Traditional Marketing Faces a Challenge Today
Mary is a bright young girl born at the turn of the century, who loves her phone. She uses it for a number of things and checks it every few minutes. It is an addiction. Young people like Mary can’t do without 24/7 connectivity and their behavior is changing because of that. Consequently, how they search and buy things is changing too. The traditional marketing model no longer works and businesses have to change in response to tectonic changes in human behavior. Companies have to cater to a growing population of connected consumers like Mary, and we follow her in this book, discovering the huge changes that she and people like her are causing. In this chapter, we look at changes in the way that companies will do business.
There was a time, not very long ago, when companies relied on similar marketing methods to get their idea across to consumers. Newspapers and television carried ads into people’s homes. The daily dose of entertainment and news also slipped in advertisements that showed beautiful people using those products and living happily ever after. Then the companies waited as people rushed to stores to buy their soaps and lotions and the great things that had made the people so wonderful and happy.
Marketing consisted of periodically spraying consumers with advertising in the manner of using sprays on insects: The spray and pray strategy worked for a while, after which the little things got immune and newer sprays had to be invented. Consumers similarly got immune after a while and then newer ways of persuading them had to be found.
The advertising sprays worked for many years, riding on the power of mass media. But then, the media started fragmenting. Channels and newspapers multiplied. Marketing managers did not know who was watching what. The invention of the remote control further spoiled the traditional model: It gave consumers the power to zap advertisements. Companies were losing the means to reach their customers.
This was not all.
The IT industry then reduced the size of computers and placed them on people’s laps. People could now choose what they wanted to watch and when, rather than depend on TV channels or newspapers. Mobile phones further put small screens in the hands of people which they could carry wherever they went. Consumers no longer relied on mass media now, but could watch or read anything, anywhere. The marriage of mobiles and IT gave more power to consumers—they could do much more now—connect with friends, post comments and reviews, engage with brands, or tell them off, even while doing many other things (Exhibit 1.1).
A Day in Mary’s Life
Mary wakes up, gets ready for work, and hurries to the subway station. At the gates, she swipes her watch at the turnstile, which reads the code on it and the gates open for her. In the train, she remembers she has to buy groceries, she needs a new dress, and a beep on the phone tells her that the birthday of a friend is approaching. She settles down on her seat and uses her phone to place an order for groceries on a site she trusts. It already has a shopping list based on her past purchases and all she has to do is tick whatever she needs. Payment is made seamlessly by pressing her thumb print on the screen.
Next she decides to look for a dress and browses several of them. When she gets down from the train, she grabs a coffee from a kiosk and pays by swiping her watch. A screen at the kiosk displays dresses similar to the one she is searching. One of them catches her eye and she takes a picture of the Quick Response (QR) code on her phone.
At work, she is busy in the morning; but when she is free, she tries the dresses she had browsed earlier on a virtual model that looks like her. When she shortlists some, she sends it to her friends for their opinions. Her friends immediately respond with their comments and also send her links to reviews that others have posted.
After office, she goes to her favorite store to try out some dresses. The store manager greets her by name and shows her dresses on 3-D displays and virtual models. Her friend, who has tracked her through an app, walks in and the two girls look and select a dress.
Unfortunately, the dress that she selects is not available in her size. The store manager uses his tablet to see if it is available in another store. An order is placed.
By the time she gets home, her groceries have been delivered. Soon a drone arrives with her dress and she excitedly tries it on.
Tectonic Changes
This represents a tectonic change in human behavior as never before. Consequently, companies have had to make changes in the way they make marketing plans because the traditional ways of communicating with and engaging people have changed (Figure 1.1). The smartphone has changed the way we go about our lives in many ways as follows:
Figure 1.1 Changes in human behavior are forcing marketing to change, which in turn is inducing change in the ways of doing business
Frelin (2013) writes, “Digital has resulted in profound shifts in the business of marketing, with innovation dramatically increasing the ability to target and engage with consumers.” Apps allow customers and companies to interact with each other in progressively better ways.
People are giving mass media the go-by and are instead perpetually using their mobile devices or checking them: It has become an addiction. A report by Flurry Analytics says that an average mobile user launches an app 10 times per day, but a mobile addict launches them more than 60 times each day. By tracking 500,000 apps on 1.3 billion mobile devices, Flurry has deduced that the number of mobile addicts grew from 79 million people to 176 million people between March 2013 and March 2014—an increase of 123 percent.
Another study reported in Time (2014) says that 73 percent people admit to feeling panicky if they misplace their phone. Many users exhibit compulsive behavior: They feel the urge to check up their phones every few minutes. About 25 percent mobile phone users admit to checking their phones while driving. Smartphones are changing human behavior in many ways. The study found that:
All this requires a change in approach by the marketing managers. Companies realize that they have to modify their strategies to align with the changing aspects of human behavior. They have to get a foothold in consumers’ minds even as they do things on their mobile phones and other connected devices.
They face several questions. How are they going to spray the customers with marketing when nobody knows what channels they are using? How are they to reach customers with their lovely ads and the sales pitches?
So, is traditional marketing dead? Do we need to reinvent our thinking?
Several business thinkers have echoed this thought. Indeed, traditional marketing faces a challenge in trying to understand consumer behavior in the era of digital marketing. Lee (2012) writes that traditional marketing methods are dead, because consumer habits have changed. He points to a paradigm shift in consumer behavior: Rather than encourage customer advocacy with cash rewards and inducements, the new marketing tries to create social capital through affiliation networks and gives them access to new knowledge. The decline of traditional marketing has been due to the following causes:
In a connected, data-abundant world, customers are unlikely to be swayed by sales pitches. Now they are online most of the time, at home, in office, and even while traveling. Companies, which earlier relied on mass media to reach customers, have no option but to follow their customers online. But this is easier said than done: Any intrusion by a company into personal virtual lives is not welcome, and will be blocked out or severely punished. So, companies have to devise ways to fit in with what people are doing online. That is why they have to understand contemporary culture, which is changing today because of the following four factors (Rob Fields, 2014):
This means that the old ways of marketing certainly require a rethink. Companies have to find ways as to what works in the new environment and what does not.
So What Works?
The new marketing must gear toward peer influence, community-
oriented marketing, and customer relationships. As Pearson (2011) explains, “The fundamentals have changed, as have the means and methods to define targets, to create more productive encounters that provide more opportunities to sell, to develop deeper and more significant insights, and to exploit singular points of difference.”
The problem is that in the online world, companies no longer control marketing stimuli. People choose their own content themselves and are quick to avoid overtly commercial messages they are not interested in. They are having love affairs with their phones and do not want any undesired intrusions in their personal space. This makes the task of companies quite difficult, as they now have to find out how best to make the consumer interested and how to design sales pitches to them.
Digital strategy has to ensure that product messages are where the consumer is, that is, on their mobile devices. But since people do not like to be disturbed when they are doing things on their devices, companies have to look for ways to leverage social media presence, or provide interesting apps or content that makes the customer want to engage with the brand. The challenge is to get a foothold in consumers’ minds as they browse and interact with others online. This is easier said than done, of course, since people dislike spam and are quick to block unwanted messages and calls.
Understanding today’s consumer behavior involves finding out:
Consumer behavior study reveals that people are not buying the way they used to—by narrowing choices as they went along—but embark on journeys of discovery, discussion, purchase, and advocacy.
Consumer Decision Journey
Online consumers buy differently. Today the consumer decision-making process is more likely to be explained through the consumer decision journey (CDJ).
Traditional marketing has depended on the purchase funnel to understand consumer behavior. According to this, the consumer moves over four stages when exposed to marketing stimuli and is explained by the AIDA model. First people become aware of a product or brand, which is followed by interest and desire, and finally action, or the purchase decision. This is logical, of course, since the customer starts with a broad range of choices and gradually narrows them down. A large number of people become aware due to marketing activities, but progressively fewer numbers remain interested and fewer still actually buy the product. It is a linear model, represented by a funnel that keeps getting narrow as people move from one stage to the next.
Today people do not move in a straight, linear path from one stage to the next. They look for information from multiple sources, seeking advice from their friends, checking out opinions of others online, and interacting with friends, companies, and media at every stage of the purchase process. The decision-making process is thus more complex and can change at every stage.
A consumer’s purchase path today usually begins with the consumer getting influenced by someone, going online to search and talk about it, and getting information or reviews. In this new purchasing behavior, companies must set up digital interactions at all stages, right from the intention to purchase to the postpurchase stage. The process, called the CDJ, is shown in Figure 1.2.
Figure 1.2 The consumer decision journey
Exhibit from “The consumer decision journey”, June 2009, McKinsey Quarterly, www.mckinseyquarterly.com.
Copyright (c) 2009 McKinsey & Company. All rights reserved. Reprinted by permission.
The concept was developed after examining the purchase decisions of 20,000 consumers by McKinsey. Its authors Court et al. (2009) write, “CDJ combines all elements of marketing—strategy, spending, channel management, and message—with the journey that consumers undertake when they make purchasing decisions but also of integrating those elements across the organization.”
The CDJ shows that there are many influences on the consumer before the decision-making process, and these do not proceed step by step. People do not depend on one-way communication from the mass media any more, but use many different sources of information. It is a two-way conversation now, and companies have to satisfy customer demands for transparency and information and also manage word-of-mouth (WOM) interactions.
The consumer decision-making process has become more like a circular journey with four primary phases: consider, evaluate, buy, and experience. Edelman (2010) further explains the last stage as enjoy, advocate, and bond. The last stage is important as consumers will bring others to the fold by sharing and broadcasting their positive experiences. The new CDJ can be summed up as CEPEA—consider, evaluate, purchase, enjoy, and advocate. Companies have to build their strategy around consumer experience planning (CEP) that delivers the brand promise coherently and consistently along touch points of the CEPEA journey, as explained below.
Consider: The CDJ begins with products that a person is aware of, or the consideration set. Earlier, this set contained a large number of brands, but today’s consumers have reduced the number of products they consider. They are guided by ads or store displays, but more importantly, by recommendations of friends or someone they know and trust.
Evaluate: Next, they seek advice and inputs from a variety of online and offline interactions with peers, reviewers, retailers, friends, the brand, and its competitors. New brands are added to the set and some are discarded. The two-way communication is part of the evaluation process.
Buy: Before they buy, people like to check out products in a store. They like to see and feel the product, its packaging, and enjoy the purchase experience. The physical purchase may be made online or offline, but each element at the point of purchase is important and can result in acceptance or rejection of the product.
Enjoy, advocate, bond: After buying, people like to enjoy the product, talk about it, and bond with people who feel the same way. It is a crucial step in the consumption cycle, which is ignored by the purchase funnel analogy. They develop a deeper connection as they experience the product and share their experience with others. Many consumers, in fact, conduct online research about the products after the purchase. If they are pleased, they post positive reviews, share it with friends, and advocate the product or brand, contributing to WOM publicity. Conversely, a bad experience is also broadcast instantly.
There are two implications of this.
The CDJ and the digital transformation also impact the way that customer value is created.
Customer Value Creation
Customer value is created by using all the characteristics of the digital interaction. Pine and Korn (2011) describe a multiverse which reshapes the landscape by altering three dimensions—time, no-space, and no-matter. Technology extends each of these dimensions for value creation:
Companies have, therefore, to fuse the real and the virtual worlds the same way that customers do. They do this in various ways. Courier companies let customers track packages through their websites. Restaurants enhance their real places with Wi-Fi access. Apparel retailers help people try out new clothes on virtual models and help them select what suits them best. Some companies that have used digital value creation in their business models are described in Exhibit 1.2 that follows.
Digital Value Creators
Some amazing and unique businesses have resulted because of digital value creation. Others have transformed themselves to be more relevant to their customers. Take a look at some of the successful companies:
Airbnb: Airbnb helps people rent out rooms; customers get lower rates than a hotel would charge, while the owner makes some extra money. “We verify personal profiles and listings, maintain a smart messaging system, so hosts and guests can communicate with certainty, and manage a trusted platform to collect and transfer payments,” says its website.
Starbucks: Starbucks’ app is an easy-to-use payment and loyalty card, and helps customers find location of Starbucks stores in unfamiliar cities. It also provides pick of the week music to keep people entertained while they are waiting in line. The company realizes that the app is about relationships, not marketing.
Krispy Kreme: The store has a HOT Doughnuts Now light that lets customers know when hot doughnuts come off the line. Now the company connects that light to the Internet through an app: It alerts customers when hot doughnuts are being made at a store near them. The company found its Hot Light app more powerful than placing ads in traditional media.
The lesson from these companies is that companies have to be more focused on their customers and their purchase journeys. They have to find out customer problem and solve them through the connected device. Only then will customers respond to the companies’ marketing efforts.
These companies show that the digital invasion is an opportunity to add value to a firm’s current offerings. Some companies do so by offering online services like Google and Facebook. Others use the Internet as a distribution channel, selling software and music. Many other companies use it as an electronic store. New opportunities are being created. According to McKinsey (2012), connected consumers give rise to three key trends in digital business—big data and analytics, digital marketing and social-media tools, and the use of new delivery platforms such as cloud computing and mobility. The report says that though there are high expectations of value generation because of this, many companies were not ready to meet the challenges created by these trends.
However, companies can create value for the customer using the tools and technologies available easily today. The Internet offers a way to talk to and track customers as one-to-one marketing evolves. This leads us to rethinking the four Ps of marketing.
Rethinking the Four Ps
It is clear that conventional thinking on marketing will not work in the new digital realities. It is time to rethink the basics of marketing to serve connected customers. Webster and Lusch (2013) say that a new marketing concept is emerging that must keep into account the following:
Ettenson, Conrado, and Knowles (2013) suggest that the four Ps of marketing can be thought of as shifting the emphasis from products to solutions, place to access, price to value, and promotion to education (solutions, access, value, and education, SAVE). The focus of marketing as given by this model is summed up below:
Such a shift in thinking is required to enhance customer experience across channels. The basics of marketing need a change, as summarized in Table 1.1.
Table 1.1 Online consumer behavior and marketing strategy
Product |
Individualized and augmented products Digital products and services Products not carried in inventory in physical stores Get over the limitations of space and offer unlimited product choices online |
Price |
Offer value to customers and make their lives easier Easy comparison of prices, cash on delivery facilities Deals and discounts; tie-up with banks and easy payments Algorithm-based pricing based on supply and demand |
Place |
Quick and continuous access through virtual shop fronts, interactive displays Try and buy facilities Real-time inventory tracking across channels and delivery |
Promotion |
Educate customers by providing complete information Encourage WOM publicity, C2C communications Focused promotional messages rather than annoying people Multichannel promotion, integration of online and offline messages |
People |
Trained store and delivery personnel with online access Absence of pushy salespersons; trained salespersons with tablets Advice and support online through chat and other means Automated processes and customer service |
Physical evidence |
Website design, on-site assurance, refund policies Independent reviews, try and buy facilities Physical stores augmenting online experience |
Process |
Quick order-taking, delivery, tracking, and delivery processes Transactional and internal communications Integration of business processes |
While companies respond to changing behavior by modifying their approach to marketing, many traditional businesses and bricks-and-mortar retailing companies feel threatened—and rightly so. Sales volumes in physical stores have declined in many countries as volumes of online merchants have skyrocketed (see Chapter 2). Many businesses—travel agents, music and book stores, brokerages, and the like—have been sucked in by online portals. Businesses that thrived by leveraging scarce information have suddenly become extinct. Companies today need strategies for coping with these tectonic changes.
Coping with Change
Change is coming faster than expected, and companies are trying to cope with changes in consumer behavior in a variety of ways. Businesses, big and small, have to learn to do business in times of perfect information. Rather than fight something that cannot be stopped, they have to learn to use the new technologies to help in their businesses. In fact, online technologies open up a host of opportunities through the following:
Changing Retail
Walmart has added its In-Store Mode to its iPhone app. Consumers who launch the app in a Walmart store can scan the bar codes for price checks, customer reviews, and information about the product. The app also helps consumers in accessing the latest ads, discounts, and QR codes, which help lower the prices listed in the store.
Similarly, Target shoppers can use the Shopkick app, through which consumers earn points, or kicks, by scanning merchandise in the store. The kicks can be redeemed for things like gift cards and iTunes downloads. Target hopes that people who scan the goods will be more likely to buy those goods in the store.
Best Buy allows customers to shop online in stores, even if they do not have mobile devices. Salespeople equipped with tablets and other devices help shoppers find more detail on the products and look up reviews while in the Best Buy store.
The grocery chain Safeway introduced the Just 4 U digital savings program at its stores, which sends personalized deals to shoppers when they are in the store. Such deals make customers buy from the store immediately rather than waiting to compare prices elsewhere.
Another factor that underlies online shopping is the element of fun. Customers like to share their searches with friends, post pictures with their products on social sites, and enjoy getting liked, and discuss and seek opinions. The High Street, on the other hand, has attracted people because it is fun to go out with friends. Can brick-and-mortar stores bring back the fun into shopping?
Bringing Back the Fun
Retail companies try to bring back the fun into the shopping experience as a means to get customers into stores. Shopping for fashion and some expensive items has traditionally been a social activity: People like to hang out with their family or friends, eat together, and share experiences. Global shopping malls are trying to bring back the social and fun experience into shopping as a means of countering online buying.
The experience that people had on the shopping street is sought to be replaced by online search for bargains and social sharing in online buying. Clifford (2012) reports how Glimcher Realty Trust, which owns and manages shopping malls in the United States, is trying to make the malls fun by leasing out space to businesses that do more than sell stuff. By adding shops offering laser salons, giving hairstyling lessons, and teaching clay modeling, it hopes to bring the social experience and wean customers to shop as well. The idea is to involve people in fun activities like getting their hair done, or making pottery, soap, or a cake, with their friends.
As a result, shoppers in the United States will find such businesses in malls:
Managers have realized that shopping malls would not work by themselves, and had to look for game-changing approaches. So, a number of add-ons are being offered, so that consumers get opportunities to do something meaningful, giving them a reason to visit the mall. Concept stores offering the experience often help in sales of other stores in the mall as well.
Aubrey and Judge (2012) write that far from sounding the death knell for the physical store, the new environment opens an opportunity for brands with bricks-and-mortar retail stores. Brands and stores have to reinvent themselves so that they deliver on four fronts: experience, service, consumer-focused logistics, and integration into its omnichannel system. Indeed, connectivity is having a cascading effect on businesses.
Cascading Effects
As bricks-and-mortar companies face up to changed realities, e-commerce companies have found 24/7 connectivity a boon. We explore the boom in e-commerce in Chapter 2. The buying behavior of customers like Mary is discovered in Chapter 3. Little does she know, but Mary and her tribe are forcing companies to change, affecting the marketing organization of the future, which is explored in Chapter 4. How companies track Mary through powerful tools such as data mining and analytics is explained in Chapter 5. Mary does not read newspapers, and how marketing communications and advertising are getting impacted is described in Chapter 6, while the tools to measure marketing ROI are described in Chapter 7. Finally, we attempt to see where we are heading and describe future scenarios in Chapter 8.
The rules of traditional marketing are being rewritten, as this chapter shows. But what we are seeing is a transition phase. In an interview with McKinsey (2013), Cisco’s Chief Technology and Strategy Officer Padmasree Warrior said, “Today only 1 percent of what can be connected in the world is actually connected.” That is, there is a lot more that will be connected in the times to come. The constant connectivity is, of course, a boon for e-commerce companies, who use it to sell products.
18.218.70.93