Online consumers say: Make me an offer

A recent Ad Age/Ipsos Observer survey of 1,000 online consumers found the No. 1 thing they want is discounts on products or services. 65 percent of respondents asked for coupons, outranking better customer service, games and entertainment, or news. At first glance this seems depressing for marketers who try to decommoditize their service by focusing on brand aspects, aspirational values, or service quality offerings ... so let's explore.

1. Absent a relationship, price matters. Most consumers don't have relationships with most brands; think about the brands you care deeply about, and you'll likely stop at a handful. So any online marketing contact is likely to be superficial, akin to a first date, and of course to get customers to flirt with you, you may have to make an attractive offer. Price framing, in which you set a reference price and then discount sharply beneath it to convey value, is one way to help consumers new to your service judge whether you offer good value.

2. Immersed in clutter, offers matter. Online marketing touchpoints are wildly littered with banner ads, video, Google search results ... creating a commoditized communications space. A typical U.S. consumer changes his or her web viewing window 17 times an hour, thus being exposed to thousands of marketing cries each day. No one can possibly digest this many messages, so consumers may expect an offer in exchange for their limited attention.

3. Online touchpoints are just the beginning of a customer relationship. Customers who evolve into loyal fans, every marketer's dream, make repeat purchases and word of mouth referrals often far away from online communications. Life happens in the real world. Loyalists end up in a store, on the phone, perusing catalogs, perhaps with clicks for future purchases, yes, but those are often the "last click" after considered intent.

So brands have many opportunities to promote their deeper values as they grow share of customer. It just may not be online.

Via Ian Schafer.

The unROI of inaction

Beth Harte makes a strong case that ROI often can't be calculated for any marketing campaigns, because isolating the financial data for ROI = (net profit / sales) * (sales / investment) is usually difficult -- and thus it is unfair to hold social media to a "prove the ROI" standard. We responded over at the Brandflakes blog:

Mathematically this is the same formula as ROI = net profit / investment, but I quibble. The real purpose of ROI calculations is to make choices between alternatives. If you can make 8% by investing a million in the bank, and only 6% with a marketing campaign, pure math would tell you to keep the money in the bank.

However, this is why ROI logic often fails. Marketing is a living, breathing function to keep businesses alive, so even if ROI were below the alternative "park it in the bank" rate, if you shut off marketing, you'd damage the future business. Advertising falls under marketing and social media falls under advertising (or PR, quibble), but the logic of those internal functions is the same.

It is healthy to try to determine ROI to make choices among best possible paths, but businesses must also consider:

a - is the function necessary for basic competition?
b - what is the risk if we turn off the function, and failure to perform damages other parts of the business operating system?

So it's not just what you do, or if what you do beats the other action. It's what could happen if you don't do it at all. This may be the best argument for social media.

Image: JobotDaRobot

'Free' movies: Amazon's brilliant move to the future

Evolving a business is difficult because it seemingly requires you to take your eye off what drove profits in the past to find what will bring strong margins tomorrow. But look ahead you must; after all, the business world is littered with cautionary tales of those who did not: IBM's hardware obsession in the 1970s led it to miss the PC operating system opportunity; Kodak pushing film as digital cameras killed the photo developing industry; Microsoft wasting away first-mover advantage in tablets for nearly a decade to be beat by Apple's iPad core.

So kudos to Amazon for making a brilliant evolutionary chess move. On Tuesday, Amazon launched a service giving away movie streaming to members who subscribe to its $79-a-year "Prime" premium shipping service. Amazon Prime was already one of the smartest moves in ecommerce, building loyalty among shoppers while charging them more for "free" 2-day shipping. (It's "free" shipping, you see, if you spend $79 a year for access to it. And once you spend $79 a year, well you better buy a lot of books, spending more of your money to get more of that great "free" shipping.) Amazon Prime is a sticky pricing gambit that makes consumers feel good while sending dollars straight to Amazon's bottom line.

Now, Amazon has made the shipping deal seem even sweeter by adding "free" access to 5,700 films and TV shows, giving Netflix a competitive whack at the same time. It's an arrow shot straight at the future of digital content, while tying consumers to Amazon's current core product, hard goods shipped by mail. All we can say is Amazon, your strategy is Prime.

Heineken's curvaceous hugs

There are so many things that could have gone wrong with this display of sex in advertising, and yet it all went so sweetly right. Heineken celebrated getting 1 million "Likes" on Facebook by sending several voluptuous women out to Amsterdam bars to hug any guy caught drinking their beer. The emotions on the men's faces are wonderful: surprise, embarrassment, chagrin, regret (sorry, to the dude who ordered red wine), friendship, and the soundtrack Love's Sneakin' Up by Tim Garland provides just the right tone.

The vid has only 56k hits on YouTube after eight days, so perhaps the execution is too subtle to go viral. Still, we're thirsty now, aren't we?

Via Angela Natividad.

New, improved Google Social Search squeezes out SEO

This is Google. And this is your friend Matt, above, jumping into the third result on the Google page.

Google has made a rather radical change to its search results, sprinkling its "Social Search" listings -- which show your friends' tweets, blog posts etc. about a topic -- throughout your Google search results page. Before, such social results appeared only at the bottom of the page. The move signals that Google recognizes many consumers now use social media as much as search fields to get recommendations on topics of interest.

This tweak creates massive challenges for the organic Search Engine Optimization crowd, of course, because the inclusion of more social results limits the visual inventory for other organic search listings. A search for "Obama Daily Show" on Google, for instance, returns 9 total organic results on page 1, with only 6 visible in the initial window. If 2 or 3 of those results are now friends commenting about the show, SEO inventory has diminished by 33%.

Google has never seemed fond of the SEO ploys of marketers who try to game its system (J.C. Penney was just spanked harshly for alleged black-hat SEO tactics), likely because any off-topic victories for marketers diminish the overall quality of search results, making Google less useful and pushing away consumer usage. Now, Google is shrinking the space for SEO games-players to play in.

Twitter finally unveils ads in the stream

It's a sign of the times how cautious Twitter has been about pushing ads into its network, but starting sometime this March, the ads will come. "Promoted tweets" will begin flowing into the stream of comments from each person you follow, putting ad messages front, center, and in a place you can't ignore -- sort of like most traditional advertising.

Twitter says the promoted tweets will provide four types of customer response, which it calls "engagement": clicks on a link, similar to web banner ads; retweets, in which other users mention the tweet; "@" replies, in which a user replies to the company tweeting; and "favorites," where a user bookmarks the tweet for later reference. Twitter also provides an analytics dashboard to help marketers optimize how their messages are promoted inside Twitter. The service has been tested since Nov. 1 on the HootSuite social media dashboard, and Twitter says adverse reaction from users there was minimal.

The video above is worth a view not just to see how the advertising works, but also for Twitter's recommendations on how to be a compelling voice inside the tweetstream. Be humanly funny. Be an active participant in the community. Let others see a real legitimate two-way presence. In other words, try not to sound like an ad.

$99 eyeglasses? How Warby Parker reduces risk

It's not easy getting people to click. Warby Parker battled this when it launched an ingenious business model. There is no reason, it seems, that designer eyeglasses cost hundreds of dollars; Warby Parker found it could source materials from Italy and use Chinese manufacturers to make spectacles just as fancy as the ones at the eye shop down the street, and sell the entire package including prescription lenses for only $99. The only trick: It would have to convince people to buy eyeglasses online.

Tempting, but what if they don't fit? Warby Parker reduced the risk in several ways: You can upload a photo of yourself, and then have the eyeglasses digitally mocked up on your face to see what you look like. When you narrow down choices, Warby will send you five frames for free for you to try on at home, before making your order. And even when you finally order, Warby will guarantee the eyeglasses or you can return them.

As The New York Times noted in its review, unlike most retailers who focus on closing sales online, Warby gives you time to mull the idea over. Marketers focused on getting online results might consider: do our customers need time to evaluate the risk of choosing us? And if so, what offers, like Warby Parker, can we give them to pull them gently in our direction?

4G screaming wireless is awesome. You won't get it for years.

If you’re wondering why economist Austan Goolsbee is pitching Obama’s plan to auction off airwaves and invest federal dollars in 4G wireless, beyond the vague promise of jobs, let’s take a look at what 4G could do and why it’s so slow in coming.

The good news is the next generation of wireless networks, called 4G, will be 50 times as fast as the pokey connection you now have on your iPhone or Droid smartphone. The bad news is without a big push, that true speed increase may take 15 years to get here.

The future is complicated. In the U.S. we’re now riding 3G, a cell system that moves information to your phone at about 2 megabits per second. (Quick refresher, class: A bit is the smallest unit of digital data, the on-off 1-or-0 of computer storage, with 8 bits adding up to 1 byte. Consumers are more familiar with bytes since those are the standard metric for computer hard drives, but data-transfer geeks talk in bits -- same idea, just one-eighth the size.) The speedy broadband connection on your office computer sends data at about 4 to 5 megabits per second. So imagine what the world will be like when 4G arrives at 100 megabits per second -- your phone and tablet will become lightning fast.

The implications are enormous. 4G speed would make two-way high-definition video calls seamless. You could download an entire HD film in three minutes. The superb video capabilities could crush the cable industry, as tablet holders pull down HD clips on demand anywhere, anytime. And 4G has a nice feature 3G doesn’t -- seamless handoffs in data transfer as you leave one cell (wireless station zone) for another, meaning the Internet connection will really be always on, avoiding the hiccupy black holes you find, say, on the Amtrak Acela route from New York to DC.

If 4G pushes HD on-demand video everywhere, advertising is likely to be shaken to its core, as cable fades and mobile tablets rise. The revolutions in wireless will inspire thousands of new business models, which is why Goolsbee and Obama promise future jobs will blossom under 4G’s light.

That’s the dream, but now the nightmare. 4G won’t arrive anytime soon, despite the fact Sprint is pitching its current enhanced 3G network as 4G and Apple and Verizon promise to roll theirs out in the next two years. It’s not the carriers’ fault. True 4G coverage requires building about 10,000 cell sites that cost hundreds of thousands of dollars a pop; CNN reports the whopping $8 billion price tag will add 30% to carrier operating costs, and it’s unlikely AT&T, Verizon and the others can swallow that all at once. Even if they build out aggressively, they have to maintain all the 3G service we now expect for the current generation of iPhones. Duplication and redundancy will brake our evolution to the always-on wireless Internet future.

This is likely why today's first "4G" branded networks from Verizon, T-Mobile and Sprint don't come near the speed of true 4G.

Compounding the slow rollout is the fact new devices will quickly compete for the new bandwidth, creating traffic jams as 4G scales just as new highways paradoxically attract more cars. AT&T ran afoul of this very problem when it launched the iPhone; data traffic jumped 5,000% within a few years, and the company’s reward for being the first Apple phone carrier was a bad rep for spotty coverage and dropped calls.

Mobile can unlock economic potential. In today’s comparatively glacial 3G app economy, Goolsbee notes, "I understand there are even two kid millionaires in Finland selling games about angry birds." Future million-dollar 4G business ideas are waiting, but without a push, it may be today’s 6th graders who get them.

Is it advertising vs. social, or advertising plus social?

Edward Boches, the chief social media revolutionary in residence at agency Mullen, has once again posted slides suggesting consumers have radically changed the power structure of advertising since now they want to create and share, not listen. The concepts are intelligent yet we think Edward takes his logic too far, so we disagreed via this response.

Provoking. I couldn't hear your voiceover (wish I could), so I do have one quibble: Is advertising communication vs. customer engagement really an either-or proposition? You say in these slides that customers don't want to receive ads, instead they want to engage, yet Mullen's own successful Brand Bowl forums show how much customers do enjoy receiving ads... and then a fraction of them talk about them.

Put another way, communications should fit the ecosystem reflecting how consumers behave. As Wired co-author Kevin Kelly recently noted, the vast majority of media consumption today remains television, with wired/mobile/social media usage only a fraction of that time. This is not to suggest that social networking or consumer co-creation isn't powerful and potentially more effective ... but marketers sipping this Kool-Aid should remember that all media channels work together.

My belief is humans have three fields of personal space that drive our communication, dating back to cave men. Distance fields 10 feet+ (camp fires, TV, movies); work fields 2-3 feet (hammers, saws, laptop screens, tablets), and intimate fields (whispers in your ear, mobile). Social fits very well into our personal fields No. 2 and 3, but we have an innate need to lean back and listen to stories from afar as well. Advertising and social work together to fit both needs. It is a mistake, however, to assume that one need has supplanted the other.

Image: Tueksta

Voyurl lets you watch what your friends surf

Killer concept. Instead of trying to create yet another social portal, Voyurl allows you to watch what your friends are surfing online. It's in the beta-concept stage now, teasing interested parties on Twitter with requests to DM them for invites to sign up ... you know, the hipster early adopters will opt-in, bring their friends, and hopefully create Quora-like buzz.

But it's a fantastic idea. Google, Yahoo!, Bing, Explorer, Firefox and Safari remain (while fading to mobile) the main entry points for online communication, so why not sneak a peek at what your friends see to find out what's happening in the world? Voyurl is smart enough to realize the portal positions are taken and no social plugin, say, RockMelt, is going to become yet another doorway in -- so instead it grabs the knob of other web browsers. Voyurl may find it difficult to scale with the requirement that all users opt-in, but I'm so watching my coworkers to see if porn pops up at lunch. Admit it, so will you.

Listening to the crowd

As humans become networked systems there are incredible opportunities to listen for feedback. Unfortunately, most marketers remain stuck in an ideation-execution-go to market-trigger-response mentality, ignoring the opportunity to learn. Consider the options:

- You're running a paid search campaign, focused on costs per click, page views, conversions, costs per lead. Yet the keywords searched for give you real-time market intelligence on what your future customers are seeking. Have you parsed this data for ideas on new product development, service expansions, or marketing campaign messages?

- You plot ZIP Codes and demographics for outbound direct mailings, yet don't map prior customers who are the best proxy for interested targets and send your direct mail in proximity to their neighbors. Shouldn't you leverage the people who are your customers to find the people who live near them and likely share the same interests?

- You have friends on Facebook who are "fans" of your product, and customers on Twitter who tweet they like you. You listen to sentiment, respond to complaints ... but have you leveraged services such as 33Across or Media6Degrees to target friends of these customers who have similar affinities?

We could go on. You have customer house files but haven't run them through PRIZM to see variances in your customer demos vs. the surrounding population. You write ad copy without evaluating all the messages your competitors use in the marketplace, looking for the open position. You train salespeople without making them spend a day listening in on the call center to hear what real prospects, who don't become customers, say before they drop out of the funnel. You hold focus groups sporadically every few years before a major campaign change, instead of running transcripts from your call center daily through software that generates a word cloud of key concepts seamlessly.

Listening is hard work. The good news is, if you put down ego and denial, the opportunities around you in your business system are almost endless.

Wired data stalking and the demise of 1to1 personalization

Wired magazine's UK edition pulled off a nice stunt by collecting publicly available data on its subscribers and printing customized covers that greet individuals with freakishly accurate tidbits about themselves: Their birthday, whom they live with, even colorful comments about a recent online spat with a friend. Yikes.

Yes, a clever troller (or buyer of an Experian list) can learn a lot about you. The more interesting question isn't whether privacy is gone (it is, check your direct mail), but why similar ultra-personalization has never taken off as a marketing tactic. Don Peppers and Martha Rogers founded a consulting group in the 1990s devoted to advocating personalization based on 1to1 relationships -- corporations learning to connect with individuals via data that recognized their personal interests. It was a visionary concept, where every behemoth of an organization could treat you as intimately as the owner of a local store. What happened? A few companies, such as Netflix, managed to make quasi-personalization work, but almost no marketer has nailed the 1to1 concept. Personal relationships between consumer and corporation gave way to networks of consumers talking among themselves; social media arose, and personalization was passed by as companies yearned for "viral" strategies to reach the masses, not individuals, ignoring them. If markets are efficient, and data collection has become easy, why aren't you greeted at the mall with a digital sign saying, "Hello, Mr. Jones, welcome back, the shoes you like are on sale at the Smithswalk Outlet on Level 2"? Because 1to1 doesn't sell as much volume as 1tomany (TV) or manytomany (viral success).

Beyond the corporate incentives, 1to1 recognition may never have been what people needed. Perhaps we don't want unexpected personalization at all, because the serendipity of random product encounters creates desire tied to a whim. Like cotton candy or a high school crush, the sugary rush of blood that comes from longing something unexpected is oh so satisfying, mainly because the desire surprises us with novelty.

Or perhaps more simply, the aura of an unknown someone really knowing us, like a Wired UK magazine cover, just freaks us out.

What to learn from Groupon's whopping 50% rev share

What does it say about the state of online advertising that businesses remain crazy to use Groupon at extremely high costs?

Groupon, as you know, is a deal-of-the-day network that has achieved phenomenal success since its launch in November 2008. It has scaled rapidly to 35 million registered users (partly through acquisitions of various couponing sites) and according to The Wall Street Journal may get to $1 billion in sales faster than any other company in history.

The secret, often reported but not-oft remarked upon, is Groupon's model. The site takes a whopping 50% of all revenue resulting from the business promotion -- not X dollars per impression, or even Y% of margin, but half of all the money you make. And businesses don't seem to question it -- according to Groupon itself, companies are lining up to get in its window, and Groupon turns down more applications than it accepts. Yowza. No wonder Groupon is rolling in the dough.

Given the law of supply and demand, these high prices must mean three things:

1. Going viral is almost impossible unless you game the system. If you use Groupon, you're getting gouged as the price for going viral -- meaning that lofty success, dreamed of by every marketer who's uploaded a clever clip to YouTube, is in very short supply. Yes, we all remember Subservient Chicken or last year's Old Spice dude, which got millions of web hits. But most campaigns never strike a chord in the masses to be passed along; it's almost completely random that a guy does The Evolution of Dance for fame, and once a concept trends, it rarely can be repeated. Groupon takes advantage of this failing in today's communications networks by allowing companies to pay to reach thousands of people. It has brilliantly gamed the impossibility of viral marketing by creating a mass audience that can be reached, for a sharp rev share. Groupon is the viral equivalent of Google's "sponsored link" ads -- you can be at the top, but only if you pay.

2. Virality, if achieved, is fleeting. The very nature of "deal of the day" is that the deal changes. Groupon knows consumers rush for the new-new thing, and then want something else, which works brilliantly for its coffers but not so good for its business clients. You might try Groupon once for a pop, say, launching a new coffeeshop in downtown San Francisco, but you'd never use Groupon as a sustainable marketing initiative. How could you, giving away 50% of your revenue in addition to the coupon value on top of it, just to get foot traffic?

3. Mass audiences win, even in the age of social media. Groupon's core value is its near-guarantee of delivering your promotion to a mass audience (we mentioned 35 million registered users). Sure, it's an assurance contract, where you only give it away if enough people sign up, but that creates momentum for the participants who want you to get more mass behind them. Gurus can talk about small communities and engaged individuals all they want, but Groupon shows what businesses really love is a large throng rushing their doors.

We mean Groupon no harm: 50% revenue for being smart and filling a market need? Bully for you. There is some value here because advertising online has become more challenging, with consumers awash in display ads (about 90% of all banner ad space goes unsold) and moving to smaller screen formats (iPhones, tablets) that reduce visual inventory for marketing intrusions. Groupon is riding this wave of despair with a surefire model to reach the masses. It works, but only for a quick pop, and only if you're willing to give most of your money away. The question for Groupon is whether its king-of-online-coupon model is sustainable, even with a crack localized sales force. Google is fast upon its heels, and we can imagine the Amazons (see: LivingSocial) and eBays of the world easily finding a way to replicate the lure of discounts to the masses. In the end, competing on price is a feature and not a competitive advantage; and those pesky audiences that drive all the attention have a way of moving on.