Location Based Advertising – A Case Study



With the number of mobile chipsets with GPS enabled technology increasing at an exponential scale (720 million units in 2011 from 180 million in 2007), we see that yet another technology platform is becoming ‘free’. The interest from the most innovative companies in the world like Google that just secured a broad patent for Location-Based Advertising confirms that this technology holds a great future for new media marketing.

Consider the trend & evolution of advertising in the new media. Starting from regular broadcast, it evolved into context based, permission based, customized, and history based advertising in the world wide web. Ads are pushed on to users taking into account their purchase histories, browsing preferences, profiles, consensual solicitations, etc. Now add to this another dimension – their GPS co-ordinate. This is analogous to adding sound to silent movies or colour to black and white pictures! With this platform (GPS enables phones) becoming ‘free’ as did other functionalities in the past like coloured mobile phone display, Bluetooth, IR (came & went), radio, mp3, … this is a sure winner and future for the mobile based ad technology.

This has implications for the new media marketing in terms of better reach, relevance and results. Bruner & Kumar (2007) stated that LBA enhances the ability to reach customers in a much more targeted manner than in the past. Sellers are able to reach customers if they are for example registered with them, made a previous purchase of lets say a DVD of Saw 4 and are passing by the store, only to receive an SMS that Saw 5 is available at the store. Hence the location dimension adds many possibilities to increase the reach in new ways.

LBA gives people more relevant information based on their preferences, profile and location. As per Vidaille (2007), the response rate increases dramatically (around 20%) that is very high. Furthermore, the results can be increased as well due to the buying patterns of people now have the geographic information included as well. This information can be used in addition to the traditional cookies etc. to have better offers and deals at the right places at the right times.

LBA has its critics as well. Most prominent concerns are that of privacy and spam. Privacy is compromised as not only the geographic information, but their activity as well can reveal more information that the users want. Furthermore, a spew of SMSes based on their location might also be a cause for concern for most and regarded as spam.

Hence, it is important to give customers choice, control and confidentiality and ensure that they only receive pertinent and wanted information. Hence for an LBA to be successful, it needs to be permission based, relevant and on time.

References:

http://gigaom.com/2008/02/06/location-based-advertising/

http://www.readwriteweb.com/archives/google_patents_location-based_advertising.php

http://en.wikipedia.org/wiki/Location-based_advertising

Relationship Marketing in the New Media

The new media / social networking have created enormous opportunities for organizations to create competitive advantage. One of these is the ability via the new vessels to tap into and create a meaningful / emotional connection with its consumers. This has potentially more relevance to market oriented organizations than the sales or product oriented organizations. The market oriented organizations are more focused on creating and maintaining relationships with their customers and bringing long term value across the entire value chain and to keep their customers more competitive. This can be in B2B or even B2C setups. With the user communities, partner and supplier linkages, the market oriented organization is ever more close to its customers. If a forum/platform is made available to customers, they can give feedback and are more prone to even complain to suppliers than switching to other competitors if this connection means something to them. Organizations are employing various techniques using the new media to engage their customers including viral marketing, online communities, online gaming, online events, competitions, prizes, etc. Furthermore, various organizations are using innovative extranets to register all customers, give privileged access, participate in new product launches, campaigns, arrange online events, hotline/service support over email, text, chat, etc. These new vessels further complement the traditional marketing techniques and close the loop to reach the customer & to have a continuing relationship with them for repeat business.

The relationship marketing in new media has close linkages to permission and customization. Customers opting to follow twitter streams and become ‘fans’ on facebook show a need for association and communication that has to be reciprocated and used as per the relationship marketing models. Organizations may use these to target specifically these customers that show and interest, ‘liking’ or ‘following’ to their direct, complementary or supplementary products or concepts.

The possibilities are virtually limitless to exploit the new media to create intimacy with the customers and to create and maintain a long lasting and meaningful relationship. With the growing trend and the need for potential customers to get 1:1 feedback from other peers in addition to the suppliers, the need to harness the social media for relationship marketing has become ever more important. If you will not do it, your competitors will!

References:

http://www.socialmediatoday.com/SMC/194787

http://www.1to1media.com/DocumentDownload.aspx?Doc_ID=31889

 

‘Free’

Chris Anderson debates and focuses attention on the basics of a commercial transaction consisting of a buyer and seller. In the basic ‘Free’ transaction as pointed out by Anderson, there are three participants in this exchange of value. The buyers and sellers create an ecosystem of free exchanges whereas the third parties pay to participate in this network/ecosystem that was created. There are numerous examples most prominent of which are the advertisers participating in Google, Yahoo, Amazon, Facebook etc. Even the traditional media (TV/Radio), newspapers and magazine publishers charge no way close to their actual costs to their readers due to the three way marketing model.

The ecosystem promoting this is possible only due to the increasingly low prices for bandwidth, storage and processing power. There are numerous ways to make profits out of these free exchanges (see http://howto.wired.com/wiki/Make_Money_Around_Free_Content). The ecosystem is important due to the Metcalfe’s law – the bigger the network, the more useful it can be. It is however important to have the right content, platform, incentives, service and models that the new media can be harnessed profitably and create more meaningful interest for the target users. The fixed costs are substantial (servers, storage, infrastructure, etc.) to start off the ecosystem, but to nurture the ecosystem to grow it beyond the critical mass is an entirely different ball game. The servers are just hardware, the difference that makes a company successful like Google or a failure like Lycos, WebCrawler, Excite, etc. is the underlying factors discussed earlier that are used to build the ecosystem. One the ecosystem is there, are numerous ways to create profits and further use these models – the 1% law as per the “Freemium” by Wilson explain the rest of the phenomena in most of these ecosystems. The costs to serve users has become so low that the 1% of customers who pay for the ‘premium’ services are able to pay for the other 99% enjoying the free service.

It is also the case frequently that these businesses are created to attract the subscribers to engage in free exchange with each other only to identify a business model later on once enough network benefits are achieved.

There are other circumstances where there is no money exchanged at all in all the 3+ parties. This is the case of the gift economy, e.g. Wikipedia, open source software, Craig’s list, etc.

The New Vessels

The new vessels include Social Networks with Virtual Environments, online communities including Facebook, Viral Marketing, Serious Gaming, Widgets & Wikis, Blogging including Twitter, RSS, Podcasts, and Video-casting.

These new vessels have disrupted the way we socialize and created a virtual worldwide community going beyond the ‘desperate housewives’ like social practices to have the whole world as your neighbor. Previously geography based communities and business models have now been replaced with ever new ways of collaboration, reach and resource leveraging with virtually no limits.

These vessels are various ways to leverage the power of mass global connectivity in order to perform various functions that were not possible before. There is a great potential that more vessels will be added to this list or even the existing vessels may be disrupted by newer ones in the future.

As per Sandy Carter, these vessels are enablers to energize the ecosystem/channels of a business consisting of suppliers, partners, universities, sales team, etc. Once energized, these methods augment and complement the traditional marketing methods to drive the business in ways not foreseeable before and opening avenues of endless creativity & potential. For example, there is virtually no limit to the amount of innovation a linked social community made of part-time developers/enthusiasts may bring to a new software company. Open source software like Linux is an excellent example of how this can happen.

The quote from McLauhan could not be truer as skeptics had labeled these new vessels as mere gimmicks to create illusions of real life and to create vehicles for those unwilling to face the real world. In fact, these vessels have created new ways of expression and have linked human beings regardless of geography in ways that were unimaginable before. Organizations can now engage their customers and channels to leverage loyalty, innovation, productivity and at the same time, bring people together and promote positivity. Instead of the traditional one way link between producers and consumers, user communities are participating in giving feedback, suggestions, reviews and even participating in the development of new products. Lego Mindstorm is an example where the user communities are giving designs back to the factory and these are subsequently produced and delivered to them.

This new power of expression has transcended the traditional boundaries and created astronomical permutations of co-operation, seeds of innovation and linkages bringing the power of the masses to a new platform of where they can be leveraged. However, Sandy Carter cautions that these are merely vessels and their effective usage, creative content, promotions and model of linkages are factors that will determine their intended efficacy.

People Are Bored of Mass Communication and Expect Personalised Communications That Mean Something to Them

It was always said that human beings are social animals. The new media has provided for the first time a limitless potential for the humans to indulge their social whims and for the world to witness this. Geography has now disappeared as a constraint altogether for the social media.

The evidence is all around us on the world wide web. The simple but significant actions of people to ‘follow’ on twitter, ‘like’ on facebook and participate in open source projects shows their need to have a personal connection to peers, organizations & interests. The one-to-many preaching model is no more appealing to the masses with diverse opinions, tastes and needs. Everyone wants personalized everything. Personalized communication may be in many forms. It can be producer to consumer, broadcaster to audience, or even consumer to consumer.

Although, this is not true in all cases. Mass communication still has its followers. People still like to read newspapers, print media, magazines, watch TV, etc. However, there is a growing segment of the population, mostly N-Geners which are used to and demand personalized, customized and meaningful communication that is two way and where they have the option to leave their mark for the world audience to see as well. There are numerous psychological reasons which explain this behavior including Virtual Identities that are attractive for people to maintain in addition to their real life identities. The use of Avatars and participation in virtual worlds like Second Life and MMORPG (Massively Multiplayer Online Role Playing Games) are examples among many others. From social psychology (http://wiki.media-culture.org.au/index.php/Virtual_Identities_-_Social_Psychology), we can also infer that users feel ‘invincible’, dis-inhibited and anonymous in the virtual/online world and may interact more openly and freely to others and therefore have a greater need for personalized communications.

People opting to get newsletters/updates and register themselves to get personalized content delivered to them are also examples in this context. This intersects with the permission based marketing as well as personalization is done in many cases where the users either directly opt or visit similar sites and the customization is done through their history and buying patterns e.g. in Amazon. This is also a form of communication and this personalized feel once you visit the Amazon web page is the main driver of its enormous success and the increase in its network power.

We summarize by saying that as the N-Geners are quickly outnumbering the snail mail generation, we see a very positive trend towards personalized & meaningful communication due to various social psychology factors and effects related to the virtual identity concept.

The Long Tail is Bringing a Profusion of Choice to Consumers

The issue of variety has been facing the mankind from the dawn of time. With deep implications in economics and international business, the variety issue is closely linked to Ricardo’s theory of comparative advantage. Free trade increases productivity/output regardless of where the absolute advantage is (Charles Hill, 2006). This free trade also increases and promotes variety for the world. The new media has decreased transaction costs in various industries e.g. the music industry where the costs of stocking a track or CD from a popular artist or a forgotten ‘oldie’ become mere megabytes on a terabyte storage area network in a small data centre. It thus becomes now feasible for a music distribution business online to stock not only the hits at the head end but also the long/tail end of the variety/distribution according to Chris Anderson.

Long tail is a form of the power law versus the conventional bell curve or normal distribution. This is due to the perfect market effects and when we factor into the equation that people are more prone to listen to their peers and their contacts then others and thus the stars gets exponentially more hits than the others & the median is subsequently skewed towards the hits. This does not represent necessarily an increase in choice to consumers but only explain or indicate the choices that become more popular.

The long tail has brought tremendous choice to consumers that was never foreseen in the past. This is not only beneficial to those consumers who are able to feed their nostalgia by a few clicks at 3am by ordering an ‘oldie’ they used to listen in their teens. It is also enabling organizations to target the full spectrum of the product variety – the high sellers and the vast variety of low sellers, thereby increasing their revenues.

Organizations like Amazon have also successfully become a one stop shop by bringing a profusion of choice to customers. Most of the orders placed on Amazon are not even processed by its employees but it makes small profits on a huge variety of items. The customers thus get gargantuan choice and reduce significantly their search costs. Thus the reduction of transaction costs has enabled the new media and creates the possibility to increase the variety and thus reduce search costs for consumers. This reduction in transaction costs are powered by three things becoming virtually free per Anderson – the processing power, bandwidth and storage. This gives a platform for these new businesses based on user networks to thrive and give services at very low cost or for free due to the very low marginal cost associated with this phenomenon.

Mobile is the Marketing and Media Platform of the Future

Referring to the “Metcalfe’s Law”, the usefulness of a network increases exponentially with the proportional increase in the number of subscribers connected to it. With the advent of the microprocessor and software application technology in smartphones, the popularity of the mobile devices has increased exponentially over the past decades. There are a few key reasons that may be broken down as below:

1. Mobile devices are popular because internet is popular and can be accessed via these devices in an ever increasingly intuitive and user friendly way.
2. People have an endless source of entertainment and to increase their productivity while on the move – can be during travelling, holidays, or even while sitting in their living room sofas.
3. The social need of the human animal to have a sense of connection with other humans exasperates the need for mobile devices and the ability to ‘stay connected’ to the world regardless of where he is. This new phenomenon may be experienced e.g. if you leave your mobile phone at office and feel the restlessness and the urgency to retrieve it at the earliest. The power of Web 2.0 adds to this with the people having the ability to interact 2-way across most popular internet media and let their voice be heard across the world regardless of wherever they are.

Marketing is all about reaching your target/focus customers in the most efficient way. With the development of location based services (LBS) in the ever increasing GPS enabled mobile phones, there is a huge potential to have targeted advertisements based on the locations of potential customers. This new dimension of having ‘mico-casting’ instead of the traditional broadcasting or the permissive ‘pod-casting’ is currently revolutionizing the advertising and marketing industry. Refer to the case of the development of the new advertising platform “LocationPoint” by NAVTEQ where the platform has been developed to cope with the LBS and to push ads to customers based on their locations in addition to their previous histories and preferences/solicitations.

With the power to have this ‘micro-casting’ possible, the advertising revenue is bound to shift away from the regular broadcasting media towards where the ads are really needed and have a larger impact ratio per viewing.

Apart from the internet based mobile marketing, the traditional SMS based mobile marketing still shows promise e.g. companies like Tatango are active in group messaging and contend that they are still more popular than mobile internet.

References: Justin Montgomery- NAVTEQ, Justin Montgomery – Infographics

RIP The Consumer, Get Ready for ‘The Art of With.’

Gone are the days where there used to be clear distinctions between the low cost and differentiation strategies as per Porter’s models. Then came the dawn of the mass customization models and the success of companies like HP, Google, Dell, Adidas etc. Now we are talking about changing consumers into prosumers as consumers not only prefer to get involved in customization or even more, the manufacturing of the products & services they buy, but demand it. The course texts give numerous examples of organizations that have failed where their rivals blossomed by adopting the model of co-creation. Ebay, Facebook, Lego and Twitter are excellent examples.

Customers want to co-create the products & services they buy. The power to chose is addictive. With the advent of Web 2.0 and the ‘Netgen’ outnumbering the old school snail mail generation, we are experiencing this explosion and huge shift in this social paradigm. The power of Web 2.0 has brought consumers ever close to sellers in a network enabling information exchange between seller to consumer and consumer to consumer. This ‘power’ of choice and the psychological need for the human as a social animal to have a connection with other humans has seeded into this phenomenon and we see that the plain old consumer has turned into a globally aware, ethically conscious and a very ‘choosy’ prosumer that is very particular about the overall experience and the global human connection that he experiences before making a purchase.

Organizations need to roll up their sleeves & get adept at ‘The Art of With’. Failure to do so may certainly be detrimental to their business. This is an exciting time and future generations will look back at this transition towards a world where the product of every purchase has some direct influence of the purchaser in its synthesis.

Images from: linkalpha.com, flickr.com-redjotter