Digital savvy customers demand converged approach to marketing

A new breed of information-sharing customer is evolving. But today's agencies, content networks and distributors are still not geared up to meet the demands of the digital consumer and advertiser, according to a new report.

By Stuart Lauchlan, news and analysis editor

Direct marketing and traditional brand advertising are merging online and causing a rift into which unsuspecting companies will fall, according to a major new report.

Based on surveys of 2,800 consumers across six countries and one-on-one interviews with advertising industry professionals around the globe, IBM Global Services found what it calls a growing rift between advertisers and content owners, media distributors and agencies. Four important trends are also emerging: consumer adoption of new distribution formats, a shift in advertising spend, digital migration of platforms and the emergence of new capabilities due to moves by new entrants and existing players.

In the report 'Beyond Advertising: Choosing a Strategic Path to the Digital Consumer', the services arm of the technology giant concludes that so-called 'alternative' marketing channels are set to grow the most in the coming years, presenting new challenges for marketers and customer relationship managers. Companies will put their growth strategies at risk if they cannot evolve into more of a marketing services model as they identify and adopt the next generation of digital formats.

"To succeed - especially in the current economic environment - media companies will need to develop a new set of capabilities to support the industry's evolving demands, which include micro targeting, real-time ROI measurement and cross-platform integration," says Saul Berman, IBM Global Leader for Strategy and Change Consulting Services and co-author of the study. "Now is the time for companies to move quickly to become more effective with their assets and build for the future."

These 'alternative' channels, which will include the likes of online advertising and word of mouth marketing, are expected to grow to 27% of overall marketing expenditures by 2012, up from 7% in 2002. At the same time, traditional ad formats, such as print and broadcast TV, are expected to drop from 47% to 32% of share over the same period. The same will be true for B2B marketing, suggests IBM. Some 63% of global chief marketing officers expect to increase interactive/online marketing spend while 65% expect to decrease traditional advertising.

The study indicates that mass marketing faces many challenges as the audience becomes increasingly harder to target and fund from an integrated marketing perspective. Reaching diverse segments will require niche offerings and contextual search capabilities that are tailored for new platforms, new offerings and by geographic market.

More interactive

To compete in this new era of advertising, media companies and content, suppliers will have to fundamentally change the way they deliver information to their audiences. Advertisers and marketers are aggressively shifting their spend to even more interactive, measurable formats as providers struggle to move 'beyond advertising' to new forms of communication that combine the ROI characteristics of direct marketing with the brand characteristics of traditional advertising.

"Digital formats such as social media, online video, mobile communications, gaming and advanced TV enable companies to simultaneously meet transactional and brand-building objectives," according to the report.

The widespread adoption of social networking, such as Twitter and Facebook, and the popularity of digital content services such as YouTube have had an impact on how customers want to engage with organisations. IBM notes that between 2007 and 2008, the adoption of social networking tools almost doubled from 33% to 60% while online/portable music services more than doubled to 46% from 22%. At the same time, mobile internet data plans nearly tripled to 41% from 15% and access to mobile music and video quadrupled to 35% from 7%.

All of this has an impact on customer behaviour patterns, making them ready to accept content and marketing in different formats and via different channels. Most notably, a new breed of customer is evolving which is not only willing to share information, but actively expects to do so.

"Media, entertainment and advertising agencies must realise consumers are open to sharing information under the right conditions," says IBM report co-author Bill Battino. "Our research shows consumers are willing to trade knowledge about their usage and preferences for content and associated targeted marketing offers. Companies that excel in permission-based advertising will take share of marketing dollars."

The other side effect is a further blurring of the demarcation lines between advertising and marketing functions. IBM notes that platforms have traditionally been aligned with either transaction or brand objectives. It demonstrates the distinciton by citing phone, direct mail and promotions which could address transaction objectives like targeting, ROI, measurement and response, where as platforms like TV, print, outdoor and radio made it easier to address brand objectives.

But the likes of social media and online video, combined with advanced digital TV and networking capabilities, make it possible to address both transaction and brand requirements. IBM calss such a convergence "brands-actional" advertising. This means that the canny marketer can address both target audiences but also means that the less canny marketer will be at even more of a disadvantage.

This latter breed of marketer may well be the more common. According to the study, today's agencies, content networks and distributors are not geared up to meet the demands of the digital consumer and advertiser. In fact, an alarming 80% of participants interviewed for the study expect the industry to be at least five years away from being able to deliver true cross-platform advertising and marketing.

The study concludes that there is a growing need for more consumer-centric marketing, which involves combining more granular targeting and measurement with cross-platform integration. Granularity is the basis for ROI driven advertising which is able to micro-target and interact with desired consumers while measuring response and impact. Integration enables the delivery of messaging to consumers in compelling, innovative ways across platforms.