A look into why some industries and companies have moved aggressively into digital, but others still have not.
Digital agencies and consultants have long been "fighting the good fight" trying to convince their big, traditional brand clients to shift more dollars to digital. But while some industries and companies have moved aggressively into digital, others still have not, as evidenced by their paltry allocation of budget to anything digital. But let's take a closer look at why this is the case and propose some rational ways of approaching the channel and tactic mix question.
Some Background: eGRPs Are Like Comparing Pigs to Hogs
One of the main arguments for not shifting more budget to digital is that there is no way to compare metrics from traditional media with metrics from digital, and therefore it's hard to justify the shift or to calculate ROI. The part about not being able to compare apples to oranges - or pigs to hogs, as it were - is true. The metrics are indeed fundamentally different. The measurements of traditional advertising all had to do with the size of the audience to whom the ads were (supposedly) shown while the metrics of digital channels are all based on actions that users take - from clicking on a banner ad to typing in a search to sharing something on a social network. But creating a GRP-like metric for digital (known as eGRP), which measures "reach and frequency" in digital, is not the right solution, even though there are some short-term benefits like raising awareness among advertisers that up to 60 percent of display ads are never seen (e.g., below-the-fold) or up to 80 percent of their ads are not shown to the right target audience (see Nielsen's press release on Online Campaign Ratings - PDF).
One-way channels like TV, print, and radio had to be measured in terms of reach and frequency because there was no "response" metric. The thing that could be measured was audience size and how often you showed your ad. And that used to be perfectly acceptable. But allowing advertisers to prolong that way of thinking is dangerous and completely wastes the unique advantages of digital - the real-time feedback loops that advertisers can use to tell if their advertising is working or not.
Traditional and Digital Should Coexist Like Pitching and Catching
Traditional advertising is not like digital; and digital marketing is not like traditional. Nor are their metrics. But they can, and should, coexist and work together. This is now possible because the habit of the majority of users is to go online to do more research before making most purchases, even if they originally got inspired by seeing a traditional ad. So advertisers can continue to "pitch" their ad message out to a bunch of people through one-way mass channels like TV; but they should also do sufficient "catching" in digital channels when these same users come online to find more information to inform their purchase decision. And this is more about achieving the right balance of "traditional and digital" rather than "traditional or digital."
Brand advertisers still allocate a large majority of their advertising budgets to traditional channels - like TV and print ads. But once those ads make a user aware, or remind them they need something, they will come online to look for more information. For example, they will look up "digital camera" (because that is what they want) not "kodak digital camera" (see Slide 4 of my "Mythbusting Advertising" presentation). If Kodak doesn't have the right content in digital channels or isn't properly search-optimized so users can find said content, then they will lose the sale to competitors who are - e.g., Fuji's page shows up on page one of search results, and Canon has better reviews on Amazon. So advertisers like Kodak should make sure to balance both the pitching in traditional ad channels and the catching in digital channels - to achieve maximum business impact and ROI.
A Look Ahead: Soda and Soup on the Left; Computers and Cars on the Right
But let's take one more step and explore the optimal balance and how that differs from industry to industry. Users will probably not spend too much time researching low-cost, simple products - like soda, soup, or soap - but would spend a lot more time researching big-ticket, more complex products - like computers, cameras, and cars. If you think of a continuum with low-cost, low-complexity products on the left and high-cost, high-complexity products on the right, you will also see that the left side of the continuum will be more like branding/awareness while the right side is more like digital/direct response.
Brand advertisers who are selling soup or soda will continue to allocate more dollars to branding than direct response, and traditional mass channels like TV are best suited for this. However, they too can move more dollars online now because venues like Facebook can provide as much, if not greater reach and frequency than even some offline channels - e.g., Burberry has 12 million Facebook fans, about three times the size of the largest remaining print magazine's circulation (see "Facebook's Reach is Already Larger than All Magazines"). And Facebook can generate billions of ad impressions per month and report back to the advertiser how many views and clicks they got, virtually in real time. So brand dollars will continue to move from offline branding media to online branding media - e.g., the CPM side of Facebook.
Advertisers who have more complex or higher-cost products should more aggressively allocate dollars toward digital and also pay predominantly on a performance basis - e.g., cost-per-click (CPC) or cost-per-action or -acquisition (CPA). Digital is like the ultimate direct response medium where you get nearly instant results and feedback. So these advertisers can get far more for their ad dollar in digital channels, especially with a performance-oriented payment model. They will efficiently capture the demand when users come online and "raise their hands" to reveal their purchase intent and also complete the purchase in some cases.
So, as we can see, it makes logical sense that some industries are still more heavily balanced toward traditional mass branding channels - like soda and soup. Other industries - like computers, cameras, and cars - should shift more of their balance to digital channels and improve ROI because of the more efficient capture of demand in digital channels. And "traditional versus digital" should now be more like "pitching and catching," utilizing both in the right amounts and in the right ways.
E-Commerce Concept image on home page via Shutterstock.
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Dr. Augustine Fou is the senior digital strategy advisor to CMOs, marketing executives, and global brands. Dr. Fou has over 15 years of Internet strategy consulting experience and is an expert in social media marketing strategy, data/analytics, and consumer insights, with specific knowledge in the consumer packaged goods, financial services/credit cards, food/beverage, retail/apparel, and pharmaceutical/healthcare sectors.
He is a frequent panelist, moderator, and keynote speaker at industry conferences. Dr. Fou is also an Adjunct Professor at NYU in the School for Continuing and Professional Studies and at Rutgers University at the Center for Management Development, where he teaches executive courses on digital strategy and integrated marketing.
Dr. Fou completed his PhD at MIT at the age of 23. He started his career with McKinsey & Company and previously served as SVP, digital strategy lead, McCann/MRM Worldwide and group chief digital officer of Omnicom's Healthcare Consultancy Group (HCG). He writes a blog "Rants, Raves about Digital Marketing" and can be found on Twitter at @acfou.
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August 21, 2014