There’s a fundamental change going on in marketing that is letting brands get access to consumers directly for the first time in a long time probably since the advent of mass media.
Brands have mass walls sitting between them and the consumers, the wall are two different kinds one is retailers which one can think of as Walmart or Macy’s the brands in many cases don’t even know what the consumer is buying and certainly don’t know who the consumer is. Also, mass media: like Times Magazine, Newspaper, Publishers the brands by advertising on them they have no visibility of what their consumers have done overall in them. So, the brands can’t interact with the consumer and they can’t get the key information for which they crave on consumer behavior.
In the last twenty years there has been a huge shift in retail landscape for example Borders can been replaced by Amazon kindle. Blockbuster has been replaced by Netflix while Tower Records has been replaced by Spotify and Apple Music. So there has been a whole lot of changes from where retail is happening but there is no fundamental change in the walls that sit up there. There’s just new people manning the walls in addition to the TV network you have Facebook and Google. So, the brands lacked direct access to information which left marketing essentially as a guessing game.
Are my ads reaching the right consumer?
Am I producing the right number of products (fundamental production decision)?
Am I wasting resources of various kinds?
In marketing your trying to reduce the guessing game…….
So today the retail landscape is finally changing now which means brands will have direct access to consumers for the first time. They can talk directly to consumers, they can migrate from guessing to knowing, provides an interesting investment thesis as new companies are utilizing.
With the advent of Direct to Consumer Marketing there has been a rise of:
- Crowd based social commerce
- Promotional transparency
- Experiential shopping
1. Crowd Based Social Commerce:
Crowd funding has long been viewed as weird, kind of weird companies producing weird products.
- One example that comes to mind in Soylent which through chemistry provides all the nutrients you need to live. People live on Soylent it’s a huge convenience and is chemically derived so it’s enough to live. Soylent crowdfunding campaign attracts $755k so people can survive without food. So, it started off as a weird project but its now turning into a thriving company.
- Tesla Model 3 orders hit $14 billion in one week and in one week it got reservations for 300,000 cars. What is more interesting they did not spend a penny on mass media to generate that demand. Also, what’s interesting they know the name and identify for every single buyer who purchased that car, it’s a fundamentally different game. They were able to raise $1 billion in future debt for future reservations for there car. How did it they do it? They utilized the social media by generating pre-order demand for Model 3. Than famous people started sharing that “Hey I got a Model 3; did you?” and then it became a phenomenon that popular people have pre-ordered this car. This became a model discussion that that did you order your Model 3?
- Another example is XIOMI which markets their phone through social media. They launch pre-orders with price and release date and over 2.11 million registered within 24 hours. These phone start at $300 so millions of dollars of income were generated over a few hours. Pre-order allows them to go to consumers directly.
What’s in it for Audience:
- Consumer: Access to product, fear of missing out, part of movement, determine what the product is over time by buying in pre- order
- Brands: They get to mobilize their community around act of purchasing, pull forward demand, predict demand, inform production, direct consumer relationships, no media spend
We’ve also seen start up’s come up with direct to consumer demand. Betabrand is an example point in case: Betabrand is a pearl company focusing on millennial’s which puts up on their websites whole piece of concepts. They literally let people vote: For example Yoga jeans have 3400 votes. The minimum number of votes once activated the brand is put into production and the voters become customers. Historically the voters are creating demand and fulfilling it. It’s a completely different notion and is a different model.
2. Rise of Promotional Transparency
“Half the money I spend on advertising is wasted, the trouble is I don’t know which half”
John Wanamaker (1838-1922)
The tools which a CMO had back in John Wanamaker’s time period were largely newspapers, radio TV while the CMO today literally has the same toolkit newspapers, radio, TV and now the internet. Little change so the marketer has to say when they buy the right audience are they consuming it is totally a guessing game.
TV is falling apart in front of our very eyes while newspapers and magazines are also moving in the same direction. Television is not the mechanism which you can reach the younger customer, this change is echoing in front of total audience. The total audience of Prime TV in the US for example has gone from 14-15 million to 4 million from 1980 to 2010. The US population has increased in the same time while the prime cost per thousand homes has increased a lot. So, your getting a much smaller audience and you are paying tons of money and you still don’t know whether your reaching your audience or not. New brands are emerging that want to give promotional transparency through new mediums
Instacart is an on-demand service which will do your grocery. They do that by partnering with other local grocery chains for $5 delivery fee within one hour. What’s the difference? Instacart knows what the visitor has bought at every purchase and it lets you be incredibly smart on how you sell to your individual customers. They are creating products for grocery companies on how to approach promotions for example in the past it was Spray and Pray, promotional coupons in newspapers. The new world is targeted is targeted, performance based, trackable over time, friction free loyalty, millennial user acquisition and precise.
3. Rise of Experiential Shopping
E-commerce till a few years back was largely product search. Google, Amazon are both product search and you go to them when you know exactly what you want to buy. The whole concept of browsing goes outside the park because you already have decided what you want and how you can get it sent to me. This is called the purchase funnel. Find: Research: Discover and Explore
Google and Amazon play at the find stage get me the lowest price help me out. This leads to competition: for example, I want a Playstation 4. Everything on Google is an ad when you search for this which gives you complete price clarity as the consumer is typically is looking for the cheapest. Where would you typically buy it from? So, the time you get on Google Search and Play Station 4 retail partners are going to war on who gets the buy. Google spending is up, you’ve double marketed, you’ve fought at the top and bottom of the funnel. This is a failing initiative. Google takes out the entire margins for the retailers.
A new set of companies which are trying to playing at the top of the funnel: Pinterest and Instagram. They have one opportunity that they can influence them from my service, second opportunity on where to buy my product and service, third we can keep them out of the google channel therefore get then to comes to my store.
In the larger picture is tools and services emerging which allows brands to go directly to consumers:
- You take marketing from an art to a science
- Guessing to Knowing Targeted Predicting