Archive for December, 2010

Posted 21 December 2010 09:13am by Patricio Robles in eConsultancy

It has been a long time coming, but according to new stats, the internet has achieved a significant milestone this year: it surpassed newspapers to become the second largest ad medium.

Specifically, eMarketer predicts that by the time 2010 is finished, marketers will have spent just under $26bn on online ads, up nearly 14% year-over-year. At the same time, the research firm estimates that newspaper ad spend will have dropped over 8% year-over-year, to just under $23bn.

That spending on internet advertising has surpassed newspaper ad spending is not exactly surprising. Most have expected it to take place for some time. But that doesn’t diminish the importance of the milestone, which says just as much about the rise of the internet as it does about the fall of the newspaper.

Advertising doesn’t exist in a vacuum, of course. Marketers go where the consumers go, and on that front, consumers have been spending a lot more of their time interacting with the internet than they are interacting with print publications, including newspapers.

As Geoff Ramsey, eMarketer’s CEO, noted, “Marketers are devoting bigger shares of their budgets to digital media as they see more customers shifting time toward the web.” eMarketer also points out that, as an ad medium, the internet has also benefitted because it’s generally easier for marketers to track ROI from online ads than it is to track ROI from print ads.

In 2011, there won’t be a reversal of fortunes. eMarketer expects the internet to solidify its position as the number two ad medium, while newspapers continue to see a decline.

But life at the top poses its own challenges for internet advertising. As more and more budget continues to be allocated to the internet, competition will increase. That logically means that, in some areas, prices will increase too. And the ‘internet’ isn’t just one big homogenous blob for advertisers.

Advertisers have a plethora of places to put their money online, from search to social, so those who want to be successful will increasingly have to up their game. Simply throwing money at the internet is not a viable strategy; as the market for internet advertising continues to mature and grow, advertisers will need strategies that are creative, sophisticated and holistic.

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Posted By: Stephanie Reese in The eMarketer Blog

Groupon’s quick success has spawned dozens of copycat daily deal sites, but will these sites continue to flourish? Only if marketers become savvier to the new breed of consumer in today’s digital world.

From a consumer point of view, the problems with the Groupon model are these:

Problem #1: Deals aren’t targeted enough. Groupon subscribers are offered great local deals, but “local” doesn’t always equal “relevant.” A recent visit displayed discounts on everything from jewelry to indie film club subscriptions to colon hydrotherapy sessions. (And let’s face it, some things, like sushi and Botox, just shouldn’t be purchased at a discounted price.)

Niche deal sites—like Plum District for moms and Scoutmob for hipsters—seek to solve this problem, though right off the bat they’re limited by scale.

Although it spurned Google’s acquisition offer, Groupon is taking a page from Google’s do-it-yourself ad-placement playbook in the next iteration it is rolling out. Groupon Stores will allow local merchants to set up deals for themselves without going through a Groupon salesperson. Customers will have the option to follow stores they like, and be alerted to new deals as they’re posted, which if used will make the process more customizable and the ads—potentially—more relevant.

Problem #2: Merchants lose control. Do marketers really need Groupon to blast their own deeply discounted offers (especially when they’re being charged a commission to do so)? Furthermore, wouldn’t they prefer to have control over the deal than cede it to a third party?

Gap, for example, has received lots of buzz as Groupon’s first national partner. While most observers saw the Gap deal as a success, Augustine Fou, chief digital officer at Omnicom’s Healthcare Consultancy Group, said in a Mashable post that the Gap effort “is a prime example of when NOT to use Groupon.” He said that the more press Gap got the more money they lost, estimating that the retailer was out at least $7.5 million from the campaign. Unless that money is considered part of an advertising budget, it’s a dingy deal for big-name national stores.

Once large retailers figure out how to do it, there’s nothing to stop them from hosting their own daily deals. Neiman Marcus, for example, has already followed in flash sales site Gilt Groupe’s footsteps by launching its own branded “Midday Dash” sales. Local retailers with smaller marketing muscles, on the other hand, might find a one-time Groupon run worthwhile for drawing in new customers.

Problem #3: It goes against consumers’ natural instincts. What’s amazing about Groupon is that in a world where consumers have become accustomed to instant gratification, they’ve managed to get people to pay for goods and services they might not cash in on for months—or (as was the case with a spray tan I purchased on a whim) for goods they’ll never remember to use.

Although merchants benefit from this arrangement because they don’t actually pay for marketing until they get a customer in the door, how many times can we expect consumers to take a gamble with their money?

To make their offers more enticing for customers, some deal-of-the-day sites have shied away from the group-buying model. Instead of promising retailers a certain return, they give subscribers a passcode that will get them a discount at the time of check out, or when the restaurant bill is paid.

My favorite example of this kind is BlackboardEats, which sends coupon codes to users for 30% off to a pretty fantastic range of restaurants. No payment up front, no buyer’s remorse and a friendly reminder of the specials you’ve acquired.

Plus, BlackboardEats only features restaurants selected by their staff of experienced food editors, giving it a more exclusive feel. Wonderful for diners—not so wonderful for restaurants when the discounts cut into their slim profit margins (although BlackboardEats, unlike Groupon, doesn’t charge restaurants a fee to participate).

Problem #4: Whether merchants will see return customers is questionable. The success of Groupon tells us that consumers are willing to try new products and brands, but these types of deal sites don’t necessarily encourage brand loyalty. After a consumer has received a great deal on flowers from one vendor, will they return to that same vendor, or look for a great deal on flowers from a vendor of seemingly equal quality?

According to Crain’s New York Business, some restaurateurs are convinced daily deal sites don’t work in their favor. “A lot of them are like mosquitoes on your back,” said Tracy Nieporent, a partner in Myriad Restaurant Group. “They suck your blood and give you a little sting, and they all perceive us as a way to make money.”

And it isn’t only restaurant businesses that are displeased. In fact, in a study done by Rice University, 40% of merchants said they wouldn’t run a Groupon deal again. (However, Groupon CEO Andrew Masonmaintains that 97% of participants want to be featured on the site again.)

For merchants whose goal is simply to bring in large numbers of new customers, Groupon-like deals work well. Scott Bankey, co-owner of the New York restaurant Nolita House can vouch for this. His “Buy $20 dollars worth of food for $10” deal with Groupon exceeded his expectations. His restaurant saw increased exposure through voucher-holders who brought friends, and he got to pocket the money from voucher-holders who didn’t show up at all, he told Crain’s.

Will Bankey participate again? Maybe, but he’s already begun running his own $10-for-$20 promotions, so what’s the point?

Problem #5: Groupon cheapens brands. Even if a consumer does become a fan of a product after purchasing it from a daily deal site, how willing will they be to pay full price for the jeans or gym membership the next time around? As Crain’s points out, Groupon feeds this kind of deal addiction, and as a result consumers will be unlikely to go where they can’t get a good deal.

That is, unless a brand has maintained prestige by never offering mass deep discounts in the first place.

The opportunity for marketers. As consumers become accustomed to never paying full price, merchants and retailers will need to react, without cheapening their brands in the mean time. Maintaining exceptional quality and providing great customer service will always help develop true brand advocates.

But smart brands that want to compete with Groupon will pay more attention to their returning clientele, and offer these best customers more generous and exclusive rewards. “You want first shot at deeply discounted unsold inventory? It’s all yours. A new coupon with every purchase? Here, have two. By the way, have you heard about our friends and family sale? Just keep the tweets coming, please.”

The bottom line: Consumers will always love a good deal. But they’ll also fall harder for their favorite brands when their loyalty is rewarded with great, exclusive deals.

Where do ideas come from?

Posted: December 21, 2010 by FMstereo in General

Posted by Seth Godin on November 25, 2010

  1. Ideas don’t come from watching television
  2. Ideas sometimes come from listening to a lecture
  3. Ideas often come while reading a book
  4. Good ideas come from bad ideas, but only if there are enough of them
  5. Ideas hate conference rooms, particularly conference rooms where there is a history of criticism, personal attacks or boredom
  6. Ideas occur when dissimilar universes collide
  7. Ideas often strive to meet expectations. If people expect them to appear, they do
  8. Ideas fear experts, but they adore beginner’s mind. A little awareness is a good thing
  9. Ideas come in spurts, until you get frightened. Willie Nelson wrote three of his biggest hits in one week
  10. Ideas come from trouble
  11. Ideas come from our ego, and they do their best when they’re generous and selfless
  12. Ideas come from nature
  13. Sometimes ideas come from fear (usually in movies) but often they come from confidence
  14. Useful ideas come from being awake, alert enough to actually notice
  15. Though sometimes ideas sneak in when we’re asleep and too numb to be afraid
  16. Ideas come out of the corner of the eye, or in the shower, when we’re not trying
  17. Mediocre ideas enjoy copying what happens to be working right this minute
  18. Bigger ideas leapfrog the mediocre ones
  19. Ideas don’t need a passport, and often cross borders (of all kinds) with impunity
  20. An idea must come from somewhere, because if it merely stays where it is and doesn’t join us here, it’s hidden. And hidden ideas don’t ship, have no influence, no intersection with the market. They die, alone.

The inevitable decline due to clutter

Posted: December 21, 2010 by FMstereo in Digital Marketing

Posted by Seth Godin on December 03, 2010

Digital media expands. It’s not like paper, it can get bigger.

As digital marketers seek to increase profits, they almost always make the same mistake. They continue to add more clutter, messaging and offers, because, hey, it’s free.
One more link, one more banner, one more side deal on the Groupon page.
Economics tells us that the right thing to do is run the factory until the last item produced is being sold at marginal cost. In other words, keep adding until it doesn’t work any more.
In fact, human behavior tells us that this is a more permanent effect than we realize. Once you overload the user, you train them not to pay attention. More clutter isn’t free. In fact, more clutter is a permanent shift, a desensitization to all the information, not just the last bit.
And it’s hard to go backward.
More is not always better. In fact, more is almost never better.

Posted 15 December 2010 by Seth Godin in Seth Godin’s Blog

Some things sell for not much more than they cost to make. Things like steel.

Others? They sell for high multiples of cost. Spa services, fancy ties, long haul airplane tickets, coaching, books–these are things that might cost a bunch to set up, but once the factory is rolling, the marginal cost of one more unit is really low. The challenge, then, is to find a way to get new customers without alienating the folks that have paid full price. Even better, to turn those new trial customers into loyal customers.

One of the challenges of selling to new customers cheap is that you might end up with a price shopper, someone who is always cheap, someone who will never convert into the kind of customer your high margin business needs to survive.

Priceline was a pioneer in figuring out how to isolate one customer type from another. The reason the original Priceline was so incredibly difficult to use (with blind reverse auctions, etc.) was that they wanted it that way. Anyone who was willing to through that hassle and anxiety to save $100 bucks for a ticket on Delta was clearly not someone Delta was going to have an easy time selling a regular ticket to. In other words, Jay Walker had figured out how to create a second type of air travel. One for cheapskates. The alternative to Priceline was a bus ticket or no travel at all… And Delta was fine with offloading excess seats to them, because they didn’t have to worry about alienating their core customer.

Groupon is a very different thing. Here, it’s not a hassle, it’s the fun factor. Buying this way is exciting, you never know what’s next, you do it with friends, the copy is funny, it’s an adventure. As a result, many Groupon customers in fact do convert to becoming long time patrons of the place they tried, because they’re not inherently cheap shoppers. When they’re on Groupon they’re hunting for fun. But if you offer an astonishing product and great service after they try you, they may convert into shopping with you for the long haul, not because you’re a Groupon replacement, but because you bring them more than the alternatives.

And the magic basket? Tim Ferriss just finished offering more than $1600 worth of high-margin items in a basket to people who bought 30 copies of his new book. The marketing partners get trial among a group of people who are each paying more than the cost of a single item in the basket, these customers are proving they’re not among the ultra-cheap. And the products are quasi-aligned, appealing to the same sort of consumer. Is there a cheaper way for one of these companies to reach this precise person? I’m not sure there is.

Imagine taking this even further and leaving out the book part. A basket of aligned items, all high margin, none from the market dominator, each holding out the possibility of future business… You could do this with an 8 pack ofcomputer games or phone apps, or drink coupons from a dozen bars in the same town, or even clothing for guys size 38. Alex has experimented with this atSwagapalooza. I’m betting that there’s quite a lot to be done in becoming this market creator/differentiator/middleman.

What’s missing so far is an intelligent way to get permission, to follow up, to further organize those that do a trial and teach them and connect them so that they see a further incentive in sticking with the thing they just tried.

What’s also missing is a willingness on the part of high-margin marketers to use their products and these sort of interactions as a replacement for the unmeasurable and largely ineffective lifestyle advertising they use now.

The net, once again, is making it easier to find and organize tribes of people, even for short durations. When you intersect these aligned groups with high-margin products, you can create fascinating commerce opportunities.

Five ways to monetise social media

Posted: December 16, 2010 by FMstereo in Digital Advertising, Social Media

Posted 13 December 2010 09:22am by Chris Moffatt in Econsultancy

New media evangelists proudly claimed that 2010 would be the ‘Year of Social Media’. The real question for me as an Online Merchandiser is how this technology can be harnessed to turn users into buyers.

Any exploration of the idea needs to come with some essential caveats. Firstly, marketers need to consider their audience carefully. Early adopters of new media networks, particularly younger people, don’t tend to respond well to “their” networks being overtaken by people trying to sell them products.

A recent study by Roiworld found that 20% of teenagers now use Facebook less or not at all due to the advertising content. The brand was badly stung by privacy issues relating to advertising in 2008.

Generally speaking, web users don’t mind being marketed to, providing that they have agreed to the nature of contact, and the content is relevant to them. Twitter is all too aware of this issue; as Dick Costolo mentioned at a web conference in Paris earlier this year, “Promoted tweets are not ads. They’re only tweets.

Secondly, companies need to be very aware of the tone of their content. The rules of party small talk apply: it’s generally best to steer well clear of politics, religion and other potentially controversial subjects.

Thirdly, consider the benefits and costs of this fast, direct and mass interaction with your web customers. It’s as easy for an irate customer to post an angry tweet as it is for your best customer to sing your praises.

With that in mind, I present a list of key ideas for turning social media from an interesting diversion into a profit-making activity:

Get involved

Identify key brand advocates by using Google Alerts to spot your brand on blogs, then contact the bloggers and start to build up a relationship with them.

The benefit of having a network of (positive) content writers on tap cannot be underestimated. Also don’t be afraid to respond to customer comments on blogs or tweets.

Be helpful, courteous and polite, and write to customers as if you’re speaking to them on a shop floor, and you shouldn’t go wrong.

Strike a balance

It’s important to pitch your content in the right way, not too casual (you should be business-like) but also not too formal (customers like to see the personal touch behind the corporate face).

In my opinion, examples of brands that get this right are Topshop (read the Inside Out blog), Net-A-Porter’s brilliant Facebook page, and Argos’ enthusiastic tweeting.

Blog, blog, then blog again

Blogging is fantastic for SEO (which, by the way, is far from dead). Loyal customers will enjoy looking behind the scenes of your brand, and you can reward them by flagging up new product ranges, or perhaps giving early notice of sale dates.

Don’t just mention your products in the text of your blog, link to them, offer a “quick buy” button if possible, and use images and video.

Measuring and testing social media activity is vital

Any web analytics package worth its salt will track social media conversions, as well as identifying referred sales. As with any online marketing, testing is the best way to evaluate the success of your campaigns.

Experiment with different forms of content (viral tweets, Facebook posts, targeted CPC advertising, blogging) and find out which works best for your customers.

Motivate your customers

Give your customers the incentive to engage with your brand. Why not run a competition for customers who comment on your blog?

A common Facebook trick is to offer a discount or promotion in return for “Liking” a brand. Similar promotions can be run on Twitter by asking customers to use a particular hashtag in their post.