or services online and a third to purchase goods there. A majority of the respondents also expect their companies to be getting 10 percent or more of their sales from online channels in 2010 — though, twice as many companies as have hit that mark today. But while these expectations appear to be driving plans for future spending, at least in some areas, DIFFUSION believes that companies who don’t plan for this expenditure and build capability around it are going to be left behind, not only by competitors but by their customers.

Social retailing goes beyond the media.

As both MySpace and Facebook begin to battle it out for the social media ascendancy, it’s becoming increasingly apparent that for retailers and advertisers (check brand owners) will soon to need to invest in this space to see how they integrate their ecommerce efforts with the customer intimacy social media promises. And this goes way beyond the current brand advertising or brand advocacy.

Social retailing, a term coined earlier this year by US technology consulting firm IconNicholson, combines mobile communication, online networking sites like Facebook with traditional off and online merchandising and it’s coming to a store near you.

In this increasingly brave new world a typical scenario could see us and our friends are constantly online and ready to advise whether those pants really do make our bums look big. And if we do actually venture into a store, RFID tags on items will enable in-store personalized commentary to be displayed about the products we are looking at. Checkout lines nonexistent because we are there either for a pickup, self checkout or even to buy items with our cellphones whilst browsing the store. If we’re signed up to the our local malls, retailers will already know our interests and text-message or bluetooth us personalized coupons and offers as we walk through their doors.

It is a view that has the backing of global technology research firm Gartner, identifying two new groups of emerging online shoppers, what it calls the "solo hunter" and the "social gatherer" in its report Social Shopping Will Shape the Future of E-Commerce released in May this year.

"Online vendors of goods and services that ignore the social dimension, as exemplified by the 'social gatherer' archetype, are ignoring a potentially large revenue component," said Ray Valdes, author of the report.

"These vendors are, in a substantial sense, 'leaving money on the table'.

"Social shoppers seek not just artifacts or information for future use but also an enhanced emotional connection to other participants in the shopping experience.

"Despite a seeming lack of preoccupation with purchasing a particular item," the report continued, "it is possible that the total transaction amount in a social-shopping journey will exceed that of a solo foray; therefore, e-commerce vendors that ignore this dimension are leaving money on the table."

The Gartner report concluded that immersive virtual environments like Second Life and social networking sites like Facebook and MySpace have both an advantage and DIFFUSION notes the opportunity in “supporting peer-to-peer interaction across multiple vendor locations and in enabling spontaneous human social engagement at varying levels of intimacy, allowing collaborative purchases to occur,"

But as we noted in (see DIFFUSIONblog Minority Vision 18 March 2005) some aspects of social retailing are being hampered by the limits of the current technology. As Valdes notes "The limitations of technology on the Web today allow only indirect support for social shopping," he maintained. "The technology platform needs to evolve for more direct support in a more integrated manner."

And this is the immediate opportunity for a whole group of stakeholders including media owners, retailers and advertisers (check brand owners) to start to develop real social communities of interest beyond the solo hunter. Australian companies like Westfield, the world’s largest mall owner, could combine with a social networking site like Facebook or social shopping site Kaboodle to develop a social retailing property for it’s own global portfolio.