Transcript Chapter 1 - York University

Instructor:
Detlev Zwick, Ph.D.
E-Mail: [email protected]
Web Site:http://www.yorku.ca/dzwick/
D IGITAL M ARKETING
W EEK 2
D IGITAL M ARKETING I S
B IGGER THAN T ECHNOLOGY
The Internet provides individual users with
convenient and continuous access to
information, entertainment, and
communication.
 Communities form around shared photos
(Flickr), videos (YouTube), and individual or
company profiles (Facebook).
 The digital environment enhances processes
and activities for businesses.
 Societies and economies are enhanced through
more efficient markets, more jobs, and
information access.

T HE D D ROPS FROM
D( IGITAL )-M ARKETING

Gartner predicted that the d would drop,
making d-business just business and dmarketing just marketing.

Nevertheless, d-marketing will always have
its unique models, concepts, and practices.

Online search

Online data collection

Online marketing strategies
S LOW
APPROACH … WHAT WAS
TRADITIONAL MARKETING ALL
ABOUT ?

When did marketing as a practice come about?

Why?

What has been driving the latest innovative push in
marketing starting in the early 1990s?

What did this event do to marketing?

What did the Web 1.0 bring to marketing?
D IGITAL M ARKETING TODAY:
W EB 2.0

Web 2.0 technologies connect people with each
other through social media, which have created
opportunities and challenges for marketers.
 Power shift from sellers to buyers.
 Consumers trust each other more than
companies.
 Market and media fragmentation.
 Cultural shift (participatory, open,
autonomous)
 New opportunities and new risks for
marketers.
E XERCISE

What to do when it flows?
A C RISIS

FOR MARKETING ?
“Today’s marketing world is broken…We are still too
dependent on marketing tactics that are not in touch
with today’s consumer”


Jim Stengel, Global Marketing Officer, Procter &Gamble
“Used to be, TV was the answer. The only problem
was it stopped working sometime around 1987.”


President GM North America
“Broadcasting an ad on television or in a newspaper
is admitting you have no idea who your customers
are.”

Gary Loveman, CEO, Harrah’s
OR

OPPORTUNITY ?
Today the customer is in charge and whoever
is best at putting the customer in charge
makes all the money. Stephen F. Quinn, Senior vice
president for marketing, Wal-Mart.

Consumers wrest control away from brand
management control freaks...get over it.
Turning your brand over to the consumer is
taking control - and in fact, if you do, they'll
return it to you in better shape. Russ Klein,
President for global marketing, innovation and strategy, Burger King
POWER SHIFT FROM
COMPANIES TO INDIVIDUALS
Ex. Store.ca
A CQUIRING A C USTOMER
FROM S OCIAL M EDIA
OTHER OPPORTUNITIES AND
CHALLENGES IN WEB 2.0
 Internet adoption
matures.
 Online retail sales
reach 7%-10% of all
sales.
 Search engines are
now reputation
engines.
 Improved online
and offline strategy
integration
 60% broadband
adoption at home
 The long tail
T HE F UTURE : W EB 3.0

Lines between traditional and new media are
blurring.

Appliances are converging and becoming
“smart.”

Wireless networking is increasing.

Semantic web will provide worldwide access
to data on demand without effort.
C ONSUMER B EHAVIOR
O NLINE
T HE C USTOMER ’ S S TORY

A typical one-hour adventure in the life of a 25year-old professional, Sue:

Tunes her iPod to the latest Diggnation
podcast while her TV is tuned to CNBCs
Morning Call and her cell phone and PC are
within reach.

Picks up her computer to find a blog
mentioned during the podcast, sees a video
on the blog and texts a friend about the
video.
T HE C USTOMER ’ S S TORY, CONT.
Sue searches for the video title on
Google and finds a job posting on
Vimeo, an online video-posting site.
 She posts a link to the video and Vimeo
site to her Twitter stream.
 Sue is the new consumer: a multitasker
attending to different media
simultaneously.
 How can a marketer capture dollars from
these behaviors?

E XCHANGE O UTCOMES


There are 5 basic things that people do
online:
 Connect
 Create
 Enjoy
 Learn
 Trade
Each is ripe with marketing opportunity.
C ONNECTING O NLINE IN THE U.S.
C REATING & U PLOADING
C ONTENT IN THE U.S.
L EARNING AND G ETTING
I NFORMATION
T RADING O NLINE
IN THE U.S.
21 ST C ENTURY M ARKETING C HALLENGES

Twitter, Youtube, Facebook,
Instagram, and on and on…

FRAGMENTATION!!

Attention

Demand
M ARKETING I MPLICATIONS

Fragmentation makes

reaching

keeping the attention of your customer
ever harder.
W EB 2.0 C OMMUNICATION SHOWS TWO
THINGS :

Consumers love to interrupt!

Consumers love to talk!
=> Give me some examples…
C HANGES YOUR
R ELATIONSHIP

From ‘selling to customers’ to hosting guests

From ‘controller’ of communication (teller of
stories) to enabler of communication (resource
for stories told by others).
D- MARKETING M AP
Consumer
Marketer
Marketer
Consumer
D- MARKETING M AP
Consumer
•Retail sites
•Banner Ads/Links
•Email/Spam
•News Releases
•Blogs/Online forums
•Search Engine Optimization
•Viral/social marketing/Twitter
Marketer
Marketer
Consumer
D- MARKETING M AP
Consumer
•Social search
•Third party and retailer evaluation sites
(e.g. epinions.com)
•Blogs/Twitter
•Wikis
•Social networking sites
Marketer
•Retail sites
•Banner Ads/Links
•Email/Spam
•News Releases
•Blogs/Online forums
•Search Engine Optimization
•Viral/social marketing
Consumer
Marketer
D- MARKETING M AP
•Social search
•Third party and retailer evaluation sites
(e.g. epinions.com)
•Blogs
•Wikis
•Social networking sites
Consumer
Marketer
•Link building
•News releases
•Blogs/Online forums
Marketer
•Retail sites
•Banner Ads/Links
•Email/Spam
•News Releases
•Blogs/Online forums
•Search Engine Optimization
•Viral/social marketing
Consumer
D- MARKETING M AP
Consumer
•Search
•Email
•Twitter
•Company-owned product
evaluation sites (beta)
•Blogs/ Online forums/Twitter
•Feedback sites
•Social search
•Third party and retailer evaluation sites
(e.g. epinions.com)
•Blogs
•Wikis
•Twitter
•Social networking sites
Marketer
•Link building
•News releases
•Blogs/Online forums
•Twitter
•Retail sites
•Twitter
•Banner Ads/Links
•Email/Spam
•News Releases
•Blogs/Online forums
•Search Engine Optimization
•Viral/social marketing
Consumer
Marketer
B UT WHAT ELSE HAPPENS TO
CONSUMERS ONLINE ?

Too many choices!

Information & cognitive
overload!
H YPERCHOICE AND THE
CHOICE PARADOX
We think more choice is better, but there can be
problems with excessive choice:
1. Ability to Choose
2. Satisfaction with Choice
T HE J AM E XPERIMENT
A
Tasting booth for unusual jams in
an upscale grocery story.
A: offered 6 jams
B: offered 24 jams
What percentage of tasters later
purchased one of the jams?
B
Iyengar, S. & Lepper, M., 2000, When choice is demotivating: Can one
C HOICE
AND SATISFACTION
No choice can
be bad.
Excessive
choice can also
be bad.
satisfacti
on
Limited choice
may be best.
Number of choices
B REAKING APART THE CHOICE
PARADOX
E. Reutskaja & R. Hogarth, 2009, Satisfaction in Choice as a Function of the Number of Alternatives: When
“Goods Satiate. Psychology and Marketing, 26(3), 197-203.
W HERE
DOES THIS LEAVE THE E -
MARKETER
( E. G.
RETAILER ,
INFORMATION BROKER , ETC .

?
New Businesses and Business models

Search

Curating & subscriptions model (scommerce)
E XERCISE

Fab.com

Birchbox.com

Mistobox.com

Quarterly.co
In teams, analyze what these sites do?
What need(s) do they satisfy?
Based on your example, identify one additional C&S
idea.
S UBSCRIPTION C OMMERCE
AND C URATED C OMMERCE


Solving the BIG CONSUMER BEHAVIOR
CONTRADICTION OF E-MARKETING:

Balancing the risk of consumers’ cognitive
overload with a need to offer choice

Or: a need for simplicity driven by very busy
lifestyles coupled with the pleasure of trying and
discovering something to one’s own taste in this
contemporary Aladdin’s cave.
Answer: style-masters, professional stylists,
celebrities and experts on a certain field carefully
select a limited and manageable choice of
products
S-C OMMERCE & C URATED
E XPERIENCES

Curation: simplicity, convenience,
personalization and discovery.

Since 2010 there has been a rise in the
number of e-sites offering handpicked item
selections, usually on a subscription model
that combines convenience, curation and the
pleasure of being surprised and taken care
of.
S-C OMMERCE

Curate & subscribe e-commerce sites

cater to a wide range of consumers’ needs (tea
lovers, foodies, fashionistas, new parents, etc)

Subscription fees range from the US$10,000 per
year for a Net-a-Porter shoe-subscription to the
US$39.95 USD for ShoeDazzle and the US$10 per
month charged by Birchbox.
C ONSUMER BEHAVIOR :
C ONCLUSION

Consumers become active

Consumer Attention becomes
fragmented

Consumer Attention reaches limit

Leads to new value propositions

Curate & subscribe
M ARKETING IN THE A GE OF
F RAGMENTATION
N OW,
THE
G OLDCORP C HALLENGE

How do you innovate in Gold Mining??

It was late in the afternoon, on a typically harsh Canadian winter day, as Rob McEwen, the CEO of
Goldcorp Inc., stood at the head of the boardroom table confronting a room full of senior geologists. The
news he was about to deliver was not good. In fact it was disastrous, and McEwen was having a hard
time shielding his frustration. The small Toronto-based gold-mining firm was struggling, besieged by
strikes, lingering debts, and an exceedingly high cost of production, which had caused them to cease
mining operations. Conditions in the marketplace were hardly favorable. The gold market was
contracting, and most analysts assumed that the company's fifty-year-old mine in Red Lake, Ontario, was
dying. Without evidence of substantial new gold deposits, the mine seemed destined for closure, and
Goldcorp was likely to go down with it. Tensions were running at fever pitch. McEwen had no real
experience in the extractive industries, let alone in gold mining. Nevertheless, as an adventurous young
mutual fund manager he had gotten involved in a takeover battle and emerged as Goldcorp Inc.'s
majority owner. Few people in the room had much confidence that McEwen was the right person to
rescue the company. But McEwen just shrugged off his critics. He turned to his geologists and said,
"We're going to find more gold on this property, and we won't leave this room tonight until we have a
plan to find it." At the conclusion of the meeting he handed his geologists $10 million for further
exploration and sent them packing for Northern Ontario. Most of his staff thought he was crazy but they
carried out his instructions, drilling in the deepest and most remote parts of the mine. Amazingly, a few
weeks later they arrived back at Goldcorp headquarters beaming with pride and bearing a remarkable
discovery: Test drilling suggested rich deposits of new gold, as much as thirty times the amount Goldcorp
was currently mining! The discovery was surprising, and could hardly have been better timed. But after
years of further exploration, and to McEwen's deep frustration, the company's geologists struggled to
provide an accurate estimate of the gold's value and exact location. He desperately needed to inject the
urgency of the market into the glacial processes of an old-economy industry. What is he to do?
N OW, THE G OLDCORP
C HALLENGE

form groups of 5.

1) Describe McEwen's problem (strategic issue).

2) Analyze the challenge for reaching Goldcorp's
strategic objective.

3) Based on your knowledge from other
industries and Chui et al.’s points, recommend a
course of action for McEwen.
21 ST C ENTURY M ARKETING C HALLENGES

FRAGMENTATION!!

Attention

Demand

Community and Communication
ATTENTION E CONOMY

Fragmented media

Consumers tuning out or completely skipping
messages


61% of consumers say that marketers and
advertisers do not treat them with respect

69% are interested in products or services
that would help them skip or block
advertising
Poor Information/Metrics on effectiveness
L ONG TAIL (C HRIS
A NDERSON )

Fragmented Demand

Niches are Riches
W HAT IS “N ATURAL
D EMAND ”?

The “Head” of the Demand Curve:


Pre-Internet, old economy firms turned out a
small number of “hits” or blockbuster products
The “Tail” of the Demand Curve:

Internet-era, new economy firms offer a broader
range of niche products.
T HE H EAD

Prior to the Internet, production,
distribution, and consumption focused
on a few hits because of scarcity of
resources:

there simply was not enough time, space,
or money for businesses to offer
everything for everybody.

The 80/20 rule was the dominant
model—20 percent of a business’s
products accounted for 80 percent of its
sales (and usually 100 percent of its
profits).
T HE L ONG TAIL

In markets where technology
dramatically reduces the costs of
reaching niches through one or more
of these powerful forces:

democratizing the tools of production
greatly expands the universe of content

democratizing distribution greatly
reduces the costs of consumption

connecting supply and demand by
lowering search costs of finding niche
content drives demand down the tail.
T HE L ONG TAIL

In the long tail model, these forces allow online
businesses to greatly increase the variety of their
products.

Anderson argues that 98 percent of a long tail
business’s products sell at least one unit in a
quarter

on a cumulative basis, these small numbers of
sales of large numbers of niche products generate
enormous revenues and profits.
IS

THERE A
L ONG TAIL ?
www.rogerebert.com hosts more than ten thousand
reviews and its Web traffic statistics show that even
the most popular film represents less than 1 percent
of their business.

In June 15, 2006, "The Da Vinci Code" and "Brokeback
Mountain" were tied at 0.8 % of page views

the next most requested reviews in 2006 were for "V for
Vendetta" (0.7)

"X-Men: The Last Stand" (0.6)

"An Inconvenient Truth" (0.5).
The lesson: People are curious about a lot of different
movies."
IS

THERE A
L ONG TAIL ?
The Long Tail of Holiday Music.

eMusic had 1,226 holiday albums in the catalog

1,128 had been downloaded over the Christmas
season.

That's 92% of the catalog!
Source: Digital Audio Insider, 2007
TO S UMMARIZE :

In virtually all markets, there are far more
niche goods than hits

The cost of reaching those niches is now
falling dramatically.

Simply offering more variety does not shift
demand by itself. Consumers must be given
ways to find niches that suit their
particular needs and interests. A range of
tools and techniques—from
recommendations to rankings—are
effective at doing this.
TO
SUMMARIZE CON ’ D

Once there’s massively expanded variety
and the filters to sort through it, the
demand curve flattens. There are still hits
and niches, but the hits are relatively less
popular and the niches relatively more so.

All the niches add up. Although none sell
in huge numbers, there are so many niche
products that collectively they can
comprise a market rivaling the hits.

Once all of this is in place, the natural
shape of demand is revealed. That shape
is far less hit-driven than we have been led
to believe.