The customer takes over
In addition to the well-known forms of Internet-based marketing, a number of innovations in the Web 2.0 environment have either newly emerged as so-called “consumer-generated content” (e.g. blogs as user-created online magazines) or have grown considerably in importance (e.g. search engine marketing or various forms of content sharing).
In the new “get involved Web”, users praise and criticize products and companies without inhibition – today consumers already produce more marketing information than the companies themselves. This means that companies are increasingly losing control of their own market and brand management. The constant increase in Internet use hides the fact that media consumption time is incrementally shifting from classic media and static Web sites towards the “social Web”. The “get involved Web” is more interesting and credible from the user’s point of view, and is therefore currently growing rapidly. The new Web 2.0 portals live off user-generated content. People write their thoughts on products and companies honestly. This usually seems more credible to the reader than traditional marketing messages. From the company’s point of view, intelligent use of the Internet requires and offers authentic dialog with the consumer – both individually and with the entire community. Applications such as www.mystarbucksidea.com or www.nikeid.com reduce the isolation between customers and cultivate groups of customers with a special interest focus. The collaborative feedback and suggestions from customers then can be incorporated into the regular and company official customer service Q&A area.
The changing landscape for marketing
Social communities will serve as “filters of trust” for consumers and will force to make the often discussed “integrated campaign” mantra a reality. The changes currently occur at least in 4 dimensions and phenomena, which are pretty interrelated:
- Changing media consumption
Studies have shown that even for stand-alone classical advertisement campaigns the respective user numbers and hits – e.g. on Google – increase significantly – even without any online campaign being in place nor planned. In future all campaigns and marketing activities will be digital – if planned by the originating companies or not. As the collaborative, actively content-producing consumer (the “prosumer”, according to Don Tapscott) proliferate, companies have increasingly tough choices about how to interact with them. While previous generations spend up to twenty-four hours in front of the television per week, the upcoming, net-affiliated generation grows up interacting, peering and collaborating with each other. The decline of classical media consumption is over-compensated by the use of bi-directional, collaborative interaction channels. While the consumption of classical media declines and has been overtaken by Web based communication and collaboration, the time spent online is already three times the time on classical media.
- The long-tail – from blockbusters to the niche
The core of the long tail concept is the consideration that the long tail of the market – that is, that group of products which cannot be carried in stores because individual sales are too few – can make up a considerably greater share of the total sales volume of a company than what the Pareto principle would actually lead us to expect. As a result, a reorientation of the product range in terms of the offering would actually need to occur – away from “hits”, towards the niche. Therefore, it could be lucrative for online markets to orient the product range towards less popular products intentionally. In contrast to retail stores, online markets offer almost unlimited shelf space, so that even products with low individual demand can be included in the product range. Small individual sales can only be cumulated to generate a profit with Internet sales. This also has the quasi side-effect of addressing customer groups that were previously small and geographically separated. Thereby, niche products can also meet a critical demand. The long tail phenomenon is supported by a change in demand behavior: powerful search tools and recommendation systems, especially Web 2.0 applications (blogs, social networks, etc) support this development and lower the search costs for consumers. This may make it more profitable for the customer not to buy the most well-known, popular products, but to carry out further and more detailed searches. The emphasis is on finding a product that matches individual preferences more closely than the popular product that is principally in demand on the general market. While Mass Customization has been discussed already for a longer time, now it comes into effect and to market, utilizing the long-tail effect.
- Diminishing cost per lead
In parallel and as a result, the cost per lead declines from ca. 10 US-$ in direct mailings to only 0.29 US-$ in search engine marketing.
- The need for enhanced customer services and integration of interaction channels
The customer requires a seamless customer experience in the Amazon.com style, connecting various communication channels and media with each other.
Implications for marketing and information management
This implies the need for more, far more targeted activities and marketing campaigns per year per target group, yielding higher response rates on one side – but also requiring more efficient processes on managing the multitude of different campaigns, processes and workflows in parallel. With regard to the change in media consumption, a further enhancement of the marketing mix optimization seems inevitable. And it is in parallel also required to find ways to permanently identify the needs for the likes of these “prosumer” individuals. A move towards Web 2.0 will demand some very specific skill sets in an organization that didn’t exist before – e.g. community managers or journalists for editing the content and communication across all customer interaction points. On the data management side, a broader set of transactional data has to be managed and analyzed. Text mining technologies foster on recognizing patterns out of unstructured data such as comments in blogs. In addition, the CIO portfolio has to be extended and has to include at least three new management areas – from cooperative technologies management (such as self-organizing mesh networks, community computing grids, or peer production networks), community engineering management (such as lead user communities) or information filter management.