19 November 2009

Retailers should look to reach out to customers through digital channels

Lindsay James takes a look at how retailers should be changing their marketing strategies to embrace digital channels and connect with the customer on a more personal level.

Today’s consumers have the world at their fingertips. At the touch of a button or the click of a mouse they can not only make purchases, but also access a significant amount of information that will influence their buying decisions. They can access product reviews, availability details, price comparisons and special offers, and they can also make themselves heard by voicing their opinions about products or brands on social networking sites like Facebook and Twitter.

With this in mind it’s no surprise that many of the biggest advertising spenders are moving towards digital channels. In its recent five year forecast, analyst firm Forrester Research predicts that interactive marketing in the US – including search, display advertising, e-mail, social media and mobile marketing – will be worth US$55 billion by 2014, 21 per cent of all spend. The same trends can be seen in the UK, where online advertising has overtaken newspaper and magazine advertising combined.

Despite this, research shows the retail industry is failing to keep up with the pace of change, with retailers spending less than ten per cent of their marketing budgets on online channels. “One of the key reasons for this disparity is the perception that e-commerce is a consumer-driven market where shoppers actively search for what they want,” says Katherine Ellis from Microsoft Advertising. “By taking this view, retailers are missing the opportunity to drive online consumers to their site. Bricks and mortar retailers face the question of whether online drives offline sales and how they can measure its success. Traditional retailers’ businesses are still organised according to out-of-date principles and they need to change the way they speak and think about consumers. Digital media offers another dimension to the media mix and there are huge opportunities to reach and target audiences.”

“The world of marketing has been revolutionised,” says Geraint Thomas, Microsoft’s director for the consumer packaged goods industry. “It used to be that you had a Web site and you would spend money to try to drive consumers to that Web site, but nowadays the consumer has changed – they are interacting with retailers and brands through their mobile phones as well as through online gaming, organic search and much more. Marketers need to learn how to interact with consumers consistently across many different digital channels.”

Because an effective digital marketing strategy is holistic, Microsoft focuses on delivering a comprehensive solution for digital marketing, with Microsoft Advertising and consumer brands like MSN and Bing. Microsoft also provides retailers with channels such as Xbox Live, Microsoft Mediaroom, Microsoft Tag for consumer mobile marketing and TellMe for voice-enabled customer interaction.

“To support this type of experience Microsoft also offers Web technology to support e-commerce and branding such as Commerce Server and SharePoint, with rich search and merchandising experiences from FAST,” says Dominic Citino, industry market development manager for Microsoft’s retail industry team. “Retailers can deliver rich interactive experiences, including streaming HD video, with Microsoft Silverlight. Finally, cross-channel insight enables retailers to deliver consistent experiences across channels, and integration technology like BizTalk Server, database platform SQL Server and ERP and CRM applications from Microsoft Dynamics deliver real digital marketing execution.”

Challenges come in two main streams for bricks and mortar retailers.The majority are still trying to come to terms with digital media. They need to become much quicker and more responsive

Tony Bryant, K3 For retailers, this creates exciting new routes to market, allowing them to speak to individual customers directly. But finding ways to blend digital channels into existing marketing plans can be daunting: established strategies aren’t necessarily set up to handle these new ways of communication.

“Challenges come in two main streams for bricks and mortar retailers,” says Tony Bryant, business development manager at K3. “The majority are still trying to come to terms with digital media. They need to become much quicker and more responsive. They need to ensure the marketing infrastructure – solutions, people or agencies – is geared up to flex change.”

“Digital marketing, much like the rise of multi-channel retailing, offers much in the way of perceived opportunity,” explains Citino. “However, where digital marketing challenges retailers is in the area of monetisation. Retailers clearly see value in driving tighter connections with their customers and in the ability to deliver their brands in relevant ways, but the historical investment models built in the context of traditional advertising are now being challenged in a digital world.”

Citino believes retailers need to focus on two key priorities. “First,” he says, “is the understanding that the retailer shares its brand with its customers. This is a critical realisation. Stewardship in this sense is the real value that retailers can bring when imparting their key brand messaging in emerging digital contexts. Secondly, it is important not to separate retailers’ strategies for digital marketing from traditional e-commerce strategies. The inherent value of a holistic digital strategy is that digital marketing is inclusive of a digital perspective of customer centricity. A retailer that can connect its digital marketing strategies and technologies with the transactional nature of online commerce is in a position to deliver a much more consistent experience to its customers and is in a much better position to see a return on its digital marketing investments.”

British supermarket chain Asda, owned by Walmart, has jumped feet-first into digital marketing. Chief executive Andy Bond recently outlined his vision for a ‘transparent’ business, including webcams of the farms producing its milk and carrots, and a team of bloggers recruited to tell shoppers about the business. Bond labels new way of doing business as ‘democratic consumerism’, drawing comparisons with President Obama’s politics: ‘offering openness, transparency, collaboration and dialogue’. This is a confident move. Asda clearly feels secure enough about the root and branch value of its company and what it stands for, to start broadcasting directly from its own blogger base.

But embracing social media is yet to become the norm. Graeme Crossley, CEO of communications agency Brand Reputation, believes many brand owners are still failing to appreciate just how many consumers are now relying on social media and Web reviews to aid their purchase decisions, with some opting to have no contact whatsoever with brands offline prior to deciding to buy. “Brand owners need to recognise that the online world has much more power than they may realise and can often be the only resource a consumer needs,” he says. “We are seeing more people making purchase decisions on high value items such as cars and electronic equipment based purely on online reviews from other customers. This is a trend that will only get stronger.”

A survey from Lightspeed Research strengthens Crossley’s case. Lightspeed’s figures show that 71 per cent of all respondents read online reviews before making a purchase decision, and that 33 per cent of respondents would be dissuaded from buying a product after reading just two negative reviews. Over three quarters of respondents said they would be deterred by three bad reviews.

“Social media is having a significant impact on how customers shop and how they influence peer customers to engage with brands and ultimately transact,” says Citino. “There are different paradigms from which to view the impact of social media. First, there are very tangible ways in which retailers can leverage the social aspects of shopping within a completely brand-controllable environment. These include things like product reviews and ratings and sharing wish lists. The vast majority of retailers have seen positive results from embracing these types of capabilities. In this area technologies like Microsoft Commerce Server 2009 and SharePoint Server 2007 deliver ready-made capabilities that retailers are leveraging today to rapidly deliver product reviews and ratings to enhance the shopping experience.

“The other key paradigm to think about in the context of social media includes those experiences outside of a controllable brand experience. This view includes social networking sites, blogs, micro-blogs, wikis and viral video. In this world retailers have a bigger challenge. Because retailers cannot control all of the brand messages and interactions it is important to listen to what is happening to their brands in these environments. Microsoft recently announced a new proof of concept platform with the code name Looking Glass. It’s a social media aggregator which will allow marketers to track and monitor their brands in social media outlets. Looking Glass can also trigger alerts and workflow to enable a retailer to react to certain triggers around their brands.”

“Leveraging Looking Glass as a proof-of-concept can extend the conversations retailers are currently having with their customer,” says David Shadle, Microsoft’s user experience evangelist. “It is a great demonstration of the power of the Microsoft platform. Looking Glass gives you the ability to show how Microsoft technologies such as Silverlight, SQL Server, Windows Server and SharePoint can come together to solve real business problems.”

The very fact that Looking Glass is being developed illustrates the inherent need from marketers for campaigns that are quantifiable. They want to be able to measure the impact of digital advertising, just like they’ve been able to do with traditional tactile and e-commerce channels. Clearly Looking Glass will fulfil this need with respect to social media, but how do you measure overall success in digital marketing? What do retailers do with the huge amounts of data that is created from such campaigns?

“Microsoft can help marketing departments and retailers make sense of the mountain of data,” says Citino. “With dashboards such as Office SharePoint Server, Microsoft can link not only advertising data but business data into real-time dashboards to help determine return on investment and to help take immediate action. Through capabilities provided by Microsoft Advertising, advertisers can quickly determine the effectiveness of marketing campaigns both online and off. With these solutions at their fingertips, retailers and their agencies can have concrete facts and figures that will help them make decisions about how to effectively spend their marketing budget.”

“In the last two months Microsoft has launched the Bing Intelligence Tool which allows advertisers to strip bare search marketing trends, demographics, keywords and even levels of monetisation,” says Katherine Ellis. “This tool provides unique insight into consumer tastes and behaviours. For example, in less than two minutes, advertisers can analyse the impact their TV campaign has on driving searches online. This can be done in real time so advertisers can see what happened in the last five days rather than waiting months for their in-house econometrics to come back. And Atlas, a part of Microsoft Advertising, has launched a tool called Engagement Mapping which allows advertisers to track a consumer’s online journey. This allows advertisers to view all the interactions that consumers make when deciding to make a purchase to the final sale. This level of transparency allows advertisers to attribute the correct value that each distinct impact has on driving that sale rather than just relying on the last click.”

This article first appeared in the Winter 2009 edition of Retailspeak magazine.

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