1. D IGITAL M ARKETING W EEK 2 Instructor: Detlev Zwick, Ph.D. E-Mail: dzwick@schulich.yorku.ca Web Site:http://www.yorku.ca/dzwick/dzwick@schulich.yorku.ca

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.

3. T HE D D ROPS FROM D( IGITAL )-M ARKETING  Gartner predicted that the d would drop, making d-business just business and d- marketing just marketing.  Nevertheless, d-marketing will always have its unique models, concepts, and practices.  Online search  Online data collection  Online marketing strategies

4. 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?

5. D IGITAL M ARKETING T ODAY : 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.

6. E XERCISE  What to do when it flows?

7. 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

8. O R 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

9. POWER SHIFT FROM COMPANIES TO INDIVIDUALS Ex. Store.ca

10. A CQUIRING A C USTOMER FROM S OCIAL M EDIA

11. 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

12. 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.

13. C ONSUMER B EHAVIOR O NLINE

14. T HE C USTOMER ’ S S TORY  A typical one-hour adventure in the life of a 25- year-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.

15. 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?

16. E XCHANGE O UTCOMES  There are 5 basic things that people do online:  Connect  Create  Enjoy  Learn  Trade  Each is ripe with marketing opportunity.

17. C ONNECTING O NLINE IN THE U.S.

18. C REATING & U PLOADING C ONTENT IN THE U.S.

19. L EARNING AND G ETTING I NFORMATION

20. T RADING O NLINE IN THE U.S.

21. 21 ST C ENTURY M ARKETING C HALLENGES  Twitter, Youtube, Facebook, Instagram, and on and on…  FRAGMENTATION!!  Attention  Demand

22. M ARKETING I MPLICATIONS  Fragmentation makes  reaching  keeping the attention of your customer ever harder.

23. W EB 2.0 C OMMUNICATION SHOWS TWO THINGS :  Consumers love to interrupt!  Consumers love to talk! => Give me some examples…

24. C HANGES YOUR R ELATIONSHIP hosting guests  From ‘selling to customers’ to hosting guests enabler  From ‘controller’ of communication (teller of stories) to enabler of communication (resource for stories told by others).

25. D- MARKETING M AP Consumer Marketer Consumer

26. D- MARKETING M AP Consumer Marketer Retail sites Banner Ads/Links Email/Spam News Releases Blogs/Online forums Search Engine Optimization Viral/social marketing/Twitter MarketerConsumer

27. 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 Marketer Consumer

28. D- MARKETING M AP Consumer Social search Third party and retailer evaluation sites (e.g. epinions.com) Blogs Wikis Social networking sites Marketer Link building News releases Blogs/Online forums Retail sites Banner Ads/Links Email/Spam News Releases Blogs/Online forums Search Engine Optimization Viral/social marketing MarketerConsumer

29. 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 MarketerConsumer

30. B UT WHAT ELSE HAPPENS TO CONSUMERS ONLINE ?  Too many choices!  Information & cognitive overload!

31. 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

32. T HE J AM E XPERIMENT 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? A B Iyengar, S. & Lepper, M., 2000, When choice is demotivating: Can one desire too much of a good thing. Journal of Personality and Social Psychology, 79, 995-1006

33. C HOICE AND SATISFACTION No choice can be bad. Excessive choice can also be bad. Limited choice may be best. Number of choices satisfacti on

34. 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.

35. W HERE DOES THIS LEAVE THE E - MARKETER ( E. G. RETAILER, INFORMATION BROKER, ETC. ?  New Businesses and Business models  Search  Curating & subscriptions model (s- commerce)

36. 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.

37. 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

38. 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.

39. 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.

40. C ONSUMER BEHAVIOR : C ONCLUSION  Consumers become active  Consumer Attention becomes fragmented  Consumer Attention reaches limit  Leads to new value propositions  Curate & subscribe

41. M ARKETING IN THE A GE OF F RAGMENTATION Mapping Digital Marketing Media and What can we learn from an Youtube/ebay/Facebook world?

42. 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?

43. 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.

44. 21 ST C ENTURY M ARKETING C HALLENGES  FRAGMENTATION!!  Attention  Demand  Community and Communication

45. A TTENTION 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

46. L ONG T AIL (C HRIS A NDERSON )  Fragmented Demand  Niches are Riches

47. 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.

48. 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).

49. T HE L ONG T AIL  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.  But how do you lower the search costs?

50. T HE L ONG T AIL  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.

51. I S THERE A L ONG T AIL ?  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. www.rogerebert.com  In June 15, 2006, "The Da Vinci Code" and "Brokeback Mountain" were tied at 0.8 % of page viewsThe Da Vinci CodeBrokeback Mountain  the next most requested reviews in 2006 were for "V for Vendetta" (0.7)V for Vendetta  "X-Men: The Last Stand" (0.6)X-Men: The Last Stand  "An Inconvenient Truth" (0.5).An Inconvenient Truth The lesson: People are curious about a lot of different movies."

52. I S THERE A L ONG T AIL ?  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, 2007Digital Audio Insider

53. T O 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.

54. T O 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.